Backbench with a view

Tomorrow, John Dalli will be on the backbench listening to Lawrence Gonzi as he reads his budget speech. Here he speaks about what he expects of this budget, and of the next two years of Nationalist rule

From the backbench seat, the former Nationalist finance minister will tomorrow watch his party leader reading the speech that, year in, year out, still somehow grips the nation as people brace up for the worst shocks, jolts and, if lucky, some good news.
For a whole decade, John Dalli has been the prime mover on budget day, carrying the black box of tricks meant to heal the country’s economic woes with bad-tasting medicine.
It doesn’t take a veteran finance surgeon to realise that Lawrence Gonzi’s prescription tomorrow will be anything but sweet. With the water and electricity surcharge stepped up to 55 per cent just a week ago, one can only expect the prime minister to continue tightening our belts, perhaps using vocabulary slightly more fashionable than Mintoff’s.
To the question of what kind of budget speech he would prepare if he were still in charge of finance, Dalli craftily says he no longer has access to the facts and figures he used to have as minister, although he has some generic ideas.
“To make these kind of decisions you need to have all the facts and figures in your hand, which I don’t have, so I can’t make a deep analysis as I used to make before,” he says in what sounds like a bit of false humility. “The worst thing is to read statistics and give a superficial interpretation of them. However it seems clear that the country needs a catalyst to give confidence back to the people so that they reactivate economic activity. People need to look at their future with much more confidence. There are substantial cash flow problems for several entrepreneurs and there is the problem of bureaucracy, not a small problem as it seems to be choking the country all the time. The measures that need to be taken include a boost for business, some measures that would give better access to finance to small businesses, and more investment in research to be used to participate in Europe wide research programmes which we can then use to regenerate our economic activity.”
Narrowing down his diagnosis, it is health, according to Dalli, the area where government has to reform immediately, cut down on costs and provide some health services at a price, other than taxes.
“I always say that one of the biggest problems we have to face as a country is health,” he says. “That’s what government has to tackle. It has to tackle it in the right manner, and at the earliest possible. I hope we don’t miss our chance, yet again, in this budget, in failing to do something about it, because if we do nothing now I can’t see government doing anything with an election round the corner. It won’t happen if not now, in my opinion. It has to be tackled now. I think there should be some kind of cost-sharing for some services being offered for free at St Luke’s. We’ve discussed a lot of things when I was minister, we had made many proposals, and I just wish and hope that these proposals are taken a step ahead in this budget.”
To all those earning meagre salaries putting them just above the tax free bracket, Dalli makes it clear they can forget about tax revisions in this budget. The deficit works against them, and that is government’s priority right now, not individuals’ income. And according to Dalli, the only political priority left for the government now is to win the next election.
“After the EU accession priority has been achieved, public finances understandably are now the government’s priority,” he says. “It is in the country’s interest to reduce the deficit. We always took the approach of attacking the deficit in as gradual manner as possible. Today, that the political priority is not as much as it was before – now the only political priority is to win the next election – the deficit is very high on the government’s agenda.”
While this year government reaped a Lm25 million increase in revenue from VAT increases introduced a year ago, this year it will have to keep reducing deficit figures, cutting down on public expenditure and somehow boosting the economy.
“Next year the deficit will have to be reduced through economic growth, but will we have economic growth?” Dalli says. “There must also be a reduction in public expenditure. Now we have to be careful here because this has nothing to do with the populist idea of government expenditure on travel or receptions… these are trivialities (hmerijiet). Government will not save anything on that, and it would be ridiculous if it had to exaggerate on cutting that kind of expenditure. I always said cutting expenditure means targeting social services and wages.”
Dalli agrees with the surcharge, even though this is inevitably another kick in the teeth to people’s spending power which is stifling the economy.
“I don’t just look at it in terms of the 55 per cent surcharge,” he says. “I take into account the rising cost of fuel and what the surcharge would have been if the government opted to adjust energy prices to set off the extra cost in one go. I am pleased that in its deliberations, government did not take Enemalta’s financial interest as the only factor in the equation.”
But he isn’t satisfied with the way Enemalta is buying its oil either.
“If you ask me if I’m satisfied, I don’t how it is being procured, so I can’t say I’m satisfied because I don’t know how it is being bought.”
He does stick to his guns about hedging by dismissing “all this talk” about it. “I had said publicly that hedging is a gamble,” he says, even though it is pretty obvious that oil prices will keep going up, up and up. He himself wrote in The Sunday Times that while surcharges have the connotation of a temporary measure, the oil problem is permanent.
“Yes it’s permanent, of course, in the sense that we’ll never buy oil again for ten or thirteen dollars a barrel. But whether it will cost US$80 or US$40 remains guesswork. Then there are options one can consider, which are not a gamble but an insurance. The reality is that we can’t keep treating oil as if it cost nothing. This means everyone has to change his lifestyle, because money we used to spend on other things will now have to be saved for energy, to keep using our machines, equipment, home appliances, and the luxuries we’re used to living with. This naturally means that expenditure that used to go into other sectors will be curtailed. This will result in lower turnover in the trading sector and lower demand on the manufacturing sector that caters for the local market.”
Precisely, isn’t that the destructive kick to economy which is coming at the worst time possible?
“Yes but what can we do? What is the alternative?”
Are you saying government has no options?
“It has no choice.”
What about restructuring Enemalta?
“Let me give you an example: If you’re at home and we’re hit by the bird flu, and instead of buying chicken for 60c you end up buying them for Lm5, what do you do? You have to change your lifestyle, it’s useless crying that you like chicken and you want to eat nothing but them for 60c.”
But what about Enemalta?
“Yes, Enemalta has to reflect upon and attack its inefficiencies, and it has quite a lot. Since the last surcharge was decided more than a year has passed. The worst thing is to leave these measures end up as political statements. When I was involved in government we kept our distance from this kind of economic management. It seems they have accepted the suggestion I had given about fuels, that electricity should be subjected to the fuel prices on the market, adjust the prices periodically, month by month or every two months. That’s how things should be done.”
Talking about changing lifestyles, Dalli himself had to change his, though for totally different reasons. For the first time in his political career, he is in his own words “resting on the backbench”.
“This was the first time it happened to me under the Nationalist government,” he says. “I have a lot of things going on, I make my interventions wherever I feel they’re necessary, and give my contribution wherever I feel it’s needed.”
He admits June 2004 was the most obscure month in his political life, when the prime minister neither defended him nor asked him to resign in the midst of media reports about his alleged but unproven influence with the Iranian shipping line that was about to start operating from the Freeport, and about the foreign ministry purchasing airline tickets from a company linked to Dalli’s family.
“It was a very difficult month,” he says, although he is clearly not too keen on talking about it all again right now, limiting himself to reiterating that this was an unprecedented act of backstabbing which forced him to bow out.
I tell him that when Guido de Marco contested for PN leadership, and lost, against Fenech Adami, the victor made the wise move of magnanimity in paving the way for de Marco’s election to deputy leader. With Dalli, history took him the opposite way, down the vaults of the stamperija, on the brink of the backbench.
“Everyone makes his decisions. I contested the leadership election with a conviction that I could serve the country. When we got to the second round I retreated voluntarily because I felt that was the honourable way. Others in the past may have gone through backroom negotiations and second rounds and God knows what, but for me these are not questions of negotiation.”
But let’s face it didn’t you expect some gesture to bridge with you after that contest?
“Well let’s say this is about what people feel is right. What I feel is up to me…”
That’s what I’m interested in.
“What I feel is that it is in the party’s interest that we pull the same rope. How we go about that is the responsibility of the leader, and much depends on him to keep everyone united, he has to think up his tactics and strategy to do that.”
Do you see PN loyalists who identified with you being alienated?
“Yes, I’ve said this last November in my speech at the party’s general council, that a lot of Nationalists were being alienated at that time. Unfortunately we saw certain people persisting with their ways, although today I see an attempt to gather all the family again, and I hope this will be a success.”
Earlier this year, he had a much publicised private meeting with the prime minister and PN secretary-general Joe Saliba, generating speculation about a possible reappointment in Gonzi’s Cabinet.
“We also spoke about certain positions that may arise,” he concedes, “not necessarily ministerial because now I am also building my private life – I had to start from scratch a year ago, I’ve worked a lot throughout this year and built something.”
We are, in fact, speaking inside his office on the fourth floor of the Portomaso Tower, where his business consultancy agency is based.
“Thank God I have made progress, but now I’ll also have to consider what I would have to sacrifice, I won’t just leave everything, so there are a lot of considerations. But I am in politics and my intention is to remain in politics, to remain active in politics.”
Asked to give his judgement about Gonzi as finance minister, Dalli said: “I think he’s doing all he can as finance minister. He has the power of a prime minister, which is a lot of power. It means that when he takes a decision because it needs to be taken there is nobody to go behind his back and put pressure to dissuade him from doing it.”
I tell him he must know something about that, to which he replies with a smile.
“It happened continuously, every minute of each day.”
What concerns him at the finance ministry, however, is that Gonzi is leaving too much to be decided by faceless bureaucrats who are just concerned about the bottom line.
“What I’ve always suggested, both to the prime minister and to everyone, is to consider the economic implications of their decisions. The finance minister is not the treasurer of a local band club. Every decision you take in finance will have economic implications and you have to foresee them. Let’s take fiscal morality: I’m glad the prime minister continued strengthening the measures I had introduced to reduce tax evasion. But in my opinion one has to be aware not to cross the borderline in the balance between what is good and what makes sense. I think that, even because he (Gonzi) doesn’t have the chance to go into detail about what’s happening and is leaving a lot in the hands of heads of departments… these people are, in my opinion, pressing a bit too much. Some people who speak to me tell me they opened their files as far as 10, even 20 years ago. The emphasis I always put on when I was finance minister was on bringing everyone in order, so that we could have a good tax base on which we could build our future. I know that once you start soaking up businessmen’s money, especially money they may have already invested, then you create a vicious cycle of cash flow drainage.”
Are you saying these are bureaucrats taking decisions which will have not only economic consequences as you say but also political?
“Finally, as you say, there are political consequences. That’s why whoever is leading has a complex task ahead of him, it’s not just about the government’s bottom line, because it has to reduce the deficit, boost the economy and win the next election – three targets that have to be achieved at one go. Now to balance those three factors is not easy.”
Indeed, at this rate, do you believe your party can win the next elections?
“Things will be very different in two years’ time,” he says. “It depends a lot on the international economic situation, and as I see it, Europe’s economy will get a boost. In two years’ time we’ll be going for an election when the European economy will be going upwards at a steady rate. There is no reason why we shouldn’t ride this bandwagon of economic growth. If this happens, with the feel-good feeling that comes with such growth and the Labour party remaining as it is today – lacking credibility – I believe the votes are there to be regained by this government. In my opinion this can happen by fuelling a policy of economic growth and ensuring that our house, the party house, is a united home geared to govern.”