11th July 2008
The Malta Independent - Friday Wisdom
The Malta Independent - Friday Wisdom
Surcharge
Subsidy
Many expressed doubts about whether the 30,000 households who are being exempted from the surcharge on their utility bills truly merit such subsidy or whether such list of social cases is effectively populated by households who in effect earn more than they declare and consequently are not only evading tax but getting a double whammy receiving undeserved subsidies on surcharges which are killing the rest of us.
If there is a reliable measure of what households truly earn it is their energy consumption pattern. It is not a perfect measure but still very indicative and in the absence of other evidence there is no doubt that high consumption is indicative of high earnings. So while gladly showing solidarity with genuine social cases who live too close to the breadline to afford paying the surcharge, it is only fair that opportunity is taken to weed out the blood suckers by checking that the subsidised energy consumption truly reflects the pattern of a deserving household.
Labour’s Extended Shadow Cabinet
The decision to include nearly each and every Labour MP in the shadow cabinet means that Joseph Muscat is treading carefully trying to solidify his position before proceeding to tough decisions – which however are inevitable if he is to make Labour electable.
This may be a wise move not to ruffle too many feathers before taking full grip of the party he now leads. But it is no long-term solution if the new leader really means to leave his positive mark on the party.
At some point in the not too distant future he has to start choosing his real shadow cabinet. Uncommitted voters need to identify themselves with faces that will form the executive of a designate Labour government.
Many expressed doubts about whether the 30,000 households who are being exempted from the surcharge on their utility bills truly merit such subsidy or whether such list of social cases is effectively populated by households who in effect earn more than they declare and consequently are not only evading tax but getting a double whammy receiving undeserved subsidies on surcharges which are killing the rest of us.
If there is a reliable measure of what households truly earn it is their energy consumption pattern. It is not a perfect measure but still very indicative and in the absence of other evidence there is no doubt that high consumption is indicative of high earnings. So while gladly showing solidarity with genuine social cases who live too close to the breadline to afford paying the surcharge, it is only fair that opportunity is taken to weed out the blood suckers by checking that the subsidised energy consumption truly reflects the pattern of a deserving household.
Labour’s Extended Shadow Cabinet
The decision to include nearly each and every Labour MP in the shadow cabinet means that Joseph Muscat is treading carefully trying to solidify his position before proceeding to tough decisions – which however are inevitable if he is to make Labour electable.
This may be a wise move not to ruffle too many feathers before taking full grip of the party he now leads. But it is no long-term solution if the new leader really means to leave his positive mark on the party.
At some point in the not too distant future he has to start choosing his real shadow cabinet. Uncommitted voters need to identify themselves with faces that will form the executive of a designate Labour government.
Secretary
General Selection Menu
The PN councillors were given a very restricted menu to choose their new secretary general from. Presumably in the PN’s case it does not really matter much who the secretary general is as behind him there is a brain bank which shapes the party strategy. MLP is different. The secretary general is basically the CEO with very thin resources behind him both to set the strategy as well as to help in the execution. Labour have much greater need than the PN for a resourceful person in role of secretary general.
When an incumbent is contested it sends a signal that not all is well with his performance. When an incumbent is vibrantly contested the way Jason Micallef seems likely (some five or six other claimants seem to be lining up for the post) then it is not a signal. It is writing on every wall that he failed and he should go.
Strengthening Democracy
Dr Joseph Muscat played his cards well when he told the Prime Minister that the pairing agreement can only be considered if it is included in a much wider package which strengthens democracy and addresses issues that have hurt Labour and abetted the PN in securing their extended stay in power.
The need to bring some discipline to party financing is supreme. Without it we will never have an effective democracy. I wrote extensively on this and still think that only total abolishment of political donations will work. Whatever threshold is established for donations still leaves an escape window to structure donations within such threshold.
Controls on what caretaker governments can do in the run up to elections is also another area where discipline is needed as in a two-horse race a few hundred votes make the difference between government and opposition.
However Labour would be more credible if its own statute is overhauled in parallel to ensure that the power of incumbency does not effectively weigh on who is elected to high party positions. The leadership election of 2003 and 2008 were both influenced by the power of incumbency. It should not be.
The Board of Discipline and Vigilance needs to be re-invented and renamed with its main task being the takeover of the party administration in the period between a general election and the general conference electing the leadership and the administration. The election commission should be answerable only to the board. During the rest of the time the board should be issuing codes of conduct and ethics for all in the party and making checks to ensure that such ethics are being adhered to. It should be a positive board armed with the authority of moral suasion rather the threat of discipline. Discipline will be reserved for the executive of the party only after the board would have exhausted all efforts to make moral suasion work.
Fair Value Destruction
The fair value accounting standard is forcing banks to make provisions on asset valuations which are by all measures fundamentally wrong and in the current circumstances severely undervalued. This is compounding problems and creating more uncertainty in the financial markets than needs be.
Fair value accounting is built on the principle that the market price is reflective of correct asset pricing. This notion has long been abandoned in the investment world where markets are known to overshoot in both directions so that market values tend to depart widely from the underlying fundamental values sometimes to the upside (irrational exuberance as in 1999/2000) and sometimes to the downside (irrational pessimism as at present).
It is time to review the fair value accounting principles. Banks that can show ability to hold on to assets till maturity should not be obliged to write fictitious losses leading to more pessimism and yet more fictitious losses. In such cases the concept need to change to long-term fair value rather than current market price.
Cheaper to Die
Liberalisation of the hearse service should make it cheaper to die. How about more liberalisation that makes it cheaper to live.
The PN councillors were given a very restricted menu to choose their new secretary general from. Presumably in the PN’s case it does not really matter much who the secretary general is as behind him there is a brain bank which shapes the party strategy. MLP is different. The secretary general is basically the CEO with very thin resources behind him both to set the strategy as well as to help in the execution. Labour have much greater need than the PN for a resourceful person in role of secretary general.
When an incumbent is contested it sends a signal that not all is well with his performance. When an incumbent is vibrantly contested the way Jason Micallef seems likely (some five or six other claimants seem to be lining up for the post) then it is not a signal. It is writing on every wall that he failed and he should go.
Strengthening Democracy
Dr Joseph Muscat played his cards well when he told the Prime Minister that the pairing agreement can only be considered if it is included in a much wider package which strengthens democracy and addresses issues that have hurt Labour and abetted the PN in securing their extended stay in power.
The need to bring some discipline to party financing is supreme. Without it we will never have an effective democracy. I wrote extensively on this and still think that only total abolishment of political donations will work. Whatever threshold is established for donations still leaves an escape window to structure donations within such threshold.
Controls on what caretaker governments can do in the run up to elections is also another area where discipline is needed as in a two-horse race a few hundred votes make the difference between government and opposition.
However Labour would be more credible if its own statute is overhauled in parallel to ensure that the power of incumbency does not effectively weigh on who is elected to high party positions. The leadership election of 2003 and 2008 were both influenced by the power of incumbency. It should not be.
The Board of Discipline and Vigilance needs to be re-invented and renamed with its main task being the takeover of the party administration in the period between a general election and the general conference electing the leadership and the administration. The election commission should be answerable only to the board. During the rest of the time the board should be issuing codes of conduct and ethics for all in the party and making checks to ensure that such ethics are being adhered to. It should be a positive board armed with the authority of moral suasion rather the threat of discipline. Discipline will be reserved for the executive of the party only after the board would have exhausted all efforts to make moral suasion work.
Fair Value Destruction
The fair value accounting standard is forcing banks to make provisions on asset valuations which are by all measures fundamentally wrong and in the current circumstances severely undervalued. This is compounding problems and creating more uncertainty in the financial markets than needs be.
Fair value accounting is built on the principle that the market price is reflective of correct asset pricing. This notion has long been abandoned in the investment world where markets are known to overshoot in both directions so that market values tend to depart widely from the underlying fundamental values sometimes to the upside (irrational exuberance as in 1999/2000) and sometimes to the downside (irrational pessimism as at present).
It is time to review the fair value accounting principles. Banks that can show ability to hold on to assets till maturity should not be obliged to write fictitious losses leading to more pessimism and yet more fictitious losses. In such cases the concept need to change to long-term fair value rather than current market price.
Cheaper to Die
Liberalisation of the hearse service should make it cheaper to die. How about more liberalisation that makes it cheaper to live.
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