Spot the tea party

The PN wants the state to top up the meager 58 cents Cost of Living Allowance (COLA) increase with a tax cut  which would simply result less in less revenue to finance public services like public transport and welfare programmes.  Moreover even the richest categories will benefit from this tax cut while the poorest who do not pay any income tax will have to be compensated through a cash payment.   This would simply mean that the state would partly pay through a reduction in its revenue  for a cost normally paid by employers.

For if there is a need for a top up  one can only conclude that the current mechanism to measure the cost of living should be reformed.  So instead of having the state top up a meager cost of living increase of 58 cents through a tax cut , it would make more sense to reform the COLA  mechanism to ensure that wages reflect the change in the  cost of living.  

Having the state subsidize an unsatisfactory COLA is simply a way of socializing labour costs.   COLA has contributed to social peace and has even served to temper demands for higher wages.  COLA also offers the only hope of a wage increase to a  mass of non unionized workers including professionals who are not covered by a collective agreement.  The 58 cents increase risks eroding trust in this model and contribute to social unrest.

Before rushing to ‘tea party’ territory (a term used to refer to the small government ideology of right wing republicans in the USA)  by championing tax cuts for all and sundry the PN should assess how such cuts impact on the common good, a concept which defines its identity as a Christian Democratic party which as the late Guido de Marco used to put it “looks towards the left”.  Perhaps, the PN should heed more to the critique of capitalism made by Pope Francis. 

The PN has recently taken the courageous and rational step of supporting a second pillar pension system to safeguard pensions of working class people who are the least likely to invest in private insurances, simply because their disposable income is limited.   In the same way the PN should be wary of advocating tax cuts which would simply deny government of revenue for public services. 

We should not forget that public finances are still reeling from a promise made by the PN to slash income tax for high income earners made before the 2008 election (and re-proposed in the unapproved 2012 budget) which was enacted and religiously endorsed by the newly elected Labour government in 2013.  I remain of the opinion that this tax cut is a social obsceniy. Ironically  in what stands a reminder of the tea party credentials of Muscat's Labour Party in 2009 just months after the world was struck by the worst economic depression  Joseph Muscat was calling on government to enact the promised tax cut.   

Today the PL attributes low inflation and thus the meager 58 cents increase to the decrease in energy bills and promises to make up for what it admits to be an unsatisfactory increase through welfare programmes for the least well off.  

The first argument not only exposes the fact that the poorest categories were probably the least to benefit from the cut in energy bills simply because they consumed less energy, but they were also the first to lose whatever they may have  gained in reduced bills to the decrease in COLA.

A Caritas study showed  that utility bills represented  less than 6% of the minimum consumption bill of a low income family composed of two adults and two children and just 5.4% of that of a single-parent family. On the other hand the same study recommends a 14% increase in the minimum wage.  Therefore by decreasing COLA to reflect the reduction in utility rates, Labour is behaving regressively. On the other hand businesses will not only benefit from a decrease in utility bills which will come in place in this budget (despite the great uncertianities facing the energy sector)  but will also benefit from the lowest ever COLA increase.   Morever while some businesses benefit, small retail businesses  also suffers as the working class has less money to spend.

Perhaps at this stage it might have made more sense to temporarily  remove energy costs  from the COLA calculation to ensure that this will  not have had a regressive impact on the least well off and a perverse beneficial impact on the business classes.  In this way lower income groups will not suffer from diminished wages  until the COLA  mechanism is permanently adjusted to reflect the real increase in the cost of living.

The government may seek to tamper this regressive trait through targeted spending in welfare programmes for the poorest categories.  But the risk of this is that instead of benefitting from an automatic universal increase in income, low income categories could find themselves on the receiving end of conditional cash transfers which could further penalise the most vulnerable. This is a sharp departure from Labour’s advocacy of a living wage aimed at restoring dignity to every person.  In fact one hopes that the government will heed the call made by the Jesuits’ Faith and Justice Centre to stop labeling the unemployed as lazy and to understand that poverty is a result of a multiplicity of factors which may include personal  misfortune, mental health issues and upbringing.  The only answer to poverty is a strong universal welfare state based on the premise that people have a basic right to live decently irrespective of their behaviour. Moreover the only way to fund this is through progressive taxation. Moreover if we want to make work pay the government has to increase the hourly minimum wage to ensure that all categories of workers including part timers get a decent pay.

The current obsession of both major parties with pandering to the  interests of business and the prejudices of the upper middle class reinforces  the need for a stronger, bolder and more vocal  left both within the two parties elected in parliament and outside them.