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michaelfalzon
Michael Falzon

Deficit myths, debunked

The real deficit was even bigger… the KMB government was drawing funds from the Posterity Fund and the real deficit would have otherwise been Lm89.4 million

michaelfalzon
Michael Falzon
11 April 2017, 7:37am
Karmenu Mifsud Bonnici (left) with Dom Mintoff (right) during a Front Maltin Inqumu rally in 2003
Karmenu Mifsud Bonnici (left) with Dom Mintoff (right) during a Front Maltin Inqumu rally in 2003
The news that Government’s Consolidated Fund registered a surplus of €8.9 million last year – the first surplus registered since 1981 – was welcome. As Finance Minister Edward Scicluna put it: “From a deficit of €362m in 2012 this government turned things around registering a surplus of €8.8m in four years. We broke the cycle of borrowing to finance annual deficits.”

Nobody noticed, however, that this piece of news debunked two intriguing political myths – or should I say ‘alternative facts’. One of them was pushed by the Labour Party and the other by the Nationalist Party. 

The myth pushed by the Labour Party was that in 1987, the Mintoff/KMB administration had left a financial surplus. This was rubbish, of course. The country’s financial situation when the PN government took over in May 1987 was amply explained by the late George Bonello Dupuis in his first budget speech as finance minister, precisely on 25 November, 1987. He explained that in 1981 there was a positive balance of Lm31.9 million in the consolidated fund but this had become a negative balance of Lm24.2 million by the end of 1987. The real deficit was even bigger as these figures hid the fact that the KMB government was drawing funds from the Posterity Fund and the real deficit would have otherwise been Lm89.4 million.

Even so, this was done at the expense of a crumbling infrastructure that was abandoned by Labour in government through lack of investment in energy and water production, in telecommunications, in the road network and in other areas. 

History shows that as soon as the income from the renting of the military base ended in 1979, Labour governments at first struggled to avoid budget deficits and then gave up completely. 

The myth probably owes its origin to the level of Malta’s external reserves about which Labour propagandists used to blow their trumpet so much. In fact these reserves have since increased substantially, albeit they have nothing to do with the government deficit.

By the time the Mifsud Bonnici administration was replaced by the first Eddie Fenech government in May 1987 there was definitely a deficit in the consolidated fund, not a surplus. And KMB’s pre-electoral antics – employing some 8,000 in the public sector and embarking on numerous ‘special projects’ – made sure that no surplus was possible in the government’s books.

Today we have a Labour Prime Minister and his finance minister boasting that Malta’s financial situation has been in deficit mode since 1981 – thus confirming that the old Labour myth of Mintoff and KMB having left millions in the consolidated fund was nothing but a big lie.

The myth propagated by the PN was that a Labour government in 2013 would pursue the disastrous policies of the Mintoff years. This led to the PN predicting that there will be an increase in unemployment under a Labour government. Not only that. During the 2013 election campaign Simon Busuttil even ‘predicted’ that Labour’s fiscal and financial policy will lead to Malta having to ask for a bailout from the EU! 

Much more recently, the PN even claimed that in 2016, the government had spent €250 million more than was originally intended – a claim that flies in the face of the news about the end of the deficit that – incidentally – was then ‘explained’ by the PN as the result of under-spending in infrastructure.

Everybody now agrees that Muscat’s labour and Mintoff’s labour are miles apart ideologically, especially in the way private investment is looked upon. Muscat debunked his infamous anti-EU stance that led to his producing the notorious ‘Made in Brussels’ programmes on Labour’s television station, and converted himself into a EU stalwart. Is this good or bad? I think it is good for the country – more so it is a vindication of serious PN policy-making.

The idea that a Labour government would necessarily lead to a rise in unemployment and a financial mess was the result of the PN equating Muscat with Mintoff, at least as far as economic policies are concerned. The PN is still at it. It often describes decisions or actions taken by the Muscat government as having the same effect of Mintoff’s short-sighted policies, often the result of the heavy chips he carried on his shoulders. Today, one even hears claims that some Muscat decision is a threat to democracy in this short-sighted attempt at harking back at the ‘nostalgic’ Mintoff days.

I have said it often enough. Fighting Muscat as if he were Mintoff on the democracy front is stupid and short-sighted. The most recent example was the hype made about the media law – a hype that led to PN supporters not understanding why an amendment to the bill as published solved everything and led to the PN voting in favour of the bill in the House of Representatives.

We need to rid politics of stupid myths. 

Claudio’s appeal

During the discussion on the Media and Defamation Bill in Parliament, Claudio Grech (PN), spoke of an incident in which his son asked him why MPs could not do anything to help a friend of his who was suffering from a rare and life-threatening illness. What good can Members of Parliament do, he asked, if they are unable help a young kid such as his friend?

That incident, he said, led him to ask himself about what MPs in Parliament consider as the more important issues. It also led him to a stimulating and interesting refreshing view on politics. He criticised other MPs for the perpetual mudslinging and trading of insults in Malta’s political milieu – an introvert world that pushes more and more people away from politics with the result that many often feel completely cut off from the setting of petty party political clashes.

Claudio Grech seems to be the only Opposition MP who realises that the PN is simply pushing a sterile debate for the sake of opposing whatever the government proposes. Others may feel the same but prefer not to say so in public.

Meanwhile, no one seems willing to seriously debate policies and issues that truly make a difference to people’s lives.

I fully agree with this assessment. Perhaps, as Mr. Grech implied, shouting insults is easier than doing research and coming up with solutions for some of the problems the ordinary citizen is facing.

[email protected]

michaelfalzon
Michael Falzon is a former government minister who served under several Nationalist admini...
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