Thursday, November 20, 2014

Budget 2015: Positives, negatives, unintended repercussions and policy gaps

Labour’s 2015 budget has various implications. Some measures are welcome and others might have negative – even if unintended - repercussions. One can also note policy gaps concerning issues which were avoided in the budget speech.

As regards economic and financial policy, so far the Labour Government has managed to keep Malta in a relatively stable position with various positive indicators, as was the case with the previous administration during times of global financial crisis. The Budget does not contain sudden shocks or surprises with potential destabilizing effects in the short run.

At the same time, however, it has to be seen whether the emphasis on policies such as sale of citizenship and construction are sustainable in the long run. It also has to be seen whether certain expenditure trends and industrial indicators are reasons for concern.

One of the main emphases of the Labour Government’s budget for 2015 is to reduce welfare dependency. Active labour measures have been consolidated and introduced.

Some of these measures act as an incentive for persons on social benefits to enter the labour market. In this regard, such persons will have their benefits phased out over a 3 year period, thus making work pay. This is in in line with the Jobs Plus initiative proposed by UHM prior to the last general elections and agreed with by the political parties and constituted bodies.

Though the tapering of benefits is a welcome step forward, a question which comes to mind here is what happens after the 3-year period, particularly if one’s employment is precarious. The lack of policies and legislation on precarious employment does not help things. In this regard, I would like to point out that as a signatory of the Jobs Plus initiative in my capacity as Chairperson of Alternattiva Demokratika – The Green Party in 2013, I had proposed the inclusion of ‘decent jobs’ in the Jobs Plus text. This was included in the official text. To date, Government has not followed this through.

One of the other active measures is based on ‘punishing’ those who do not abide with workfare measures – in this case I am referring to the Youth Guarantee scheme. Welfare claimants under 23 years of age will lose their benefits if they do not sign up to it. For a variety of reasons, not all young persons will necessarily sign up, and the net effect may be increased poverty amongst such persons and, if they are parents, their children. Is this socially desirable? I would have preferred this scheme to have been introduced as an incentive to empower youth, rather than one having negative undertones.

A variety of other social policy measures in areas such as disability, childcare and parental leave are most welcome.

What is not welcome, in my view, is Government’s lack of prioritization for pension reform. Reliance on voluntary third-pillar pensions can result in a situation where only a minority invests in the scheme. Others, for a variety of reasons ranging from lack of affordability to lack of concern with a distant future, may not invest in pension, eventually resulting in increased inequality amongst elderly persons. I would have preferred the introduction of compulsory second pillar pensions, with Government making up for persons who cannot afford them. This would help manage risks associated with poverty and inequality amongst pensioners.

As regards the cost-of-living adjustment, Government’s unilateral decision to add a 35 Euro bonus is potentially a pandora’s box. If next year’s COLA adjustment is deemed to high by employers, will this result in a compensation by Government? And will every budget from now on be characterized by toing and froing on additional adjustments? How will this effect the agreement between State, employers’ and workers’ representatives on COLA? Perhaps it is time to look into the COLA methodology, and to discuss related matters such as Malta’s minimum wage.

Various environmental and transport-related initiatives are welcome, provided that they will be effectively implemented. However, various environmental problems such as over-reliance on construction, water sustainability, poor and shabby infrastructure and the presence of over-polluting transport require more determined policy-making.

As regards energy, there are too many unknowns and uncertainties to give a proper judgement. Government’s lack of transparency is not helping things, and the sense of anticipation and expectations created by Labour ever since the start of the 2013 electoral campaign is backfiring at this particular moment.

The rhetoric on energy hubs, renewable energy and diversification needs to be substantiated in the coming weeks so as to defuse the uncertainty in the field. Besides, Government should clearly show whether the reduction in utility bills is financially sustainable, given the delays and unknowns in Government’s plans.

In sum, various budgetary measures are in line with Labour’s electoral pledges and are politically legitimate, even if at times contradictory. However, the success of a budget should also be measured in terms of sustainability, unintended consequences, and the cost of non-decision making.

The above also appears as an interview in The Malta Independent, 20th November 2014:

Tuesday, November 18, 2014

Citizen or the Consumer?

When one takes stock of the social and political challenges which Malta is currently facing, three important categories should be given the importance they deserve: social justice, sustainability and democracy.

It has become clear that civil rights and liberties are being mainstreamed in social policy. Social changes and effective political campaigning helped articulate the discourse.

As welcome as this progressive step forward is, it should not result in a wrong impression that now everyone is equal. Though Malta is one of the least unequal societies in the EU, inequalities keep persisting in various fields, including social class, poverty and social exclusion. Precarious employment is the latest manifestation in this regard.

This shows us that individualization has many faces – from opportunities, such as those being enjoyed by LGBT persons given Malta’s policy changes, to constraints, such as those faced by precarious workers.

In an individualised society we have no choice but to make choices, but policy making can help us be more autonomous in the construction of our biographies.

Maltese social policy is moving towards more active measures, but at the same time it is articulating a discourse against welfare dependency. On the one hand, people are being encouraged to be better equipped to face the risks and opportunities of our times, yet on the other hand it seems that the poor are being blamed for their situation.

In such a context one should keep in mind that universal welfare – such as health and education, as well as the recent expansion of childcare services – often protect many families from poverty and social exclusion.

Let us not feed ourselves the illusion that ‘new’ welfare schemes, such as third pillar pensions, are going to give us more social justice. If anything, such voluntary pension schemes can only further increase inequality, this time between those who can afford such a scheme and those who can’t.

A more socially just system would have introduced a compulsory second pillar with the State making up for those who cannot afford to participate

A welfare state which moves towards conditional welfare can weaken such institutionalized solidarity and thus increase inequality.
Indeed, Malta’s hybrid social model has so far served well in the avoidance of social and economic difficulties which are being experienced elsewhere in southern Europe.

Social justice requires sustainable finance, which, in turn can help fuel a more sustainable economy. Regressive fiscal measures and unsustainable expenditure can put this in danger.

At the same time, a sustainable economy requires ecological sustainability.

Malta is currently experiencing global ecological challenges such as climate change which can have devastating impacts unless policies are implemented to manage such risks in a sustainable way.

At a local level, Malta has its fair share of ecological challenges. For example, transport policies which favour cars over pedestrians, bicycles and public transport vehicles, result in gridlock and increased pollution. Besides, Malta keeps permitting troglodyte vehicles, especially in the construction sector, which emit unacceptable levels of fumes.

Public land keeps being treated as an unlimited resource ripe for commodification, whilst water consumption and waste management are being sidelined from the prioritisation they require.

Malta’s current energy debate is sideling key considerations. For example, are cheaper utility bills necessarily sustainable in terms of public finance and consumption?

A general lack of transparency, and vague talk on related issues such as energy hubs and renewables are not helping matters.
Paradoxically, such ecological issues can serve as opportunities in the transition towards a green economy, creating job opportunities and enhancing sustainability.

A major challenge for policy makers in this regard is whether we are consumers or citizens, as highlighted by social policy theorist Michael Cahill.

Consumers require instant gratification in an unlimited quest for more, whilst citizens have both rights and responsibilities. Policy-making which appeals to the former might win votes, yet how sustainable is it?

I do not believe that politics should necessarily be based on a hyper-real quest for endless consumption. Not only because this could ultimately implode, but also because there is no such thing as one monolithic ideology. A politics without adversaries means that we are all absorbed within a monologue.

On the contrary, in a democracy, there is always the possibility of different political discourses.

Diversity and antagonism strengthen the democratic imagery. Here, one may borrow the term ‘agonism’ from political theorist Chantal Mouffe – where the adversary is seen as an opponent with whom one shares a common allegiance to democratic principles, in a spirit of mutual respect.

Political parties are essential actors in such a context, but they are not the only players. NGOs and the media have a key role in sensitising society on various issues and in bringing about social change.

Parties and other civil society actors can work in a spirit of dialogue, forming alliances and coalitions, and respecting adversaries who have different views.

Such alliances proved successful in Malta’s EU and divorce referenda campaigns. Likewise, they can prove successful in other areas.
In such a context, I think that Maltese society should reflect on the possibility of politics which gives primacy to the citizen rather than the consumer.

This article appears in The Times, 18th November 2014: