No decision yet as Cabinet, MCESD explore options

The Cabinet yesterday held one of its longest meetings to date to discuss what measures should be introduced to deal with soaring oil prices and a decision could be announced by the end of the week.

Sources said the fuel issue was the government's "biggest challenge" and the topic will also be on the agenda of a Cabinet meeting tomorrow being held primarily to discuss the upcoming budget.

Meanwhile, during a three-hour Malta Council for Economic and Social Development meeting yesterday, constituted bodies underlined the need to spread the burden fairly and equally while Government Investments Minister Austin Gatt promised to relay their views to the Prime Minister.

The price of imported oil was $45 a barrel when Enemalta introduced the 17 per cent consumer surcharge on consumption in October last year. Now that the average price has reached $65, that figure is likely to be much higher.

Dr Gatt said last week that the government was contemplating increasing the water and electricity surcharge to 102 per cent or putting up fuel prices by 20 cents per litre. He said that if the government chose to shoulder 30 per cent of the burden, it would still have to raise taxes or finance it through more loans.

However, the sources said one suggestion had been to raise VAT by 3.5 per cent but this was out of the question.

Nor is reducing the excise tax on fuel an option since the rate is already below the minimum threshold imposed on member states by the EU.

However, the sources said the government may be able to reduce the tax for the tourism and manufacturing industries to alleviate the fuel burden since they are vital pillars of the economy.

"It is not an easy situation," the sources said. Introducing energy policies was not straightforward since wind energy on land had effectively been ruled out and even if solar panels were to cover the whole of Comino they would only generate 10 per cent of the energy required by the island.

Although the government was actively considering what energy policies may be feasible and Enemalta was looking into the possibility of a gas pipeline, these were long-term solutions, the sources said.

The MCESD meeting discussed the social partners' reactions to the upcoming budget document followed by an exchange of views on the best ways to cushion the impact of the fuel-price rises.

Speaking to reporters after the meeting, Dr Gatt said that while the Malta Chamber for Small and Medium Enterprise - GRTU and the General Workers' Union had failed to take a clear stand, the Union Haddiema Maghqudin and the Confederation of Malta Trade Unions insisted that the burden should be split fairly across the board.

While echoing the same views, employers also urged the government to cap the burden on industry and hotels.

GWU general secretary Tony Zarb said: "Today it was clear that there's no agreement between the social partners on how to solve this issue, though everyone warned the government that its proposed increases would be a huge burden...

"Though the government gave the impression that it was prepared to listen, in reality it's quite clear that it's going to stick to its guns... This meeting was a smokescreen."

Malta Employers' Association director general Joe Farrugia, on the other hand, said the social partners had given Dr Gatt enough advice to help the government come up with a reasonable decision.

Constituted bodies were looking at the options that safeguarded jobs and did not dent the country's competitiveness, he added.

Chamber of Commerce president Louis Apap Bologna said it was important to reduce the burden on the low-income earners.

"We've agreed that there shouldn't be just one option but there are different avenues which the minister promised to explore," Mr Apap Bologna said.

GRTU director general Vince Farrugia warned that the options given so far by the government would eat into the little profits small businesses were reporting.

"If other social partners are prepared to accept the proposals given by the government so far, then they should be prepared to face the consequences. The government has ventured on its own throughout - now that it has cooked up its recipe, it has resorted to us to ask if we like it."

FOI president Adrian Bajada underlined the importance of minimising the social problems in the country.

Turning to the budget, UHM president Gejtu Tanti expressed his disappointment that the increases in price indices would not be reflected in January's cost of living increase and therefore, he said, workers and pensioners should be compensated.

Parliamentary Secretary Tonio Fenech said the government would evaluate everything before communicating its final decision on the budget to the social partners.