Labour’s Mr Nice Guy | Karmenu Vella

In what must be the most surreal setting for an interview in my career to date, I meet Labour's shadow minister for finance Karmenu Vella in the Parliamentary canteen, as the Opposition motion of no confidence in Austin Gatt is in full swing.

Other members flit in an out, and outsiders would no doubt be surprised at the jovial and friendly atmosphere between MPs of different hues - and above all, how starkly it contrasts with the tense and volatile atmosphere within the Chamber of Representatives, just next door. 

As the debate crackles through the speaker of an ancient radio set in the corner, it seems natural to kick things off by asking Vella what he makes of Franco Debono's surprisingly tenacious stand to date [Note: Debono had not yet spoken in the debate].

He shrugs. "If you ask me the question boils down to what comes first: the party, or the individual. If we were talking about a matter of fundamental principle, I would understand that an individual may feel he comes before the party. For instance, if the party took a stand on an issue that went against one's own fundamental principles, the choice would be plain: you either bow your head, or leave the party and cross the floor. But here we are talking about the day-to-day administration of a particular sector. This is a management issue, not an issue of principle. And the party has taken a decision, theoretically it should come before the individual..."

Surprisingly from someone whose own party stands to gain from the forthcoming vote, Vella talks about the issue as if it were a waste of Parliament's precious time.

"It's a little like a village band club having an internal argument about whether to hold its march in the morning or in the evening. One man says morning, the other says evening. The committee votes, and the majority decides on a morning march. What does the other man do? Bow his head to the majority and carry on? Or keep stamping his feet and insisting on an evening march instead? This is more or less what is happening within the PN at the moment..." 

In recent television interviews, however, Vella seemed to imply that there is a lot more than just that going in the Nationalist administration. One of his recent criticisms centered on the famous promise of a downward revision in tax bands just before the 2008 election. He talked about it as an example of political 'irresponsibility'. But isn't it fair to also acknowledge that the promise had been made before the current financial crisis? And doesn't his own criticism also mean that an incoming Labour government will be similarly 'irresponsible' to lower the tax rate, as Muscat has hinted he would do?

"Let me first clarify what I said on Dissett about the tax revision promise. My point was that when the PN promised to reduce income tax on the eve of the election, it was not on the basis of any fiscal calculation or economic criterion. It was just an electoral gimmick, plain and simple. So much so, they also promised to introduce that measure in the first budget after that election. And yet three years later they still haven't kept their word..."

He also rejects the notion that the promise was made before any financial crisis.

"When he made that promise, Gonzi had already publicly admitted that we were going through international economic crisis. He said this on record, talking about a crisis in the price of oil, cereals and maize (qmugh)..."

To prove this particular point, he later sends me a link to a propaganda clip, filmed shortly before the election, in which Prime Minister Gonzi is heard clearly outlining the fact that the world was indeed in economic crisis.

 "Not only that," Vella goes on, "but the income tax reduction was meant to be the answer to that crisis: Gonzi claimed he was proposing a package of incentives to mitigate this crisis, while acting as a catalyst for business and giving a push to job creation. It was a measure intended to stimulate economic activity. And for a whole month, the Prime Minister insisted continually that this measure would be introduced in the first budget..."

Vella argues that if the tax reform really had been intended as a stimulus package, it should have been introduced in the first budget, as originally promised.

"The fact that this was not done, despite a clear need for economic stimulus at the time, confirms my suspicion that it was really just an electoral ploy. And if it were to be given now, on the eve of another election and on the pretext of yet another international crisis, this would certainly be irresponsible, yes".

All well and good, but surely this would also apply to a Labour government, if it tinkers with the same fiscal machinery...?

"What the PN promised and failed to deliver doesn't in any way affect our own policies. With regard to taxation, the Labour Party will take its decisions at the right time, depending on the exigencies and economic priorities, as well as the actual financial situation of the day..."

But this doesn't quite answer the question, does it? And as such, isn't this typical of the criticism so often levelled at Labour? That it is a party quick to criticise, but which never outlines any concrete proposals of its own...?

"This 'criticism' comes from Nationalist sources and has no basis whatsoever in fact. Ever since Joseph Muscat has been party leader there have been plenty of proposals... including some which the government actually took up. We put forward proposals on energy, to control the cost of living, to reform MEPA; we suggested economic measures before Budget 2010, measures to reform the rental laws, the water and electricity bills..."

Suddenly I find myself assaulted by a seemingly endless list of 'proposals' made by Labour in recent years: anything from the St John's Co-Cathedral project, to the setting up of a family committee, to divorce legislation, to a reform of Parliamentary procedure, and many, many more. "We even made proposals to improve public transport," Vella concludes wryly, as the Parliamentary debate reform rages on in the background.

OK, but what I actually had in mind were electoral proposals: and it just happens that Vella himself is responsible for Labour's electoral manifesto. So far, details have been sketchy, but Joseph Muscat has hinted at a number of measures to be included. He has promised to reduce the tax burden, decrease utility bills while increasing social expenditure, etc.

How sustainable is this overall plan, considering today's bleak economic outlook? And how does Karmenu Vella plan to reduce utility bills in particular, considering that the age of subsidies is now over, and that energy costs are not really negotiable? 

"A government can never look only at taxes, or only at expenditure. The two things go hand in hand. The first thing any serious and responsible government does is look at where tax money is being spent. A serious government is a government that clamps down on wastage and improves efficiency. There are also considerable problems when it comes to tax revenue management: the present government often displays fiscal irresponsibility when it fails to meet its own targets in both tax collection and expenditure. This has been confirmed by several reports by the EU and the Auditor General. Recently we even had a report indicating that Malta has one of the highest black economies in Europe: a quarter of our entire economy manages to slip through the government's fingers. Lastly I believe it is important that the taxpayer gets his money's worth, something that today's taxpayer doesn't feel he is really getting..."

Yes, but we are still skirting the issue. How, specifically, can Labour manage these issues better than the present administration? Vella points towards the utility bills as an example.

"A reduction in the cost of water and electricity is not something only a Labour government can achieve. Any serious government can do it, too. Unfortunately, the PN has shown it lacks both the responsibility and desire to even try. There is so much neglect and mismanagement in this sector alone, suffice it to say that government has not tabled Enemalta's audited accounts, for whatever reason, in over two years. Just imagine what position it is in to address the cost structure of the same entity! This government has time and again been accused, even by its own exponents, that had it not rejected bids for a power station using different technology, it would have been able to issue much cheaper electricity bills..."

But it is on the expenditure front that Vella brings out the big guns. "Let let's not forget that this government never found it hard to spend hundreds of millions of euros on all sorts of projects that are not priority material. It found hundreds of millions for the Greek bailout and the European Financial Stability Facility... not to mention to give itself a €500 a week pay-rise. Then there were the millions spent building a bridge that leads nowhere, as well as all those consultancies that benefit only its own friends. Bearing all this in mind, I don't really think there should be any problem for a Labour government to find enough money to relieve the burden of utility bills that are currently crushing families, and undermining our economy's competitiveness..."

Apart from the above-mentioned projects and consultancies... can Vella give any examples of where he would cut back government expenditure?

"We are not looking only at less expenditure, but more judicious expenditure. I am more in favour of quality spending than just quantity. This government's main shortcoming arises from the fact that much of its current expenditure gets lost in poor planning, inefficiency, delays, cost overruns, commissions, unachieved targets, flawed priorities, a lack of cost management and cost controls, wastage, etc. This all adds up to higher expenses for lower results. All this will have to be addressed".

Muscat recently hinted at a shift from tax on work and productive investment, to 'environmental taxation'. How does Vella envisage this to work in practice?

"There, you see?" he replies with a laugh. "So Muscat does occasionally propose things! And this is one of the more responsible proposals, I believe. In the past we already had a shift from tax on income, to a tax on consumption (VAT). Now we're talking about another shift, from both income tax and VAT, to a tax on environmental pollution. In other countries this is already in action. Even at EU level, there are discussions on how this kind of taxation model can generate economic growth and jobs. Besides, if we manage to raise tax money on emissions, we would be in a position to lower taxation on productive investment, so the effect would be positive on two counts: we would improve our environmental standards, while also increasing competitiveness".

This, he adds, is fundamental to yet another crucial industry for Malta - tourism.

It all sounds very positive, but this only brings to mind another of the traditional criticism aimed at Labour. It is often accused of trying to be all things to all people: and above all, of adopting populist platforms which highlight widespread complaints (utility bills are a good example), whole avoiding mentioning any of the harsher decisions it would have to take once elected. How does Vella respond to this criticism?

"It is unfounded," he replies simply. "The Labour Party neither tries to be loved by everyone, nor to look all rosy in the eyes of people. So much so, that we are often accused of 'always criticising'. Which incidentally is not true either, because where we feel necessary we never hesitate to praise what is praiseworthy. For example, when we criticised the public transport reform so severely, did we do this to be popular? And when we praised the financial services sector so highly, did we do this to be loved? I don't think so. Where things need to be pointed out, we never hold back from pointing them out, even if in so doing we might be treading on the corns of some contractor or other, or whoever may have an interest in maintaining the status quo".

One area where Vella has publicly praised the government was its success in attracting lucrative IT industries to set up shop in Malta. But it was qualified praise: Vella also criticised government for achieving this success at the expense of more traditional industries like manufacturing. How would he, as Finance Minister, have handled things differently?

"It is true that the government has done a good job insofar as financial services and iGaming are concerned. And a Labour government will continue building on this success. The mistake was that when government saw these sectors flourishing, it began to neglect other sectors. If this was done unintentionally it would not be so serious; but from certain minister's recent declarations - somebody was even heard 'betting' that the manufacturing sector would vanish entirely - I suspect this happened as a matter of policy. To my mind there is no doubt that each sector of the economy is an important sector, and as such should be given all the attention, help and support it deserves".

On a final note, Karmenu Vella is himself often described as Labour's more appealing, business-friendly face: its version of 'Mr Nice Guy'. This certainly comes across in his immediate dealings with people, as he is unthreatening almost to the point of appearing meek. But he is nonetheless one of the sole survivors of the Mintoff and Karmenu Bonnici administrations of the early to mid-1980s: administrations which were associated with various human rights abuses.

Doesn't he think his own presence in Muscat's shadow cabinet may act as a deterrent to Nationalist voters shifting to Labour? And what is his own assessment of those distant Labour governments, and his role therein?

He rolls his eyes and almost audibly groans, as if to say: 'Oh, not again...'

"Look: first of all I absolutely disagree with what you just said, and if these things took place at all I dissociate myself completely from them. But Labour was in government more recently than just the 1970s and 1980s - I was tourism minister in 1997, and I'd like to think I acted in the most upright and transparent manner possible. Most Nationalists will acknowledge this, if you ask them. I do however agree with you that Nationalists are switching to Labour these days, for various reasons. There are those who are fed up of the government's arrogance; who feel that their businesses are going to the dogs; who feel this government promised a lot, but didn't deliver... and there are also some who see in Joseph Muscat a leader who is capable of putting together a compact team that is offering a more prudent and responsible governance. If you know of any Nationalists who want to be part of Labour, but are keeping away because they're afraid of me, I'd appreciate it if you let me know about them. Maybe we can meet up and have a chat..."