True Lies

The Malta Independent on Sunday True Lies

When one tells a lie so persuasively and so repeatedly that one starts believing one`s own lie it becomes a True Lie. This is what is happening to the current administration. These are some examples of the True Lies being served almost daily on our media menu.

True Lie no. 1 is that the Labour administration is responsible for the growth of public debt to its current dizzy heights. Facts show otherwise. When elected to power in the last days of October 1996 Labour expected to find a budget deficit, as previewed in the approved` estimates,` of Lm42.6 million of which Lm6.2 was covered by grants leaving a borrowing gap of Lm36.4 million. Reality is that without any warning Labour found on its hands a totally unplanned deficit of Lm124.3 million` up from Lm43.1 million in 1995. Anyone who suggests that Labour built up this deficit in the last 2 months of 1996 believes in fairy tales.

So when Min John Dalli blames Labour` administration of 1997 and 1998 for accumulating national debt at a fast pace he should first explain how he expects,` a totally new and innocent administration finding a totally unplanned budget deficit three times that of the previous year, to break the growth of the deficit and start reducing it in just 22 months if it is not to break the social fabric of the country and bring it to chaos. And how could this be done with an opposition that was opposing even such simple tax measures, eventually kept on by the current administration,` as for example the tax of credit cards.

The answer is given by Min Dalli himself when in a more sober moment when reciting the speech for Budget 1999 he said ` Public finances are in very bad shape. It is an error to wrap this problem in cheap publicity.` To come near to finding a true solution one has to acknowledge that the current financial situation results from serious structural faults which were layered on each other over a long number of years`. And just in case anyone forgot Min Dalli has been in charge of public finance since February 1992,` barring the 22 month Labour interlude.

True Lie No. 2 is that through HSBC`s presence in Malta, investors took it for granted that the country had international banking standards.` The True Lie continues that this was also creating much more employment in all the other sectors.

HSBC had a presence in Malta through Midland Bank prior to its the acquisition of Mid-Med Bank.` This acquisition has not brought any visible foreign direct investment in any sector. Quite the contrary HSBC is aggressively promoting foreign portfolio investments in the parent organisation`s product portfolio.` To do so it even resorts to` misleading advertising to achieve its primary objective of stripping the Bank of as much as possible` of its deposit base.` May be they want to` ensure that a future Labour government can do as little damage as possible to HSBC`s ambition to control the deposit base so laboriously built by Mid-Med Bank and its predecessors.

True Lie No 3 is that nobody has effectively challenged the workings of the calculations leading to the price at which Mid-Med Bank was sold on the cheap to HSBC.` I have on innumerable occasions asked the Minister to explain to the nation why in `his` price calculation he taxed the discount factor by adding a 6% risk premium. This simple measure effectively halved the value of Mid-Med Bank. I am still waiting for an answer 30 months down the road.

True Lie No 4 is that money from privatisation would not go to reduce the deficit but to reduce the government`s need to borrow money. There is nothing untrue in this except in its pretension that this is good economic and financial management.` In fact it is highly irresponsible management. Privatisation revenues are one off revenues and should not be used to finance current operational deficits. Privatisation revenues should be applied to reduce public debt or to finance productive investments to replace the productive assets being privatised.

True Lie No. 5 is the claim that privatisation is being conducted in an open and transparent manner.` Forget for one moment that Mid-Med negotiations were concluded single-handedly under cover by the Minister of Finance. It was good to have soon after that a white paper assuring us` that henceforth privatisation would be handled by broad consensus in full transparency. This white paper was quickly forgotten. The public lotto is being privatised under terms which are unknown to any of us.` The bidding documents were restricted to the few interested bidders who could afford to pay Lm7500 to obtain a copy. Transparency demands that it should have been pasted on the internet to command maximum interest and to explain to the general public the strategies being adopted.

I ask myself what precautions are being taken to ensure that we do not end up with a gaming terminal in every street corner augmenting gaming and gambling far beyond the broad economic growth rate .` Has the government calculated the social cost that a sudden surge in gaming would cause through forced recourse to usury and other criminal practices` Has anyone made any calculation of the economic costs of such sudden surge in gaming as expenditure gets shifted from other consumption with much more economically effective multiplier effect.

These and many other` True Lies continue being reverberated day in day out until we start believing our own lies. Until villains become heroes, taxes become benefits, lies become truths, sinners become saints and offending and completely incompetent government` supposedly sees a sudden increase in` its mid-term popularity rating.` True Lies!