Save on the roundabouts and spend on the swings
Pity Joe Mizzi’s not around to find oil for DoctorElfridSant
Unbelievably (or perhaps not) DoctorElfridSant is still insisting that he was right, the rest of us were wrong, and his vote-catching – ahem – proposal to cut the electricity surcharge by half would have been great.
He told parliament, when he rose like phoenix from the ashes for the fourth time (or like Rasputin from the river) that this would have cost the government only between Lm10 million and Lm12 million, yet it would have spurred economic growth because people would have had more disposable income.
Gesu-Kristu-Spirtu-Santu. First of all, you see what I mean with my remark, posted some days ago, that this man gives numbers in euros only when he wants the amount to seem scandalously large, like with the amount of tax waived by the Inland Revenue. The rest of the time, because he can’t admit that Malta joined the eurozone against his advice, he uses old money.
Secondly, you have to look at the unsound reasoning behind his argument. The government doesn’t earn money. It garners funds through taxation. So to pay for something, it first has to cream that money off what people earn. To subsidise oil for the generation of electricity to the tune of Lm12 million, it has to collect an additional Lm12 million in taxes, or cut public spending by Lm12 million elsewhere. Either way, that Lm12 million is going to come out of people’s pockets. So what DoctorElfridSant is saying here is that it would have been a jolly good idea to take Lm12 million from people and give it back to them – or rather, to different people – in the form of an electricity subsidy, and that way, there will be more disposable income in the market.
He doesn’t see the hole in his reasoning. If you take Lm12 million from Peter in the form of income tax to avoid taking Lm12 million from Paul in the form of electricity payments, you are still taking Lm12 million out of the disposable income pool. More to the point, Paul will not have more disposable income through real earnings, but will have roughly the same disposable income that he had before the surcharge was introduced. Meanwhile, because the money taken from Peter was in the form of income tax, it is a direct assault on a real increase in disposable income through earnings. So DoctorElfridSant’s proposal would have discouraged the real growth of disposable income through earnings so as to maintain a false and static status quo of ‘disposable income’ created through the subsidy of electricity.
It’s reminiscent of CET.
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However, the surcharge has definitely eaten unto people’s purchasing power and this will continue to be further eroded come 1st July when the ‘inevitable’ (Tonio Fenech) rise in the surcharge will be introduced. People are also forgetting that petrol is in for a thumping rise too having been irresponsibly frozen for six months as has the surcharge. With oil at USD 130 a barrel, one can’t do otherwise though.
Well said. What applies to the MLP aplies still more to gonzipn. Spreading money here and there, forgive bills still unpaid, distributing money to “dear ones”, lowering income tax to the higher earners has to be recouped from somewhere else. It’s logic.
What is not logic is to waste money that could serve others.
Simple logic too?
Somehow i think that Sant’s vote catching promise to remove the surcharge backfired. To anybody with a modicum of sense in his or her head and who was considering given the guy another chance, this was confirmation that the guy had indeed lost the plot!
I said it in a previous post. It might just be that people are experiencing a sort of “boom” at the moment. What with a more than 19 per cent increase in social spending by the government. The Partit David-Copperstone Nazzjonalista is such an expert at creating an illusion of feel-good before elections. They even HEDGED (hedged???!!!) the price of oil…but only till the election is over! (Why not longer?) That is forward thinking, eh! Now after summer, or during it, when everyone is busy consuming huge intakes of fat at BBQ’s and throwing the spent coals in the sand, the government announces the new surcharge. Of course, it will be the young Minister of Finance who will have to face the people. Then, a while later, the Prime Minister-Saviour of Malta will appear, probably at the Independence Celebrations on the FOSOS to talk to us about vision and par idejn sodi. He will tell us that now is the time for sacrifices, so that we will not lose what we b’tant tbatija u sagrificcji ksibna. That no-one owns us a living. That we need to have a social pact (that is PN-jargon. Translateed it means: that wages need to be frozen). Oh we know the script so well!
@ Daphne
Your peter and paul example is way too simple. You make it sound like one is removing one tax and introducing another. It is much worse than that. It is introducing a tax to finance a subsidy, or else financing the subsidy through borrowing and thus increasing the deficit. The main difference is that, the subsidy being on a highly volatile raw material is very difficult to budget for (unless you enter in an expensive and/or risky hedge) when compared to changes in taxation. In fact, in this case the cost of the subsidy increased by over 30%, in a month.
In addition, one needs to bring into the equation the inefficiencies that subsidies create, and that will make the argument against subsidies even stronger. And also to know paul’s and peter’s consumption behaviour, to see how much the government will be able to recoup through the multiplier effect that Sant was so sure of.
@Gerald
No Maltese government has control over imported inflation. If anything our being in the EUR helps to mitigate. The government is the taxpayer. If we continue to subsidise energy consumption it leads to waste which we can ill afford.
Waste is funded by the taxpayer so ultimately the problem has to be faced. As a social democrat I feel we should subsidize normal consumption needed to keep the body and soul togteher and overtax high consumption. People with pool, aircodntioners and gas guzzling suv’s should pay the full brunt of the oil increase and the subsidy given for normal use.
AS proposal to cut the surcharge by half was fiscally irresponsible and socially regressive.
Remember nobody owes us a living.. we have to earn it!
@ P Portelli. True, nobody owes us a living. But time and time again, in the run up to the election both parties seem to be compete on who will dish out most handouts, who will provide most services for free, who will provide most subsidies etc.! I personally think that the greatest damage done by the Mintoff/KMB tenure was to the Maltese psyche ….. by ingraining in to the public’s mind the big socialist lie that the state owes everyone a living!
@ Albert
With all due respects, before you talk about hedging be sure what you are talking about. Did you know that a hedge is agreed with a financial institution for example, which means that there is a middle man between the supplier of oil and the buyer. Now we all know that for the middle man to stay in buisness he also needs to make some profit. Besides that very simple reason, hedging against oil is very complex and demanding, today more than ever. Have a look at this case and make sure you read it and understand it all well, most especially the last part on page 2:
http://www.businessweek.com/bwdaily/dnflash/content/may2008/db2008056_075377_page_2.htm
People like you should realise as soon as possible that no oil supplier is going to charge cheaper prices simply because we are Maltese. If you really want to cut on your energy bills, learn how to use energy more efficiently, that is the only way to save for now…and at the same time you will be investing in the enviroment.
@Ronnie
It’s unfair to blame Mintoff and KMB for making government look like Father Xmas. If anything Mintoff was too tight on the money purse and never incurred debts to gain votes.
If anything this culture thrived under Fenech Adami when public debt exploded much more than is justifed by infrastructure investments. In fact Gonzi had a tough time to roll it back.
People have to learn not to take whatever political parties promise at face value. They should demand plans to ensure that politicians explain how their programmes will be financed.
Please never forget that government does not have its own money to spend. It is all taxpayers money!!
@P. Portelli
It is true that EFA spent lots of money, Lm80
million of which is today enabling us to discuss
in this blog, apart from other millions for us
to be able to power the increasing demand of
electricity. Most of the millions spent were for capital
projects without which Malta would have remained
a third world country like it was in the
nissikkaw ic-cinturin days.
I am getting all confused. The Prime Minister Saviour of Malta is Dom Mintoff. Frozen wages are synonymous with KMB.
Why is Lawrence Gonzi being mixed up with this rotten pair ?
Nobody has ever claimed he was Is-Salvatur ta’ Malta. Far from it. He is only trying his damn best and being constantly critisised for doing so. As far as frozen wages are concerned this is not a PN script it is Maltese history. We had four whole years of them in the eighties thanks to Carmelo Zero’s utterly corrupt administration. But since then, Thank God and the Maltese voter, never again.
May I be allowed to strongly suggest that the Moderator bar tourists from contributing to this serious discussion.
[Moderator – I wouldn’t, because most of the people here are perfectly capable of defending their arguments.]
And now may I be allowed to say something with regards Fenech Adami and his economic competence. Fenech Adami like Gorg Borg Olivier before him is a statesman with a Vision for Malta. Gorg saw Malta as an Independent state against all odds. My uncle Joe, a staunch Nationalist if ever there was one, is on record as saying ” Gorg b’din l-imbierka Indipendenza tieghu ser joqtolna bil-guh. Minghajr l-Inglizi m’ahna xejn”. Borg Olivier the father of Malta Indipendenti was proven right. Ma mietnix bil-guh. Anzi tant kellna iekel wara l-Indipendenza li intlejna Gyms biex nippruvaw innehhu is-sonza. Eddie was committed to see Malta a full member of the EU. How right he was in his vision. Unfortunately he had to contend with an opposition party that was the only one in Europe to be anti EU. (Although it now seems that its future leader will be a MEP)
Eddie had no option but to “buy” the EU referendum at the taxpayer’s expense. In spite of the subsequent sacrifices we all had to endure the Maltese Nation will be eternally grateful to EFA for his vision and his wisdom in determining Malta’s future within the EU. Throughout our Islands’ recent history it has been the fate of the leaders of the PN to singlehandedly shoulder the burden of deciding on our country’s future. The MLP wanted Integration and Svizzera fil-Mediterran. The Maltese voted for a pair of safe hands every time it really mattered. Min jahseb li il-Maltin cwiec jizbalja bil-kbir.
Since 1996 the price of electricity never been out of the headlines
Mrs Caruana Galizia is suprised from where Dr sant would have got the money (between 10 to 12 million) if he had halfed the surchareWas she suprised from where Dr gonzi got the 12 million maltese liri when he bought Dar Malta in Brussels???
Did he told us from where he is going to bring those extra 20 million maltese liri if next november he will reduce income tax from 35 to 25 %???
By the way what happened to those HAMES BOZOZ? META SE JASLU?
Dar Malta cost 4 million not 12 million. Your ridiculous presence on this forum – priceless.
@ lino & anthony
Can you please be a bit less prejudiced?
Not everything good that happened in this country happenend thanks to PN. It is true that B.O. got independence but Mintoff was the true believer in independence after his integration bid failed. Till 1962 B.O. was still bidding for Dominion Status. And even after independence it was the change that left everything the same. It had to be the Mintoff government of 1971 and 1976 to change our economy from defence spending related to one based on commercial activities.
Of course EFA had the vision to make us EU members which unfortunately AS did not have. Of course EFA made very worthwhile infrastrucre investments which Mintoff should have done in the 1980’s when the world was gripped by recession.
But EFA spent much more than that. The debt in comparison to the GDP shot up because we financed also waste and consumption tru debt. Hats off to Lawrence Gonzi for managing to roll this back between 2004 and 2008. Thanks also to Alfed Sant who was so incompetent that he gave Gonzi a chance to make this hard roll back without losing electoral support.
The nationalists and the nation should be eternally gratefuly to AS incompetence for this. He easily qualifies to be the next President.
I believe that the new government is in a bit of a quandary. Having spent a considerable amount of money before the elections in splashing out funds on several pet projects (one can only have a look at the NSO stats for the first quarter of the year), it is now having to face the music. And with oil at USD 130 a barrel, the situation appears grim and dire.
All of you are wrong when you state that the govt is not subsidising the high price of oil. In fact, in two separate press conferences (I know coz I attended them and reported them), Austin Gatt explained that the govt was subsidising a considerable part of the surcharge as this would have shot up to around 90 per cent without the subsidy. If I’m not mistaken, a figure of around Lm 13 million was mentioned. With today’s prices, the surcharge should probably be around 200 per cent without subsidy.
We just have to wait and see but freezing the rate at 50 per cent for 6 months was gross fiscal irresponsibility at best.
The only thing that merits being called ” Doctor ” in the
MLP is their report on their electoral defeat – have you
seen in in The Times ?
@ lino. true we needed a serious upgrade of the country’s infrastructure. However I think that we ended up paying far too much for it. for example, yes we needed a hospital, but it need not cost us 250 Million.
yes i agree this government has a vision for the country, it’s the execution and the wastefulness which sometimes leave very much to be desired.
@ John
Dar Malta is called an investment, with time you will all have to eat your words about Dar Malta, it has already been estimated that a considerable capital gain has been done in the last two years. We are in Brussels to stay and what we invested in Dar Malta would have still had to be paid out in about 15 years of rent.
The tax cuts are consumption injections that will have limited harm on government tax income and a huge multiplier effect on the economy.
The halving of the tax surcharge is a pure electoral gimmick that could have seriously damaged the economy. You cannot solemnly promise to increase the subsidy up to any level no matter what, remember “even at $1,000 a barrel”??
Besides it is much more that 10-12 million LM. That expense was estimated before elections, when the oil was around 80-90 dollars per barrel. Today it is 135$/barrel, now you do the math of the substantial increase in subsidy cost, whereas the income tax cuts costs remained pretty much the same as when they were promised, and remember Gonzi never said at all costs, in fact being a responsible politician they are currently being revised.
@john
The 50% reduction in the surcharge was never something that could be accurately calculated because of the fluctuation of the price of oil, now at $135, as opposed to the $80 or less it was when that ridiculous proposal was made. Very few people now disagree that that was a crazy idea.
Placing the subsidy of a consumable which we burn away on the same plane as money spent on purchasing an asset whch appreciates in value and also generates income makes no sense.
With respect to the tax cuts, hopefully they will happen, but the difference is that they make economic sense, certainly as compared to the surcharge reduction. If the economy does badly the actual cost to the government will be lower (apart from the problems a weaker economy generates), if the economy stays as it is, there is a finite cost, and if the economy improves, although the amount of POTENTIAL revenue lost will increase, the actual cost of the measure will be mitigated by a general increase in tax collection because of higher incomes. Compare this to a measure, the surcharge subsidy, which is completely open-ended, uncontrollable, incentivises waste and has the potential to feed on itself to make itself grow through the incentivisation of waste.
As to the energy saving bulbs, they’ll happen. You should be using them already irrespective of government subsidies. They pay for themselves anyway. Get used to the idea, as time goes buy it will get more difficult to find the wasteful incandescent bulbs which are more expensive to run and generate more pollution and global warming.
Dear Melitensin of the Daphnic Tribe,
have a short break from Daphnic Lilliputian Politics and KNOW something about our coming (god forbid) new CONstitution. It is something this oracle will not tell you about, for she knows absolutely nothing of it and prefers to blindly act in faith:
http://www.youtube.com/watch?v=-Jg-qzJ-L_A
[Moderator – europarl, haven’t you got anything to say about Martin Schulz? If I’m not mistaken, he expelled one MEP from the Party of European Socialists, because that MEP happened to be making a scene about colleagues who were clocking in and sodding off. Didn’t he also block the vote for a referendum on the Treaty of Lisbon? I suppose that makes DocterJosephMuscat the lapdog of Europe’s lapdog par excellence.]
@john
So now you want the energy savers? I can imagine you clapping and waving your red flag at some pre election meeting and ridiculing the Govt’s initiative. If you are still of the same opinion as you were before the election, I will gladly take them off your hands.
@ John.
How can you compare a subsidy which would cost Lm 12 million a years to the purchase of an asset which would cost Lm 9 million? One of them is just an injection of money which in the very best scenario may reap a positive ripple effect (even though in reality it usually reaps a negative ripple effect) and the other is the purchase of an asset. Worst case scenario you sell the asset and any loss would be contained to the depreciation (if any) in the value of the asset.
Re: change in tax bands. The rationale is simple. Tax less. More disposable income which should lead to more expenditure. More expenditure means that money circulating is higher, more income from other forms of taxation such as VAT etc. i.e. it is highly probably that by lowering the tax band, government revenues would increase.
Malta is the modern country it is today because of Eddie Fenech Adami, and Gonzi is following in his footsteps. I remember a time during the 80’s when people had to work a four or three day week, and instead of overtime there was time in lieu. No one could complain, one had to lump it. The general workers union never took up the fight against socialist labour, becacause it was “married” to it.
Regarding Sant’s (convenient, let’s just pick a number) Lm12 million magic rabbit, there is none to pull out of the (godfather government’s) economic hat, except for sound and sustainable anti-inflation economic policies and non-regressive taxation.
This is accomplished by high employment (with higher added value) and greater levels of productivity combined with greater efficiencies against necessary expenditures. Then, because Malta imports mosts of its supplies and resources, as those resouces (like oil and cereal and meat) become more expensive (unless we import all of our needs from China) the local costs will go up, as will the costs of our exports, including tourism. The only way we can cope is: (a) reduce consumption and expenditure, and/or (b) reduce inefficiencies in production (like lost days in production from holidays or worker inefficiencies), increase productivity (like providing greater female participation to the workforce, or an economic stmulus, potentially like reduced income taxes), and adding greater value, once again, to our productivity (better value-added jobs, better use of IT and automated efficiencies, and better middle management where such is largely absent in Malta), and attracting greater direct foreign investment, as well as other matters that allow higher export values for the economy (like tourists who spend more, or who are accomodated in greater numbers–who also spend more; but where the costs to the infrastructure and the servicing of the product do not keep rising beyond the value of the exported product). And don’t do anything stupid to reduce market shares.
Now we return to DoctorElfridSant’s typical posture with his hand over the magic (taxpayer’s) hat. Every solution Sant proposes is isolated from the broader context that is required for sufficient analysis and resolution of the problem–which is not simply a decontextualized piece (like cutting the electricity surcharge). Oh yeah, it would be very nice for that expenditure out of my pocket to go down; ah, yes, but at what price? If I stick my finger into economy balloon, I still see my finger in the balloon, but the air has been shifted to inflat the balloon (imperceptively) to other regions of the same economy; however, the stimulus of my finger may break the balloon, if the effects of my action have not been taken into account–that might require matters not written into my over-simplified model of the balloon, which has its balance and fragilities. Oh well, ideas/realities are just ideas in someone’s head, until those unsound decontextualized ideas are instituted by the privlege and responsibilities of that someone’s being given executive powers by the electorate. In March 2008, rationality, grounded in reason, narrowly prevailed.
The Labour leadership row now spills over in Brussels:
Labour leadership contenders fume over Schulz endorsement of Muscat
and
L-indħil ta’ Schultz joħloq front wieħed kontra Joseph Musca
and in Labour’s media
http://maltastar.com/pages/msrv/msfullart.asp?an=21372
Moderator, yes, that’s the same Martin Schulz who famously calls his opponents “fascists”, when very few others are better suited to take the honour.
His big boots, once small ballet shoes, were inflated by Berslusconi when he parodied him as Commandante Schultz… But it seems Hogan’s Heroes was never a German TV staple and Herr Schulz made a scene that catapulted him to the top post of the Grand Socialist(ic) Coalition of Opportunist(ic) Collectivist(ic) Federalist(ic) Statists in the European Parliament.
You got me going, Moderator, but of course you want me to go there… yes, lapdog opportunism is the name of the game at PES and DoctorJosephMuscat has found a rather cosy niche for himself should his grandiose bid to lead the Malta branch OLs fail.
EU-Statists, please, to be sure…
Here’s Commandante Schulz in F-Action:
http://www.youtube.com/watch?v=QVeMBNB0cII
@ alex. The issue with Dar Malta was not if we haid paid too much for it or not; because i think we bought it at market price. The issue should have been, was it a purchase beyond our means; which I think it was.
When you are on an average salary you buy a 2-bedroom apartment somewhere not so exclusive and not a penthouse on the seafront.
Since the money to purchase Dar Malta most probably had to be borrowed, I think one should also factor in the interest which will be incurred over the years to pay for it and also the opportunity cost of the money being spent on Dar Malta instead of something else. When resources are scarce and finite, the country should prioritise.
The basic difference between the removal of the surcharge and the tax cuts is that one is a positive incentive and the other one is a negative incentive. Tax cuts will incentivise people to work more and thus create more work and employment; removal of the surcharge incentivises people to waste more.
@John – spending on prime real estate is an investment. Spending on oil subsidies to allow people to spend their money on other things instead (waste) is profligate. Please learn the difference between the two kinds of spending. There is a third difference: between these kinds of spending and cutting income tax. Cutting income tax reduces government revenue in the short term but increases it in the medium to long term, because people have (1) more incentive to work and earn and (2) more incentive to declare what they earn and (3) more disposable income to plough back into the economy.
@Europarl – you do bore on.
@ John
Resources are always scarce and finite. I agree with you that a country should prioritise, but from the little I know this seems as a good investment, it was only attacked because it is an ‘administrative expense’ due to Malta joining the EU.
If you want to question investments I think we should talk about the tens of millions invested in the past in public companies that didn’t give anything but debt in return, with the most obvious being the dockyards, and the many others.
John, your argument of comparing the government to a family is very scarce.
…but not as much as you, Daphne
@ alex. i think your comments were directed at me not John.
I also question the dubious investments like the Drydocks and other public companies. I have said time and time again on this blog that Government has no business running companies and this should be left solely to the private sector. The fact that the country was mismanaged on a massive scale in the 70s and 80s does not give the Government carte blanche to do what it likes, simply because everything will pale in comparison to the excesses of the 70s/80s.
You have to get out off your mentality that questioning anything done by the Government is tantamount to glorifying the opposition. I for one voted for this Government, but I find no problem saying where and when I think mistakes were made.
Besides i don’t think that any government should be in the business of property speculation.
@ronnie
I preety much agree with the first part of your comment, and I also think that being more objective will be more beneficial to discussions, so admit my faults. I mentioned other ‘investments’ becuase Dar Malta does not even come close to past bad investments, but some people want to make it look like a bad investment simply due to their hostility towards the EU.
Your last sentence is simply untrue. You speculate when you buy with the intention to either re-sell later on with the hope of making capital gains or to profit from renting out. The government invested in a property that will be using and at the same time it has the added benefit of a high probability of future capital gains, which will result in increasing the profit earned from renting out the space that the Maltese administration will not need to use.
@ alex. I only mentioned speculation because the major thrust of the argument of those saying it was a wise investment is that the property will appreciate in value with time.
Some call Dar Malta as an investment
THE Buying of dar malta was not planned in that year budget
So Dr Gonzi went to the parliament for emergency funding ,
That means taking a loan to buy Dar Malta
On loans one have to pay interest
So a 5% interest on a 10 million loan is costing the maltese taxpayers half a million interest each year
So the smallest country in the eu now have one of the biggest building in brussels
Fanfarunati??????
And what happened to the penthouse planed for our King richard cachia caruana?
Or even a penthous built on a 10 million building is to small for his ego????
Back with good news and bad news.
Good news: My substitutes didn’t fail me.
Bad news: If moderator is correct then I got an intruder
in my “office system”.
Moderator are you so positive that “Omar Bezzina’ or whoever used “my system” to post in your forum? I got a fixed IP. I am to contact my server about it.
In the meantime, I was doing a bit of research on OUR LADY OF MOUNT ETNA!I will ctach with the rest later.
@John
You are really suck at this. If you want to make a proper cost-benefit analysis you also include revenues in your equation.
It is true, you buy an asset on a loan, which brings with it interests costs, then also on the cost side there is maintenance and depreciation of the building, and finally the opportunity cost of not investing the amount loaned on another investment, usually we use the risk-free interest rate as sure forgone earnings.
Let us cross on the other side of the equation now John, the one you intentionally omit. On the income side you have imputed rent, which means the rent you had to pay if you did not own the building, you have capital gains, where in the property market the global average in the long-run is over 4%, with the amount being much higher in congested urban areas (this alone kills most of the interests), then you have profit from renting out, which again in a city like Brussels the demand is very high and thus revenue from renting becomes very profitable.
Those are pretty much the most important direct variables, then like everything else there are indirect variables that play a role.
Now when you have a value to all of these and other variables you can state if it was a waste or a good investment. From the limited info I have I think it was a good investment.
@ La Benoit, sitting in her “Gallarija” on Sunday.
You don’t seem to have much trust that Alfred Sant would have been up to facing the “present climate”, as you are “almost happy that Labour did not win this election”. I think that our Prime Minister is eagarly waiting for his sound advice.
“Disgusting and unacceptable tactics” are now taking place within The Malta Labour Party, with all that back stabbing.
May you get the promised light bulbs, and you may have mine also as I have been using energy saving lights for quite some time now. May they help you see the light!
@ Jenny
You must know that for La Benoit AS is not Sant by San Alfred.
If she reads the defeat report objectively La Benoit should know that the source of the problem was AS lack of credibility following his unorthodox re-election as leader following the 2003 defeat to promte policies which before were allahares qatt.
All the other failings identified as subsidiary to this and if there is any criticism to be made to the report it is precisely this. If list failings but gives little sense of prioratisation. It makes no effort to separate cause from effect.
However it is clear that Labour needs a new broom and only someone coming from the outside like GA can really deliver what Labour truly needs.
What La Benoit needs is not a lightbulb, but an ahemm – Well, there’s no way of putting it politely, but my guess is that the woman is somewhat frustrated, to put it mildly …