Pontification

The Malta Independent

Pontification

If there is one area where government is having undisputed success is in the growth of its ordinary revenue.

During the first six months of 2000 Government`s true` ordinary` revenue ( i.e. excluding revenue from sale of share and other privatisation income) increased by Lm49 million over 1999 and Lm65 million over 1998. This is a year or year increase of 20% and a two year increase of 28%. This is spectacular growth by any standard.

Allowing for 5% normal incremental growth the rest is revenue from new taxes and enforcement of old ones. Small wonder the` cash flow problem in the business sector is getting acute!

Lm 49 million increase in` ordinary revenue over 6 months is roughly the Lm100 million p.a. that in last election`s run-up` people were led to believe would flow easily into our Exchequer`s account as soon as we de-freeze the EU membership application. Instead the revenue is coming from a shift of resources from the private to the public sector to satisfy the latter`s insatiable demand for more and yet more. Recurrent expenditure increased yet another 6% in the first 6 months and with the bulk of the civil service agreement arrears maturing next year one can only anticipate acceleration of the trend.

The seriousness of the deficit problem can be gauged by the simple fact that in spite of taking into account the full Lm82 million` proceeds from the sale of Mid-Med Bank,` gross government debt increased from Lm677 million in June 1998 to Lm880 million in June 2000. A increase of` Lm213 which added to the extraordinary Lm82 million from the sale of Mid-Med give a structural finance gap of Lm293 million over the last two years. If you want another measure as to the size of the problem just realise that government debt has doubled over the last 4 ` years.

With the obstinate avoidance of tackling the problem at its source, i.e. the expenditure side of the public sector, the default solution has to be a melancholic choice of more debt, more taxes or deficit driven privatisations.

The first PN administration simply spent its way through the substantial hoarded resources left by a Labour administration that against professed Kenyesian teaching continued to store and tax even during the mid-80`s recession. The second PN administration piled up debts to keep up artificially the good-feel factor. This gave an incoming labour administration with a single seat parliamentary majority the impossible task of delivering its social promises whilst concurrently addressing the deficit.

This third PN administration is financing the structural deficit it created by taxing us and selling the family silver without addressing the real cause of the problem. When it runs out of taxing capacity and when it has no family silver yet to sell` what else will be left` to administer the real solution which this country is craving for`

The Minister of Finance this week accused me of pontificating and speaking with a sort of ex-cattedra infallibility.` Truly, counter- accusations of pontification come easier than providing real answers to tough questions.

Alfred Mifsud