Issue link: https://maltatoday.uberflip.com/i/1498223
WRITING in 'The Guardian' a few days ago, Huw Pill, chief economist of the Bank of Eng- land insisted that workers and employees should stop trying to pass on rising costs by hik- ing prices or demanding better wages. In short British house- holds and businesses 'need to accept' they are poorer. He said that the UK is a big importer of natural gas and its price has gone up compared with British goods and ser- vices that are sold all over the world. "If what you're buying has gone up compared to what you are selling, you're going to be worse off", he wrote. In his opinion, Britons have to reluc- tantly accept they are worse off as passing on all expenses to customers will only continue to generate inflation. Obviously British trade unions did not like this point of view one bit. In the same week, the Cen- tral Bank of Malta (CBM) held its annual presentation of its annual report for 2022 and the speech delivered on the occa- sion by Edward Scicluna cur- rently the Governor of the Cen- tral Bank focused on the perils of a high level of inflation According to Scicluna, 'Core inflation was 5.3% at the end of December, and in February it went up to 5.6%. We are await- ing that it will peak, and that it will be brought down.' Core inflation is the increase in the cost of food and the ener- gy sector. He explained that the European Central Bank (ECB) mandate was to achieve price stability and to bring down in- flation to around 2%. Scicluna went on to say that although inflation in the euro area has peaked, it is still too high and therefore further fiscal tighten- ing is expected, adding that we need to do more to tackle infla- tion and must remain vigilant. Fiscal tightening is not some- thing that the Labour admin- istrations have ever worried unduly about since the first Joseph Muscat electoral victo- ry in 2013. Money was never a problem when the same Edward Scicluna was Finance Minister. The slogan 'L-aqwa żmien' was translated by many Labour sup- porters to mean that the state had somehow conjured up in- exhaustable sources of income. The government managed to dampen somehow what should have been the enormous up- ward pressure by intervening in the energy and fuel market by stabilising prices in this sector through extensive subsidies. Subsidising energy had gener- ally and superficially a very good effect. But this subsidy is across the board and, in my opinion, is not sustainable in the long run. Despite this subsidy, the last annual Cost Of Living Allow- ance (COLA) increase given to all employees by their employ- er as part of their salary - and worked out on a formula agreed upon by the social partners over thirty years ago - broke all re- cords. It was €9.90 per week for whole-time employee with pensioners getting an addi- tional €2.60. This constrained many businesses to increase their prices, hence continuing to push inflation up. This was an absolute record. In 2021, COLA stood at €1.75 while in 2020 COLA reached €3.49 a week. The cost-of-living adjustment is worked out by a fixed formula that considers the prices of a basket of items and services, many of which have spiralled this year. It takes in- to consideration the minimum wage and the past year's infla- tion. Finance Minister Clyde Caru- ana has already gone on record saying that had the govern- ment not intervened, the COLA could have reached around €25 a week. Over the past 10 years, with inflation fairly stable, COLA hardly ever exceeded €4. Since 1990, it has only gone beyond the €5 mark on three occasions. Applying the same formula for next year's COLA, - as the Trade Unions insist - means that it will reach some €13 a week. Inflation would certainly not have been tamed. One understands that nobody wants to get poorer but infla- tion must be tamed. Another issue is the subsidy of fuel across the board. Even this should be revisited. A generous minimum level of electricity consumption based on num- ber of persons in a household should be established. Above that electricity rates should not be subsidised. Wasting money with such generosity must be stopped. Keeping petrol retail prices at the current levels al- so does not make sense. Some- thing must be thought out. Policians of both political par- ties should - for once - be hon- est about the current inflation problem. Government should be prepared to curb wasting money in giveaways. We need 2 years of belt tightening, as Dom Mintoff usd to say. Otherwise from 'l-aqwa żmien', the inflation ogre will take over our daily life. A victory for the common man The decision of the Appeal Court that has ruled that the Lands Authoity cannot take back from the Gzira Local Council part of a public garden for use by a private fuel station is welcome. This decision alone vindi- cates the establishment of Lo- cal Councils so many years ago. Anyone who has never lived in Gzira cannot even imagine the importance that Gzira residents give to that only open space that is available for their recreation in their locality. It is a shame that the Mayor of Gzira who was elected on a La- bour Party ticket has been crit- icised for doing the job that the people elected him to do - keep the interest of his locality first and foremost. On the political front, Labour has made an auto-goal. The lawyer for the Lands Author- ity that lost the case was none other that Romina Attard, the Labour Party's president while reportedly the Gzira mayor, Conrad Borg Manché has even been criticised internally within the Labour Party establishment. On his part, he accused the La- bour Party of betraying its so- cialist principles over the issue. What I cannot understand - and nobody has even tried to explain - is why moving a small petrol station without any oth- er facilities from the main road should ential giving the end us- er some 900 square metres of land not just for use as a petrol station as existing but also for a car wash, a tyre vulcaniser sec- tion, a radiator flushing service and a shop. Sometimes the governments' generosity with particular indi- viduals knows no bounds - even when it is at the expense of the common man. 7 maltatoday | SUNDAY • 30 APRIL 2023 OPINION The inflation ogre Michael Falzon micfal45@gmail.com Central Bank Governor Edward Scicluna said authorities were waiting for inflation to peak