Editorial | Wednesday, 09 September 2009

The failings of a finance minister

There can be little doubt that the failings in the finances of the country are in part fuelled by the international crisis.
Yet the present financial vision of this country is surely also intrinsically linked to the workings of a finance minister.
The role of a finance minister is to steer the country through a financial strategy that takes into consideration the needs of the business community, and more importantly, the long- and short-term interests of the country’s citizens.
Minister Tonio Fenech may not be analysed enough for his role as our finance minister. Indeed, he has been overrated by the media – even though his ministerial performance to date has been manifestly below average.
Nowhere was this incompetence more clearly visible than in his recent decision to offer an amnesty to tax defaulters: a move which has understandably infuriated bona fide taxpayers.
Besides, Tonio Fenech, under the direction of the Prime Minister, has failed to understand that in the present financial downturn, the nature of all business is confidence. Confidence does not come about solely by talking about new projects – especially those that are not budgeted for – such as the Piano project. On the contrary: confidence stems from taking decisions which allow for some leeway and more importantly, some respite from diminished revenues, increased spending and significantly less purchasing power.
In the light of all this, Tonio Fenech has presided over some disastrous decisions, which have had a direct impact on purchasing power and a multiplier effect on consumer spending and confidence.
The electricity and water tariffs, introduced on the premise that Enemalta needed some serious balancing of its budget – in a year when we face the worst of the financial crisis – led to a plethora of ills across the board. The impact on business has been very serious.
As most international business editorials have observed, most politicians have never actually run a business; small wonder they have driven their economies into the ground.
In Malta, the unit cost of production has increased across the country, and businesses are now talking about axing staff complement. Worse still was to come, with the announcement of rising costs for consumers, as is the case with gas which has been privatised.
Furthermore, the long-awaited cuts in cargo handling costs are no longer talked about, and it is a mystery why the new combined Chamber of Commerce and Federation of Industry have not voiced their opinion about this long forgotten reform.
The whole administrative setup in government has also been geared to increase bureaucracy, and with it the costs of operating a business. The whole dynamics of working a business has been an impossible task with increased controls and less tax relief.
Added to all this, a bad autumn and winter in tourism arrivals which will definitely have serious repercussions on the employment sector in this field.
And now, the obligatory ‘Cost Of Living Increase’(COLA) is estimated at €7 per week for 2010. If imposed on businesses, this will lead to a crippling effect and work towards a definite cut in employment.
Prime Minister Lawrence Gonzi has a great task ahead of him in the next budget. There is clear evidence that the budget deficit for this year will be disastrous, and erase any advances made by the Gonzi administration in the last years.
The general state of the finances will also prove that the fiscal decisions taken by the cabinet and headed by Tonio Fenech had a deleterious effect on business confidence.
The country needs to breathe, and it needs the confidence to move on. The first step is to inject more cash into consumers’ hands, by reducing the government frenzy for collecting more and more.
The second way is to redirect cash away from ill-conceived projects, and towards to the major expense accounts in the Maltese middle class – private schooling and private health care.
The third step is to curb government spending by making government smaller and less cumbersome.
There is also a fourth: to find a suitable candidate for a new finance minister with the vision to battle the present crisis, and the strength to transform the civil service so that it no longer cripples the government’s ability to manoeuvre.


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09 September 2009


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