Sent in by someone who calls himself I M Out.
A lot is being discussed about what the PN should be focussing on in the next few months. Some are well-intentioned comments. Most advice is coming from those who wish for the dissolution of the Party. It will be a headache for the future PN leadership to sift well-intentioned advice from the rest. I will eventually assess the situation myself but there will be plenty of time to do that later.
I will instead focus on what Labour should start doing. Labour will, in all probability, disregard my advice but it will do so at its own peril and the peril of our country. My focus will be mostly from an economic perspective. Having said that, there are other areas – including areas like the rule of law, freedom of speech, the environment – which the government should also be focussing on.
I consider the first nine years of the Labour government as a long honeymoon. Just like newlyweds reap the work they carried out prior to their wedding celebrations, people close to Labour took advantage of all the work done prior to their 2013 electoral victory. They were lucky enough to find a country still in a very good state despite the global economic turmoil of 2009. They were lucky enough to capitalise from the industries created by previous PN governments, to benefit from millions in EU funds, from the relatively stable global economic environment and from the significantly lower oil and gas prices.
However, the honeymoon will soon be over and the real test will start. Let’s remember the two criteria for excessive deficit procedures: the budget deficit must not exceed 3% of GDP and public debt must not exceed 60% of GDP.
GDP for 2021 stood at €14.5bn. We have had budget deficits for the past two years and, at this rate, they will soon become the order of the day. The 2021 budget deficit was close to €1.2bn or 8% of GDP. As at the end of February 2022, public debt has increased to €8.4bn or 58% of GDP. Unless the government finds ways to increase its revenues or to decrease its expenditure, we will soon hit the brick wall.
So, let’s start from the government revenue side. The only way to increase government revenue other than by increasing taxes (which according to their electoral programme is ruled out) is through wealth creation. As previously stated, the Labour government fully capitalised on the industries created by previous PN governments. Most of all, the financial services sector and the closely-related gaming sector were the source of so much wealth for so many years. Few are realising that these are now dying industries. The relatively recent requirement to identify and register ultimate beneficial owners of companies has already had a negative effect on the industry. The FATF grey listing, the shell company directive and plans for tax harmonisation will soon hit the industry even harder. People in the industry worryingly speak of a significant number of companies which have been, or are, in the process of liquidation.
Another pillar of the Maltese economy – the tourism industry – is also on the decline. Besides the effects of Covid, tourism will soon start feeling the effects of the recession in Europe.
The correlation of the above industries with the construction industry should also be studied. Those industries are the source of employment of a significant number of foreigners – if those industries fail, many foreigners will ‘go bekk to der cuntry’ resulting in a significant number of empty concrete boxes. The result? A collapse of the construction industry as well.
Therefore, dear Mr Government, it is now high time to start creating new economic sectors to generate new revenue streams and new employment opportunities. Your golden passports programme and blockchain industries were simply put – a complete failure. You can look at the PN electoral programme for some suggestions. Whilst at it, please do all your best to get Malta off the FATF’s grey list as soon as possible, to save the little that is left of our financial services industry.
Now on to the government expenditure side. The only visions that I see when speaking about government expenditure under Labour are pigs at the trough. The Labour government simply has no infrastructural projects to boast about and worryingly, in the next few years, the government will have to budget more capital expenditure (rather than recurrent expenditure) as our infrastructure will soon collapse. I simply cannot imagine how the government will fund its electoral promises in relation to the environment.
The significant increase of persons employed with the public sector and the various “consultancies” will sooner or later have a bearing on government recurrent expenditure. The imminent collapse of Air Malta will also probably result in more people employed with the government. When compared to the 190,000 full-time jobs in the private sector, the current 50,000 public sector jobs are already not sustainable. My advice here is for the government to immediately stop this trend.
Higher commodity prices will also affect government expenditure. Higher oil and gas prices seem to be on the horizon and higher expenditure on electricity generation will obviously be unsustainable without higher electricity prices. How long will the government continue to subsidise these prices? We also need to see whether Labour will be able to sustain petrol and diesel at current prices. Or will it continue subsidising them?
Higher electricity costs, higher transport costs, higher grain prices and higher import costs will all lead to higher materials cost and the related effects on the cost of living. Will the government continue sending cheques every few months or will it realise that this government expenditure is only a short-term electoral gimmick which will only see more poverty amongst us in the longer-term? Same applies to the Covid grants – how long will the government continue with this expenditure?
After nine years in government, Labour should stop dishing out favours to its supporters. Compensation for former “injustices”, creating cushy jobs for “Ġaħan”, multiple consultancies for those within the inner circle (not to mention the hidden corrupt hand-outs) – that is what it seems it has been doing for the past nine years. After nine years in government, Labour should stop being populist, stop focussing on the Labour Party and start governing. Governing for the benefit of all.