Opposition finance spokesman Charles Mangion said yesterday that the government's deficit reduction targets were unsustainable in the current climate of an under-performing economy, rising costs and low consumption.
Speaking during the last day of the budget debate, he said that several pillars of the economy, including manufacturing and tourism, were under-performing. Industrial competitiveness had declined, as had Malta's share of world trade.
At the same time the tax burden had got heavier, raising costs and keeping consumer demand low.
Given current circumstances, it was difficult to see how the government could sustain the deficit reduction targets it had set.
He pointed out that the Central Bank bought its property from the government for Lm4 million on December 31 last year for the government to meet the deficit targets.
The government was saying that its costs would rise by only 1.7 per cent next year. He hoped this would be the case because for the past few years, costs had always increased by five to six per cent more than economic growth.
Over the past year revenue from taxation had risen by 5.3 per cent, a far steeper growth than that for GDP, which meant a heavier burden on the people.
The government was pointing to a rise in VAT revenue as a pointer of stronger commercial activity. But allowance needed to be made for the fact that after Malta joined the EU, VAT started being charged at the point of sale and revenue of some Lm15 million was therefore deferred by a year. When this was factored in, revenue from VAT was actually less.
The increase in government revenue this year and last year was also influenced by the carrying over of some of the effects of the rise in VAT, tariffs rises, the eco-contribution of Lm7 million and the revenue from the VAT amnesty on arrears. New stocks had been issued at a slightly higher yield but with a premium, and millions of liri had been taken from the sinking fund.
For next year the government had already earmarked revenue of Lm20 million from the sale of Pender Place and land at Ta' Qali for the US embassy.
But how was the government projecting a 3.5 per cent increase in tax revenue when the economy was projected to rise by just 1.1 per cent?
It would appear that the government's boasting that the deficit was under control was hollow and would last only until Malta was admitted into the eurozone. That deficit control was unsustainable could be seen also in the outlay that would have to be made over the coming years on the new collective agreement for the civil service.
Dr Mangion said that while wage inflation was said to have been two per cent, analysis showed that the real growth was only 0.9 per cent, which was below the inflation rate. The purchasing power of most families had therefore decreased. What would be the impact of the new power surcharge, which would be raised monthly?
He hit out at the way how the government, through Enemalta, was making its oil purchases, and how no hedging had been made before prices rose.
The government had consistently said it needed to recoup a total of Lm59 million in oil purchases, yet revenue from the surcharge would reach Lm64 million. The MLP had published its detailed analysis of costings and the constituted bodies would do well to study it.
Dr Mangion observed that last year the Prime Minister had launched a venture capital fund, but it was nowhere to be seen in the budget for next year.
He reiterated Labour's view that manufacturing industry still had a future in Malta, but that could only happen through action to help existing firms and measures to attract new foreign direct investment. In this context, Labour agreed with several of the FOI's ideas.
Turning to tourism, Dr Mangion said this sector was lacking strategy and even the government's target to raise arrivals by 50,000 this year had not been attained. Labour would be launching its own document on tourism.
He asked where the projected revenue of Lm136 million from privatisation next year would come from. What did the government intend privatising? Would it privatise Air Malta or parts of it? It bore asking if, after 18 years of rule, the government would be leaving the country anything that had been set up by Labour administrations.
Labour MP Helena Dalli said that in its efforts to reduce the size of the public service, the government was ignoring the abilities of people in different sectors and work was being farmed out to private companies at higher cost.
Public Broadcasting Services was a case in point. Experienced people had been sent to other government departments, effectively transferring costs from one pocket to another, while their work was being done by contractors.
Money would have been saved only if there had been serious restructuring.
Public Investments Minister Austin Gatt needed to show greater sensitivity to the workers' needs. He had recently said more would be laid off from the shipyards, and yet so many foreigners were being brought over to the 'yard that it had even issued a call for tenders for accommodation services.
The way deployment in the civil service was being made left much to be desired. An assistant director in the education division was made director general of the courts without any experience of how the courts worked. Yet officials who had years of courts experience were sidelined.
The civil service, Ms Dalli said, was becoming top-heavy with many generals and few soldiers. Morale was continuing to fall because employees in corporations and agencies, also paid from taxpayers' money, were paid more for doing the same work.
She said Dr Gatt did not have a leg to stand on in his argument that the opposition was criticising PBS because it had its own station. Did the minister expect the opposition not to criticise PBS because of this? The minister seemed to be interested only in ratings. Education Minister Louis Galea, who used to be responsible for PBS, used to say that PBS should not be administered on a commercial basis because of the role it had as a national station. Had this policy been changed? Clearly the policy should not be changed with a change of minister.
Ms Dalli asked how 90 per cent of contracts with PBS involved people who used to be, and still were, supporters of the Nationalist Party. Even coverage of the avian flu simulation exercise had been awarded to a relative of the minister when this work should have been done by the PBS newsroom.
Was this the sort of restructuring that the government had wanted?
Ms Dalli attacked the selection process for the appointment of the PBS head of news, noting that the minister ignored the Ombudsman who agreed that Charles Flores should have been given the position after having been selected by an independent board. A second selection process was held, but that too had been stopped and the newsroom was still without a head.
Turning to other aspects of the civil service, Ms Dalli said it was shameful that the long-promised introduction of accruals accounting had still not come about.
She asked what had become of the Public Service Bill, which had been given a first reading years ago but never moved for debate. Would the government ever move a whistle blower bill as a means to improve accountability? Silvio Parnis (MLP) said it was difficult to reconcile what the Prime Minister said about a better life with what the people were actually going through. Certainly, the government could have done more to help people who had lost their jobs.
It was not fair, he said, that senior citizens were being sent tax bills which went back many years.
He said that at St Vincent de Paule Residence the roof of a newly-refurbished hall had leaked heavily after the first rain, and the newly-installed lifts were inoperative.
Noel Farrugia (MLP) said the government had still not paid the promised subsidies on meat production for the first half of the year. The paying agency was not accountable, its staff was half what it should be, and it was farmers and breeders who were suffering.
The government had failed to submit the export refunds scheme to the EU for the period May to December 2004 and January to December 2005. What fines would Malta be liable to as a result? This was no way to sustain the Maltese agricultural sector's competitiveness.
It was very bad that after all this time the country did not yet have the set-up to access the funds it was eligible for.