Who’ll do the deciding?

This blog has followed the transformation of Professor Edward Scicluna from academic economist to Labour politician. Admittedly, I did not see the final outcome coming but — with the wisdom of hindsight — it did explain a few things which I had found perplexing at the time.

Let’s set aside Scicluna’s botched prediction that Malta would not make it into the eurozone. The man has held some strong views on the sustainability of various cases of state generosity. The shipyards? Subsidy of wages and low productivity for two decades. Tertiary education? Provided for free with a small salary for students to boot. Pensions? The most generous in Europe. The public sector? Over-staffed. He even seemed to have had a problem with the health sector being free.

Can’t say I ever found anything strange, in those opinions. Hell, I actually agree with them. What I found strange that Scicluna’s list did not include the complaint that in Malta fuel and energy were some of the most subsidised in Europe. Indeed, Scicluna led the charge against the hiking of tariffs which is what made him a strong contender to secure a place on the ballot paper as a Labour candidate. And that’s the point where the transformation from economist to politician occured.

Fair enough. But someone had to pop the question. MaltaToday’s Raphael Vassallo thankfully did:

Still, while Scicluna is scathing about the Gonzi’s administration’s economic skills, it remains debatable whether a Labour government will heed his own advice, and embark on the necessary reforms: which include a revision of the university stipend system, and also control of expenditure on public health. What does Edward Scicluna recommend for a political hot potato like stipends?

Labour will not heed Scicluna’s advice: the Party leader, as has become habitual before every election, is claiming the Government has the intention to start charging for primary health services once polling is over. But if Scicluna is in the wrong party that can hardly be held against him: he’s not the only one as this campaign has demonstrated. It’s his weasel answer which leaves one feeling shortchanged as he morphs once more, this time from politician back to economist:

“It would be very presumptuous of me to say that we should ‘do away’ with stipends,” he replies cautiously. “But even a recent European Commission document suggests that they are a burden on the system. But these are things the taxpayer has to decide. Does the taxpayer want to keep subsidising university students? If not, there are a number of ways the system can be revised. They could be converted to loans, or grants, or part-loans, part-grants… it’s not up to me to decide how to reform the system.”

“The taxpayer has to decide”? Unless there is a box in the income tax form where one expresses himself and which I have missed, taxpayers express themselves in elections. And they do not get to chose between whether they want tertiary education subsidised but between this party and that and this candidate and that. Once elected and given a mandate it’s the politician that has to take the decision, hopefully based on what he promised during the campaign.

Professor Scicluna, come June, that’ll probably be you.

Choices we make

The Governor of the Central Bank of Malta has commented on kick-starting the economy:

An increase in public investment should be preferred to lower taxation or higher benefits, should the government be considering a new economic stimulus, the Governor of the Central Bank has argued.

“An increased stimulus in the form of lower taxation or higher social benefits is not as cost effective as an increase in public investment expenditure. The latter is to be preferred since it tends to generate a smaller demand for imports, while raising the economy’s potential output,” Michael J. Bonello wrote in the Bank’s annual report.

He also insisted that fiscal prudence remains necessary to safeguard both Malta’s credit rating and investor confidence.

That should have been pretty obvious: political choices are always made at the expense of others. It’s only in Labour’s dream world that a government can, for example, increase benefits, slash energy prices, refund VAT on cars even if the courts deem the practice to have been legal and cut taxes while denigrating the Government because its response to the crisis has been proposing more capital projects and fiscal discipline.

Note also the Governor’s point on the fact that directly splashing out cash generates a greater demand for imports. Put crudely that means that the Maltese Government will be subsidising other countries’ economies. And the issue of safeguarding investor confidence. Can anyone put a price tag on that these days?

Fellow blogger Andrew Sciberras notes that tax cuts versus higher spending may very well be what will set apart the European Socialists and the People’s Party at a European level but then hangs on to little more than hope that Joseph Muscat will be able to defy not economics but simple logic and offer both. And considering that bounties will abound, we’ll probabl also get them on a silver platter.

Muscat has not learnt the lesson from 1996 when Labour offered a populist promise of less tax and — here’s the cliché — “putting money in people’s pockets” and then discovering it could not live up to that when faced with the realities of office. That may have given Labour an unexpected electoral victory and two years of government … followed by fifteen years of opposition. You campaign in poetry, Hilary Clinton is once repurted to have said, but you govern in prose.

Nationalists are green goblins

Thanks to Mark I discovered a point made by engineer Marco Cremona that driving an electric car does not make much of an environmental difference because whatever gains are made driving said vehicle are lost in inefficiencies in electricity generation at our power station.

Cremona’s was a reply to the news item that Nationalist MEP candidate Roberta Metsola Tedesco Triccas’ campaign would be a “green campaign”, where commuting is done in an electric car. Cremona said that the Nationalist candidate has “a poor grasp of green issues” because, as we all know, whenever the Nationalists decide to do something for the environment they’re either (a) naive, (b) have sinister, ulterior motives or (c) are just plagiarising ideas from the Green Party. A Nationalist car may run on biofuel but you can bet your last carbon credit it’s been made from boiled babies.

In any case, Nationalist candidates have to be talked out of green thoughts in case the electorate strays from the righteous path and turns its back on true prophets even though it might have turned away with the right message.

For obvious reasons, when I think electric car I do not think Tedesco-Triccas but Edward Mallia; the bearded professor was probably driving one while Roberta was still pedalling at her tricycle. Notwithstanding that, I do not recall Cremona or anyone telling Prof Mallia his grasp of “green issues” is poor.

Muscat at the General Conference

“Forget pairing,” Muscat told the government to a round of applause from the Labour delegates, supposedly in reaction to government’s procedural motion limiting votes in the House to one day of the week.

Umm, why the imperative? Who remembers pairing? It was on offer close to a year ago along with the other offer for the post of Speaker. Labour was not interested, Government moved on and Louis Galea will, in all likelihood, be presiding the House until the end of the current legislature. Only two weeks ago, Muscat was saying that there was “no chance of pairing for the time being”. “Forget pairing”? Thanks for reminding us.

That, it seems, was the highlight of Muscat’s speech to the Labour Conference. Or not. The highlight was the electricity tariffs. Well, no: the proposed St John’s museum. Or the road in Ghadira. Or maybe it was the call for Tonio Fenech to resign for having said that the government was not aware of any plans for redundancies at ST.

Maybe it was the banned play Stitching, the reminder that the Nationalist Party is not a liberal party. You’d be forgiven if you thought that, for that matter, neither the Labour Party is a liberal party. After all, during the debate leading to the “seismic changes” to the Party statute the debate was whether it’s a “democratic socialist” or a “social democratic” party. Potato, potatoe, tomato, tomatoe. Anyone spotted the “l” word there?

The transformation might well have taken place yesterday. Muscat said Labour “is the natural choice for progressive and liberals“. Er, whatever happened to the “moderates”? And if you want to hold Tonio Borg as a shining example of what a liberal isn’t it’s helpful to remind that the Foreign Minister’s understanding of “not liberal” is “not governed through a laissez-faire attitude but one where state regulation ensures the protection of those citizens in most need of protection and assistance”. Democratic socialist or social democrat, that would make Muscat even less of a liberal than Borg.

Muscat’s speech then turns to the goodies. There were promises to invest in just about anything that can soak up public money: families, children, women, the self-employed, research, alternative energy. And just in case you were wondering where the money will come from … keep wondering. Because taxes — on labour, on families, on investors — will also go down.

This country is still to learn the difference between policy and a policy objective but this time round Muscat does offer a policy which allows one to dig his teeth in: a mandatory system where those who lose their job benefit from a moratorium on payment lasting a year or two until he finds a new job. Banks often re-negotiate the terms of a loan in the case of people in that situation, after all they’re more interested in collecting their money rather than re-possessing homes. But making it mandatory is sure to raise the risk for a bank lending money to someone from the private sector. And as we know bank will always transfer the risk to the consumer.

Phew. A lengthy post and I’m not sure I’ve covered everything of the “historic” speech. Indeed, in a months time it would be truly historic if anyone managed to rattle off from memory all the points in covered.

Get Arnold to run campaigns

Recently the PM announced that, once Enemalta starts buying cheaper crude on the international market, electricity rates would go down. And Cassola smells a rat:

Dear Dr Gonzi, please pull the other one. The price of water and electricity rates should have been reduced at least 2-3 months ago to reflect the slump in international prices.

Now here is the time frame of the benefits that government will be dishing out in the coming weeks: between February and March the govenment will distribute the 5 energy saving bulbs to our households and then this will be followed by a reduction in water and electricity rates between March and April.

By the way, if you have not noticed it: European Parliament elections are to be held on 6 June!

Really, why don’t the Nationalists call the man to run their electoral campaign? Five months from the EP election is sure to leave an imprint in voters’ minds.

Meanwhile, instead of trying to read the minds of whoever will be masterminding the Nationalist Party’s campaign (which, I should remind, is still to be launched), Cassola should try to read or leaf through the energy acquis. There he’ll find a Directive obliging member states to stock 90 days’ consumption worth of oil products. That means, amongst other things, that Enemalta has oil stock from three months ago which it bought at the higher prices prevalent at that time. The intention of the Directive is energy security … and that, like all other forms of insurance, comes at a price.

So, rates “reduced at least 2-3 months ago to reflect the slump in international prices”? They were probably reduced not a moment too soon, not a moment too late.

And so it goes

The Times reports:

Parliament will next Thursday be discussing a Private Member’s Bill by Labour MP Leo Brincat calling for the enactment of a climate change law.

The Labour Party augured the proposal would be supported by both sides of the House. This would allow the political forces in Parliament together with non-governmental organisations, environmental organisations and leading stakeholders to nominate experts as soon as possible in order to start working on the drafting of the law.

I have already commented on this Bill: it is little more than pandering to the gallery and a disgraceful waste of paper. But the Times article mentions another feature of the bill which I had missed in my earlier posting. The bill obliges government to present a bill on climate change.

Why Leo Brincat, who presented this bill, did not go straight to the point and present what will now be the second bill is beyond me. Could it be that, like the rest of us, he hasn’t the vaguest idea of what it could include that is not already provided for in other laws?

Is that it?

An “outburst” was how MaltaToday’s “Latest news” section described it some time ago, upping the ante for an interview with Tonio Fenech, in which the Finance Minister supposedly mauled Edward Scicluna.

The interview is now online and it turns out to be as heated as an exchanged you’d expect between an accountant and an economist. The “outburst” turns out to be the following (translation mine):

“Professor Scicluna is one who likes to offer many opinions. He isn’t one I’d consider objective in his opinions. I consider him as one who, considering the kind of declarations he makes, tilts towards Labour.

“Meaning that you quoted not an economist who gives an objective analysis of the economy. The reality is that, in the current global circumstances, not only our country is running a deficit.

“At the same time, Professor Edward Scicluna is saying that we’re giving a too strong a jolt with the energy tariffs and that we should run a higher deficit by postponing bills.

“I think Professor Scicluna should be more consistent. Is running a deficit right or wrong? It couldn’t be that in 2008 it’s wrong because it causes investor uncertainty and in 2009 it is right becuase Labour said we should have postponed everything,” says Fenech.

“Professor Scicluna should make up his mind and be consistent in all that he effectively says because, so far, I can see no objectivity”.

Forget the objectivity bit and which side of the political spectrum Professor Scicluna happens to tilt — someone’s political loyalties are nobody’s business — consistency is the issue here. In a recent interview on MaltaToday, it should be remembered, Scicluna criticised Government’s two decade attempt to keep the shipyards afloat, our pension scheme as “the most generous in Europe”, free health for all, over-staffing in the public service, expensive university education for free and student stipends … and then a rise in the energy tariffs taghtu f’ghajnu.

That, and his Eurozone prediction gone wrong, are what Scicluna should be confronted with. Claims about which political party he favours only serves to give the likes of Illum and MaltaToday the proverbial straw to clutch on to.

Then again, it seems that the Minister is not very far off the mark. Latest edition of MaltaToday (not yet online) reports that Labour has approached Scicluna to stand on its ticket in the EP election in June.

Update: The MaltaToday article reporting that Scicluna is “actively considering” standing as a Labour candidate in June.

With a little help from our friends

It seems I can never say it often enough that, no, more money for renewable energy sources will not lower your electricity bills. There are inefficiencies and avoidable losses at Enemalta which, again, require investment which requires money. But as if things were not bad enough here’s the GWU giving a helping hand:

In reply to GWU’s statement with regards to Enemalta not abiding by an agreement reached with the union and which was released on Friday afternoon Enemalta said that the GWU’s comments are premature and that this type of negative attitude is definitely not going to lead to a serious discussion and hence a solution.

Enemalta PRO, Ian Vella said that this year the corporation reached an agreement with union officials that an incentive was to be paid in addition to the wages of employees within the credit control section if the latter met the targets in collecting arrears on electricity bills.

“One should note that this agreement is beyond any obligations that Enemalta Corporation agreed upon in the collective agreement and is being given out of good will by the management with the scope of improving productivity and the efficiency of the company. It is unacceptable that the GWU grabs any opportunity to convert initiatives intended to improve the corporation’s efficiency into new inefficiencies and excuses for work not being done as is rightly expected by the corporation’s clients.” declared the statement.

Here’s a management who thought of giving some incentive to staff to collect arrears and improve the corporation’s financial situation. Along comes the GWU and insists that this incentive was meant to be another automatic salary increment. There’s no need for Muscat’s “key performance indicators” to tell us that an increase like this, unconnected to productivity, does not help.

Either-or not both-and

Along with the belief that investment in renewable energy sources will reduce consumers’ energy bills, the belief that private investment in these sources can thrive, even with Government help, in an environment where conventional fuels are heavily subsidised is another article of a very mistaken faith.

Here’s Arnold Cassola:

According to the United Nations World Tourism Organization, economic turmoil is a prime cause of concern for European tourism, which was given little hope for growth in the coming months.

The Maltese authorities must keep all this in mind and promote actions that will encourage sustainable, cultural and eco-tourism in our country.

The sharp and backdated rise in electricity tariffs does not help at all in this respect.

Cassola is all good intentions and totally clueless. The price of energy from a renewable souce does not exist in a vacuum. The huge surge of interest in renewables worldwide, even on the part of the most business-minded, was, very simply that the rising price of oil started to make the price of energy from renewables more attractive.

We’re at a time where there is a general agreement on policy objectives. After all, who could be against growth in tourism and sustainable developement? We can also be in agreement on the policy means to get there. What we often fail to notice is that the means very often pull in different, if not opposing, directions.

Energy affordability and energy sustainability may be laudable policy objectives we can agree on. But the policies that get us there push things in different, if not opposite directions. It’s that stark choice that has to be made not whether to promote whatever actions Cassola has in mind.

Here come the lobbyists

With the energy tariffs heading north, it’s inevitable that Government is getting all sort of unsolicited advice about renewable energy sources. A letter in the Times:

I am a German editor (retired) who lives in Buġibba after visiting Malta since 1978 as a tourist and I am suffering from the enormous costs of electricity as much as all the Maltese do. When I visited Germany in February I got into contact with the Schiller group, which is constructing underwater turbines that produce very cheap electricity using the currents. I was convinced at once that this technology could solve the power problems of Malta for very reasonable prices and I started working for the Schiller group as a lobbyist.

Aside from the fact that a lobbyist can hardly be said to have no interest in the matter when will people start to understand that renewable energy sources does not equal cheaper energy bills? It requires investment and the returns can only be some time in the future especially when the price of oil is falling. So we’ll all keep “suffering from the enormous costs of electricity” if these turbines were installed and the only one financially better off would be probably be this lobbyist when he collects his likely commission.

There is another matter deserving mention. It seems that one source of considerable losses for Enemalta is not in the generation but in the distribution of electricity. Again investment is needed here. As I pointed out in the discussion with the Greens’ Carmel Cacopardo on investment choices in water resources (before he seemingly felt the heat and headed off to talk about domestic wells), with Government resources being limited the opportunity cost of one investment choice is often that you end up not investing in another laudable choice.

So the Government has money to invest in power infrastructure? If it has I’d rather it went to strengthening the distribution system rather than an underwater turbine system because if we invested in the latter we’d still be experiencing losses throughout the distribution system.

Ghaziz Joseph …

God exists and answers my prayers. After the report on Labour’s “manifestation” said that Toni Abela’s speech was an imaginary letter from Barack Obama to Joseph Muscat (stating off with “Għażiż Joseph“) I was hoping the text in all its glorious integrity would be published somewhere. It has … on Abela’s website no less. It is a reminder that, while the literary technique of an imaginary interlocutor has history going back at least to Plato, it works when in the right hands. And Abela’s are not exactly “par idejn sodi” in this regard. Unless, that is, he intended to write comedy all along.

Raphael Vassallo recently reminded that Obama has his own advisers and he’s not likely to need the Nationalist Party’s advice proferred in its ridiculous atempt at lecturing the president-elect. Now it is evident that, not only does Obama has advisers, they seem to have a lot of time on their hands to the point that they brief Obama on Malta’s economic situation (which, incidentally, tallies with Labour’s assessment) and they even have views on the raising of Enemalta’s tariffs!

At least, somebody gets it

Finally, there seems to be someone who realises that efficiency, like inefficiency, bears a cost:

Malta Employers’ Association president Pierre Fava was one of those who asked Infrastructure Minister Austin Gatt for an explanation of Enemalta’s losses during an MCESD meeting.

“He was his usual abrupt self and told me that the details were in the report.

But they weren’t,” he said.

Mr Fava described the 13 per cent registered losses as excessive and said that one of the obvious issues which could be tackled at once was Enemalta’s excessive workforce.

One of Muscat’s proposals to reduce energy bills was to have key performance indicators “to identify and drastically decrease inefficiencies of this state monopoly”. I had said that indicators can be hoped to fulfill the former not the latter. Decreasing inefficiencies is a managerial and, ultimately, a political problem.

Here is the political problem formulated for Muscat: if his key performance indicators show that Enemalta’s inefficiencies are due, in considerable part, to the size of its workforce, what would he do as PM?

Water, water everywhere

Arnold Cassola, the Chairperson of the Green Party, visited SmartCity Malta and from all the environmental design of the complex singled out the possibility to re-using treated wastewater from the nearby plant of Xghajra instead of dumping it out at sea as will happen with all our wastewater plants. This is fast becoming the Green’s fav environmental topic, seemingly less for its environmental merits than for the potential to serve as a stick to beat Government with for what the Greens perceive to be mismanagement of resources.

The subject was also one of Joseph Muscat’s proposals to reduce water and electricity bills about which I commented. A reply was forthcoming from Carmel Cacopardo, Green Party spokesman on sustainable development. Had Cacopardo concentrated less on being patronising by claiming that I’m not well-informed and more on the point I was trying to make, the exchange would have been more enlightening.

Political prices of economic problems

Malta Today interviews Professor Edward Scicluna. The interviewer did ask about Scicluna’s prediction, made only months before the formal decision was taken, that Malta would not join the Eurozone. Here’s the reaction the interviewer got:

Scicluna was sceptical on whether Malta could pass the euro test, not because of the inflation rate which he expected to go down (as it indeed did), but because he was concerned of the ever increasing ratio of public debt to GDP (how much of our wealth is taken up by debt), which was being paid off by one-off privatisations.

“It appeared clearly to me, at the time, that our economy could not potentially face an external economic shock successfully.”

One would expect that to be followed with “Thankfully, I was wrong and the Maltese economy showed itself capable in handling the new currency”. It wasn’t.

It’s historic … it comes and goes

Today’s the great day, with someone on the Times comment sections even drawing comparisons with the happenings of 1919 and 1958. In the Maltese blogosphere, the Greens’ Cassola says he’s ready to follow and Labour’s Keith Grech sees it as “historic”. I’m referring to the demonstration (not to be confused with “manifestation”) being organised by the GWU and for which all other unions are participating. Which, yes, is historic, if by historic you mean something that comes by every few years (and then, only when there is a Nationalist government.

Expenditure not revenue

Sounds incredible but sometimes even the Times carries an opinion piece that, at least, can claim to make some interesting points. The conclusion:

On a general note, I feel that too much emphasis is placed on revenue streams (taxes, tariffs etc) while not enough focus is made on a concerted effort to curb expenditure. Had overall expenditure been reduced by 2.5 per cent, there would have been a saving of €50 million and possibly no need to increase energy tariffs.

Prosy point

In 1997 the GWU decided to embark on an academic “scientific study” on the impact of the electricity price hikes announced that year, leaving the UHM to protest the measure alone. In 2008 the UHM will join the demonstration being organised by the GWU over the same issue.

Factoids given for the sake of gauging unions’ relative credibility.

Muscat replies

To the Ministers involved, of course, not Thermidor, calling their criticism of his “energy proposals” “not credible and irresponsible” (I can get the “not credible” bit but “irresponsible”? they knocked over his little sand castle or what?).

Sadly, there is not much in the reply only details such as that RO plants are operated to 50% of their capacity, that night rates are unavailable to domestic consumers (they are available to industry it seems) and something on electricity theft. There, that’s my bit of “irresponsibility” for the day.

Muscat’s proposals to reduce your bills

In his speech in reply to the Financial Estimates yesterday, Joseph Muscat came up with his proposals on the water and energy tariffs. It’s important to keep in mind that this was not meant as some blueprint of an energy policy but proposals on how to reduce water and electricity bills. Which makes a difference Muscat (and the Greens and GRTU before him) do not seem to understand: making use of renewables and increasing energy efficiency might reduce your bill (although probably not in the short- and medium-term) but it will not reduce the unit price at which electricity and water are sold to the consumer.

In a nutshell (Part II)

The Times rightly places women as the budget’s biggest winners. The tax arrangements should make combining family and career easier … for employees and employers. And if baby-making is a “Nationalist fixation” as Jacques recently described it, all well and good. It should be because, first of all, typical of all European countries, Malta’s aging demographic profile is something to be concerned about. But it’s a measure that equally addresses the other important issue that Malta has the lowest rate of women’s participation in the workforce, atypical of European countries.

In a nutshell (Part I)

Sloth is one of the seven deadly sins. And to open the “discussion” on the 2009 Financial Estimates I’ll have to refer to the Times which helpfully published a list of “winners” and “losers” in the 2009 Financial Estimates. Here it is.

Energy Politics and Energy Expertise

Thankfully, energy policy is finally attracting the attention it deserves. Yes, there are still surprises to be had at the pig-headedness (which is different from simply being misguided on the matter).

Recently at Stupidity Central, the comments section under the Times’s articles, a foreigner innocently asked why the Maltese expect not to pay the full price for fuels as their European counterparts do. The answer was that salaries in Malta are lower than in the rest of Europe … like Enemalta gets a discount when purchasing fuels on the international markets because it sells on a market where salaries are low.