Sociologist, local councillor, activist, drummer from Malta

Friday, October 10, 2008

Green Budget Measures

The Times Friday, 10th October 2008

Michael Briguglio

Existing heavily-polluting vehicles not up to standard, such as certain buses and trucks, should be taken off the road as soon as possible.

Alternattiva Demokratika is putting forward various proposals for the forthcoming budget. Here, I shall focus on proposals directly related to social and economic development.

As regards the government's proposed fiscal package, any income tax reform should also benefit low-middle and middle income earners. In this regard, it is pertinent to note that AD recently proposed that the €7,300 limit for part-time work, which is taxed at 15 per cent, should rise to €12,000 and that public service pensioners who do not benefit from this tax benefit should also be eligible to it.

Besides, there should be shifts from tax on labour to tax on environmentally-harmful practices that generate unsustainable amounts of waste, pollution and use of resources. Further revenue should also be generated from companies making windfall profits such as gaming companies.
In the case of car registration tax, the new system should be based on the polluter-pays principle, while ensuring social justice. The system should therefore be based on newly-purchased cars from a clearly-established cut off date. This will help maintain social equity while ensuring that fuel-efficient cars are incentivised and fuel-inefficient cars disincentivised. However, incentives should be in place so that existing heavily-polluting vehicles not up to standard, such as certain buses and trucks, are taken off the road as soon as possible.

Malta's hefty cost of living increases should be adequately compensated. Malta's inflation rate, 5.4 per cent is higher than both the euro area average of 3.8 per cent and the EU average of 4.2 per cent. This is resulting in an increased burden on middle- and low-income earners, workers and their families, pensioners and other groups, especially given Malta's relatively low wages. Malta's annual increase in labour costs is the second lowest in the EU, rising by a mere 1.8 per cent.

In this regard Malta requires a realistic and just wage reform. The next budget should seriously consider immediate reforms such as an increase in the minimum wage and tax credits (in both cases, for various income earners, including part-timers). Besides, a review of the current methodology used for cost of living adjustments (COLA) should be carried out to verify whether such adjustments are realistic in relation to current consumption patterns. Compensation for such measures can be carried out through fiscal policy as well as through the avoidance of unnecessary non-labour costs.

One should also note that, notwithstanding recent performances, including a decrease in Malta's unemployment rate, Malta still has the lowest employment rate in the EU. Besides, many workers, including early school leavers, are employed in informal or undeclared work with precarious conditions. In order to encourage such people to work in a formal manner, wage-related reforms such as those mentioned above can be accompanied by the gradual rather than sudden removal of benefits once persons enter the labour market. This would help make work pay and contribute to avoiding sudden shocks in people's lifestyles for entrants in formal employment.

Malta also has the lowest EU employment rate as regards females and workers aged 55-64. With regard to females, Malta requires improved legislation and policies that encourage the work-life balance such as affordable and accessible childcare centres, flexible working hours as per workers' choice and equity of rights among workers in public and private sectors.
In the case of workers aged 55-64, sociological research has shown that ageing workers are prone to pessimism and feel disadvantaged in finding employment.

The introduction of early retirement schemes should therefore not be seen as an easy way out instead of investment in skills and experiences of such workers. Retraining of ageing workers should improve workers' skills and respect their dignity.

One should also note the increase in precarious employment in Malta, in part-time, contractual and casual work. The government should ensure that workers in such employment, including foreign workers, are granted equal rights as full-time workers on a pro rata basis.

Investment in various sectors of the economy should focus on productive and quality employment rather than cheap labour. More attention should be given to introduce reform in Malta's educational system so as to improve the employability of youth. While foreign direct investment (FDI) is to be promoted and incentivised, attention should be given to investment originating from local sources, thus tapping the high amount of money in local hands being invested elsewhere.

Local produce should be encouraged to help compensate for the imported segment of inflation. Local production and business tend to be beneficial not only from an economic aspect but also they result in less pollution from transport, apart from also helping to enhance community life. The government should also incentivise small local businesses through measures such as tax breaks and venture capital initiatives.

In addition to the creation of employment in various sectors of the economy, the generation of green-collar work should be given priority in areas such as production and distribution of alternative energy sources. This involves employment in various levels, such as professional, administrative, technical and agricultural.

As regards social policy, not all forms of welfare need necessarily be carried out through cash benefits, even though this is a vital form of assistance through which people can be compensated for inequalities such as unemployment. Social investment to cover new forms of risk can also include guidance, investment in human resources and life-long education, family-friendly work practices and encouragement of initiative.

Equality of opportunities should be matched with equality of outcome as much as possible, particularly in sectors such as employment and education. Discrimination on various levels should be confronted not only at work but also in other social spheres. Maternity leave, which is currently the lowest in the EU, should be increased. In this regard, the World Health Organisaton recommends to breast feed till six months, which has positive health benefits.
Besides, social security benefits should be streamlined as much as possible, thus doing away with bureaucratic labyrinths. This is resulting in unnecessary stress and hardships on vulnerable groups. Similarly, persons who have been waiting to receive benefits or refunds (tax, national insurance, etc.) for a long time should receive such payments as soon as possible.

As regards pensions, Malta's new system does not propose to solve problems regarding inequalities among pensioners, whereby pensions are based on income received during one's life. Such a system is rigid and inflexible, resulting in further inequalities for people with non-traditional working patterns such as carers and part-time workers. Women, in particular, find it difficult to balance contributory requirements with the competing demands of family life, child-bearing and insecure, part-time work.

Housing is another area that deserves priority in the budget. Vulnerable groups should be the target of social welfare in this regard. These include first-time buyers who can be helped through schemes such as government subsidies on bank loans as well as provision of affordable social housing for low-income earners. Other vulnerable groups who deserve attention include persons entering pensionable age who are not home-owners and small enterprises that cannot cope with property costs.

The government should also make use of schemes and subsidies for the restoration of old houses. Increased expenditure on housing policy can be financed through fiscal measures on property speculation, from third vacant property onwards. Fiscal mechanisms should encourage the renting and selling of properties which are kept vacant for speculation purposes.

As regards energy use, in order to reduce Malta's dependency on oil, which is having economic, social and ecological impacts, diversity should be the way forward. Priorities in this regard should include not only the proposed pipeline with Sicily but, in order to obtain as much energy independence and sustainability as possible, sources of renewable energy. Fiscal and financial measures should be introduced to make such choices feasible.

Finally, as regards government subsidies, certain services will probably still require subsidies if they are to fulfill their public function adequately. Such services include public transport, particularly in routes that are loss-making, and water and electricity, whereby basic use should be subsidised by the government whilst excessive use and waste should be penalised.

In conclusion, the government, as a major economic player, should ensure that public procurement is mandatorily Green, thus reflecting ecological and social standards such as the reduction of waste and pollution and the safeguarding of workers' rights.

Mr Briguglio is spokesman for social and economic development of Alternattiva Demokratika - the Green party.,

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