Josef Bonnici picks holes in MLP EU food prices report

The Labour Party's anonymous report on the impact of European Union membership on the price of food has a number of methodological and technical problems which flawed the assessment, Economic Services Minister Josef Bonnici said yesterday.

The MLP on Saturday published a report saying that food prices would rise by Lm10 a week.

Prof. Bonnici said in a statement that in order to claim that an impact assessment was being undertaken, one had to examine in detail the rationale for changes in prices of food.

But instead of doing this, the report claims to have looked at prices of food items in three EU countries - the Netherlands, France and Britain. It then claims to compare these with prices in Malta and proceeds to assume that prices in Malta would reach the same level as in these countries upon membership.

This approach, the minister said, was similar to that used by Labour candidate Alfred Mifsud some months ago during a discussion on gross domestic product per capita.

In that instance, Mr Mifsud had assumed, without any supporting evidence, that prices in Malta were the same as those in Slovenia.

The unwarranted assumption made in this latest report published by the MLP raised so many problems that it was no surprise that the authors refrained from putting their name to it, he scoffed.

Prof. Bonnici asked why only three countries had been picked.

"Why ignore other countries with more similar characteristics to Malta, such as Portugal, Spain or Greece?

"Does this mean that the other nine acceding countries, most of whom have lower food prices than Malta, would also have their prices rise to the levels of these three countries?"

The comparison of prices of goods across countries was a complex exercise, currently done by Eurostat and the National Statistics Office, involving purchasing power standards.

This showed, he said, that prices in Malta were almost 80 per cent of the EU average, whilst GDP per capita was 56 per cent.

In the Labour Party's report, no information was given about the items selected and how comparable they were across countries. Unless it was clearly established that the items were directly comparable, even the exercise of comparing prices became meaningless, Prof. Bonnici said.

He said the report claimed it was making an adjustment for subsidies that the government would introduce in order to keep the price of items such as sugar, wheat, beef and others unchanged upon membership.

But while no details were provided on how this was done, there were clearly grave errors.

Giving an example, the minister said that after subsidies, the price of sugar was shown to increase by 90 per cent and of flour by 123 per cent.

This was clearly wrong since the government said it would subsidise any difference in prices arising as a result of membership.

Prof. Bonnici said a mathematical error was committed in the conclusion, which said that the household budget would have to increase by Lm10.39 on a total household spending of Lm100 to absorb increases in the price of food.

Food spending under the 1994 household budgetary survey stood at Lm29.2 out of every Lm100. If food prices increased by 10.39 per cent, it would mean an increase of Lm2.92 and not the 35 per cent mentioned in Labour's report, which would be equivalent to Lm10.22, he said.

He said that if the so called team of management and economic consultants could get even this pre "O" level arithmetic wrong, there was little confidence that other errors were not lurking in the background in the unpublished workings of the report.