Issue link: https://maltatoday.uberflip.com/i/1419860
8 maltatoday | SUNDAY • 17 OCTOBER 2021 INTERVIEW 'Pre-election budget?' Absolutely not… Most newspaper headlines de- scribed Budget 2022 as a 'social budget'; but one which appears to pave the way to the next election. It has, in fact, been criticised as a 'pre-electoral budget'. How do you respond to that criticism? I went through all the newspa- per editorials this morning; and The Malta Independent, for in- stance, declared that this was not, in fact, a pre-electoral budget. I don't think it's a pre-electoral budget, either. If you look at the measures it introduced, you will see that we paid particular atten- tion to pensioners: because we needed to be certain that they could withstand the impact of inflation. As for the measures regarding the employment sector, these were introduced with care, and intended to build on what we al- ready have; to incentivize work- ers to work more hours, and ulti- mately increase their income. So if you look at how this budget was prepared, and what its narra- tive really is; you will see that it is absolutely not a pre-electoral budget. It is a calculated budget, with measures that are intended to address the challenges facing the country. Let's look at the individual measures: starting with the €1.75 increase in COLA. Many people have criticized this for being insufficient, given the extent of inflation affecting es- sential goods – especially food- stuffs. Don't they have a point? Is €1.75 a week really enough, to cope with today's prices? I am aware of this concern; be- cause I, too, do my weekly shop- ping like everyone else. But the COLA mechanism we have at present, give us precisely that sum. So regardless of whether the government is Labour, or Na- tionalist: that is the sum that the COLA mechanism would have dictated anyway. And precisely because I believe that this sum is not enough, for those who are struggling the most: immediately after an- nouncing this measure, I also added that I will be kick-starting a public consultation process, with all involved parties, to come up with a new mechanism. So that when we do have situations like today, when the cost of liv- ing is higher than normal, this new mechanism will allow us to give additional benefits to those who need them the most: over and above the existing COLA in- crease. How will this mechanism work, exactly? And to what income bracket will it be applied? Let me clear that a mechanism of this nature will not be applied to all income brackets across the board. It is a measure that will be aimed mostly at pensioners, and the most vulnerable categories of society; and which Government will also have to find the means to finance. As for how it will work, I have my own ideas about that; but rather than impose them from above, I want to discuss with all the relevant bodies, so that we bang heads together and even- tually arrive at a formula which would be acceptable to everyone. Surely, however, some will ar- gue that the cost of living is in- creasing for everybody; so why shouldn't everybody benefit from this new mechanism? Because there are brackets within society that can with- stand more than others. They can absorb some of the effects of inflation, and their salaries tend to increase by more than E1.75 a week; because their skills, and productivity, translate into sub- stantial wage increases. But then, there are other brack- ets whose wage-increases de- pend solely on what the govern- ment gives them; or else, whose wage-increases are so low – be- cause their productivity is low – that they can't cope with the cost of living. So the government – which is socially and morally obliged to take care of the most vulnerable in society – has to ensure that this income bracket is adequately protected. Another point you raised is the price of fuel. Is it true that gov- ernment did not enter into a hedging agreement; and that, for this reason, we are now at the mercy of volatile interna- tional market prices? There is a hedging agreement in place, which is due to expire next year. But the price of fuel has undeniably gone up; and now – when the prices are so high - is certainly not an opportune time to be entering into any new hedg- ing agreements. There are different ways to ap- proach this: some countries, for instance, are simply passing the cost-increases onto the consum- er. But from our end - as I said yesterday – the Government is ready to absorb this impact. So much so, that in my budget speech I specified that this im- pact may amount to 1.8% of the Gross Domestic Product. It makes no sense, in the pres- ent circumstances, to pass this expense onto the consumer. It could deal a blow that might undermine – or even kill – the country's current economic rhythm; not to mention the Re- covery Plan. Economically, then, it makes much more sense for the Government to absorb these costs itself, for the foreseeable fu- ture. Will you guarantee that utility A budget which raises benefits instead of taxes is usually a sure-fire sign that an election is imminent. But Finance Minister CLYDE CARUANA dismisses the idea that Budget 2022 is replete with unsustainable, election-winning promises: insisting that every measure has been calculated 'with prudence' Raphael Vassallo rvassallo@mediatoday.com.mt JAMES BIANCHI