Maltastar
Minister John Dalli kept his cool parrying criticism of financial misreporting, using his accounting technical abilities to justify the unjustifiable. This contrasts quite strongly with the panic exposed by the rest of the government regarding hard criticism which the Ombudsman sent their way.
May be they are both reacting differently to the accumulating evidence of loss of support for the government and its policies. Whilst John Dalli’s aspirations for party leadership could well be served by a poor showing at the next electoral tests, the rest are panicking in the face of this adversity.
John Dalli maintains that he had no option but to consider dividends and tax payments by MIA as ordinary revenue. This might impress the uninformed but cuts no real ice. Fact is that government revenue can be classified in three different ways: ordinary revenue, extraordinary revenue and financing revenue.
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Now the deception is set to grow even further. The Foundation for Tomorrow Schools has announced that it has concluded local bank financing for building public schools. This is social capital expenditure financed normally through the Consolidated Fund and impacting on the structural deficit. By hiving off this financing to a separate Foundation, this expenditure will avoid direct impact on the structural deficit but it is still a debt which will have to be made good by a future labour government.
The Central Bank, which in its conduct of monetary policy takes into account the size of the public sector deficit, cannot remain disinterested in these artificial schemes, especially as it is involving large scale bank finance by licensed banks. The Central Bank, if it truly cherishes its independence in conducting its monetary policy, should at the very least show its displeasure for such schemes, use moral suasion to deter licensed bank from complicity in covering up the true extent of the public deficit, and sharpen its monetary policy to counter-act government abuse of fiscal policy for electoral purposes.
This is the time for Monetary Authorities (i.e. the Central Bank) to show their true mettle or is their autonomy only for the theory of the statute book?
Minister John Dalli kept his cool parrying criticism of financial misreporting, using his accounting technical abilities to justify the unjustifiable. This contrasts quite strongly with the panic exposed by the rest of the government regarding hard criticism which the Ombudsman sent their way.
May be they are both reacting differently to the accumulating evidence of loss of support for the government and its policies. Whilst John Dalli’s aspirations for party leadership could well be served by a poor showing at the next electoral tests, the rest are panicking in the face of this adversity.
John Dalli maintains that he had no option but to consider dividends and tax payments by MIA as ordinary revenue. This might impress the uninformed but cuts no real ice. Fact is that government revenue can be classified in three different ways: ordinary revenue, extraordinary revenue and financing revenue.
“But the scheme which Minister Dalli forced MIA into before its privatisation generated another Lm21 million which was classified as ordinary revenue. This is technically correct but substantially, it is heresy”
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MIA pure privatisation revenue amounted to Lm19 million and this has been correctly classified as financing revenue. But in so doing it should make John Dalli blush when he had repeatedly claimed that that he was so clever that he sold 40% of MIA for Lm40 million and now we know that really it was Lm19 million.
In no country which holds its Ministers accountable through active and effective democratic checks would a Minister make false statements knowingly and be allowed to carry on with impunity. Just a few weeks back in a live TV debate with me Minister Dalli had again lied knowingly when cornered on four counts – see my article Comic Tragedy published19th July 2002 in the Malta Independent Friday Wisdom easily accessible through www.alfredmifsud.com. Bare-faced lying has become as way of life for this government who then unashamedly pretends that it is defending our moral values.
But the scheme which Minister Dalli forced MIA into before its privatisation generated another Lm21 million which was classified as ordinary revenue. This is technically correct but substantially, it is heresy. At a time when accounting standards are moving in the direction where substance overrides technicalities, John Dalli prefers technicalities to override substance. This is understandable, as while technicalities can be manipulated, substance cannot.
In no country which holds its Ministers accountable through active and effective democratic checks would a Minister make false statements knowingly and be allowed to carry on with impunity. Just a few weeks back in a live TV debate with me Minister Dalli had again lied knowingly when cornered on four counts – see my article Comic Tragedy published
But the scheme which Minister Dalli forced MIA into before its privatisation generated another Lm21 million which was classified as ordinary revenue. This is technically correct but substantially, it is heresy. At a time when accounting standards are moving in the direction where substance overrides technicalities, John Dalli prefers technicalities to override substance. This is understandable, as while technicalities can be manipulated, substance cannot.
“The substance is that there is nothing ordinary about these Lm21 million“
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The substance is that there is nothing ordinary about these Lm21 million. They are one-off revenue engineered through a structured deal to abuse the defects of government accounting systems. They should have been classified as extraordinary revenue (just as, for example, revenue released from the sinking funds is classified) without misrepresenting the true extent of the structural deficit.
If it were possible to solve government deficit through such structured deals, then I can give many other suggestions how the whole deficit could be magically resolved through manipulations of technicalities. But reality would still stay with all its problems. And reality is that the true structural deficit for the seven months to July has reached Lm93 million up from Lm56 in 1998. So much for solving the deficit! So much for being on the right track! Cool technical manipulation of figures is not a solution.
If it were possible to solve government deficit through such structured deals, then I can give many other suggestions how the whole deficit could be magically resolved through manipulations of technicalities. But reality would still stay with all its problems. And reality is that the true structural deficit for the seven months to July has reached Lm93 million up from Lm56 in 1998. So much for solving the deficit! So much for being on the right track! Cool technical manipulation of figures is not a solution.
The above Table sourced from official NSO figures shows the performance of government finance in the first seven months of each year from 1998 to 2002.
Even if hypothetically one were to accept the extraordinary Lm21 million as ordinary revenue, something I strongly disagree with, the deficit would, at Lm72 million, still be Lm16 million (29%) higher than where Labour left it in 1998. In reality it is Lm37 million (66%) higher and that’s just in 7 months.
“The Central Bank, if it truly cherishes its independence in conducting its monetary policy, should at the very least show its displeasure for such schemes“
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Now the deception is set to grow even further. The Foundation for Tomorrow Schools has announced that it has concluded local bank financing for building public schools. This is social capital expenditure financed normally through the Consolidated Fund and impacting on the structural deficit. By hiving off this financing to a separate Foundation, this expenditure will avoid direct impact on the structural deficit but it is still a debt which will have to be made good by a future labour government.
The Central Bank, which in its conduct of monetary policy takes into account the size of the public sector deficit, cannot remain disinterested in these artificial schemes, especially as it is involving large scale bank finance by licensed banks. The Central Bank, if it truly cherishes its independence in conducting its monetary policy, should at the very least show its displeasure for such schemes, use moral suasion to deter licensed bank from complicity in covering up the true extent of the public deficit, and sharpen its monetary policy to counter-act government abuse of fiscal policy for electoral purposes.
This is the time for Monetary Authorities (i.e. the Central Bank) to show their true mettle or is their autonomy only for the theory of the statute book?
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