‘The issue this election is credibility’ – Joseph Muscat

There was a palpable sense of enthusiasm under the traditional electioneering tent at Imtarfa this evening: where Labour leader Joseph Muscat addressed a meeting that was predictably dominated by Standard & Poor’s downgrade of Malta’s credit rating from A2 to BBB.

“First of all, allow me to apologise for yesterday’s hail and this evening’s cold,” Muscat began when asked by TX presenter Miriam Dalli to comment about the downgrade, “because it looks like everything that happens is now my fault…”

Joking apart, he added, the implications of the report were serious. “We cannot claim to be surprised at the conclusions of Standard and Poor’s. It is a confirmation of what we have been saying in recent years. Only this time, it comes from the mouths of foreigners.”

The report, Muscat said, supplied three specific reasons for the downgrade: Malta’s escalating national debt; the ‘guaranteed debt’ of entities such as Enemalta – which was mentioned by name in the report: an unusual initiative that indicates the seriousness of the energy provider’s financial situation – and the poor level of female participation in the workforce, which the Labour leader said will have serious repercussion on the national pensions time bomb.

“These are all things we have been trying to draw government’s attention to for years,” Muscat said. “But when we talk about debt, government’s response has always been to laugh at us.”

Government cannot laugh now that the same arguments come from respected credit ratings agencies. So instead, it is trying to pin the blame on Labour.

“It is useless blaming the Opposition for failing to support the budget,” Muscat said. “Gonzi spent a year ignoring reality, and then locked himself in a corner and tied the budget to a vote of confidence in his government. As I told him at the time: we don’t have confidence in his government’s economic management. And the report by S&P only confirms how right we were.”

Just as the Prime Minister has always taken the credit when international credit agencies gave him better reports in the past, he must now accept responsibility for the new negative rating, Muscat added to a burst of applause.

“The issue in this election is credibility,” Muscat said. “The simple fact is that Gonzi has lost credibility, and cannot be believed any longer. On the streets, his message is ‘finanzi fis-sod’(finances on safe and secure footing) – but now even foreign credit ratings are telling him: ‘we don’t believe you’.”

In particular, he added, both S&P and even the European Commission have discredited Finance Miniser Tonio Fenech’s projection that the deficit will reduce to 2.1% of GDP.

“S&P told him: ‘forget it – it will closer to 3%’.”

Separately, the Labour leader said government had neglected issues which were stifling economic growth: especially bureacracy.

Here Muscat reiterated an earlier promise to launch a “full frontal attack” on red tape, which he described as a major hindrance to the expansion of local industry and foreign investment.

A future Labour government would reduce bureaucracy by 25%: an “ambitious target”, he admitted, but one which he thought was achievable. Asked specifically how he intends to attain that figure, Muscat referred to two policy platforms. The first was to set up the equivalent of a ‘one-stop shop’, in which prospective applicants would apply for a single permit to cover all the various permits that under the present set-up would have to be pursued individually (eg. MEPA permits, health and safety certifications, police licenses, etc); the second was the introduction of a policy referred to as ‘One In, One Out’: i.e., whenever a new regulation was introduced, an older, expired regulation would be removed.

However, Muscat significantly stopped short of provided any detailed time-frames of when these changes were expected to become operative. Nor did he quite explain how he managed to identify the percentage of exactly 25%.

The same general principle would also be extended to government’s general approach to legislation. Muscat promised the introduction of a ‘sunset clause’, whereby all legislation drawn up in future would be tied to a date of expiry. Effectively this implies that future governments would have regularly revise laws to make sure they do not expire – this, Muscat said, will not only keep Malta’s laws up to date, but would also keep governments on their toes.

Turning to the property market, Muscat took the opportunity to repeat his “bold idea” for a 15% withholding tax on rental property, to replace the current tax regime of 35%. This, he claimed, would help the rental property grow by encouraging more landlords to put their properties onto the market, and at the same time also raise government revenue. Muscat hinted that the shortfall in direct government revenue arising from the lowering of the tax rate, would be counter-balancing by an increase in rental properties coming on to the market. But he didn’t explain (and wasn’t asked) exactly how he was so confident that the rental market would grow sufficiently to compensate for the taxation shortfall.

Muscat also repeated his promise to review the permanent residency scheme, which government had abruptly halted on suspicion of abuse – to replace it with another scheme that Muscat argues is not delivering the desired results.

The meeting was also addressed by first-time Labour candidate Clayton Bartolo, and veterans Charles Mangion and Joe Cilia.