Labour Party spokesman Karl Chircop yesterday described proposed amendments to the Social Security Act as nothing more than “new social taxes”.

Speaking in Parliament during the debate on the draft bill to amend the social security act, Dr Chircop said the government had chosen to “pick and choose” these amendments from a package that had been prepared by the Pensions Working Group with little or no assessment of their impact on the different sectors of society.

The Labour MP reiterated numerous times during his speech that the proposed bill would negatively affect the lower and middle class workers, with these two groups being forced to pay more when compared to high-wage earners.

Dr Chircop said the government was trying to convince the people that it was introducing changes that would be of benefit to society, however in presenting the usual demographic rhetoric, “the government is missing the main point and not addressing other factors of equal importance”.

He said the government had conveniently failed to mention the impact of the current socio-economic situation, the state of the Maltese economy, the low rate of economic growth, the low participation rate in the labour force, the high level of public debt and debt servicing, and the rate of female participation in the workforce.

“All these factors have an impact on the pensions system but the government does not mention any of them,” Dr Chircop said.

He said the Labour Party was aware of the problem that Malta would be facing in the future but insisted that this would not become evident before 2025 or 2030; “it is not as acute as the government is saying it is”.

“Why is the government hurrying so much to introduce these changes? Could it be that the EU and the credit rating agencies are breathing down the government’s neck?” he asked.

Dr Chircop grilled the government on its intentions to introduce the second and third pillar pensions saying that there were many questions that were not being answered by the government. The amendments, he said, were too vague and raised concerns that the public would be burdened with new taxes.

“How will the second pillar affect government’s revenue from national insurance contributions if part of the latter is ‘carved out’? Where will the government get the money to make up for this loss in revenue? What happens to those who already have some form of second pillar pension… will they be compensated?” Dr Chircop asked the minister responsible.

He said that administration costs for this pillar of pensions would cost the government Lm19m. “Where will the money come from? From more taxes… and that is why I am calling these amendment new social taxes,” Dr Chircop said.

The government, he added, did not have an electoral mandate to introduce these changes.

Opening the debate, the Family and Social Solidarity Minister Dolores Cristina said the draft bill was important and in the country’s interest.

She said the amendments being discussed in Parliament were the result of 10 years of debate and “throughout these years, it became clear that something had to be done sooner rather than later. This is not something that happened overnight,” Minister Cristina explained.

She said the government had reached the point where action and decisions had to be taken. “It is true that the problem will appear in 20 years’ time, but today we have to provide the solutions for tomorrow. We have the responsibility to ensure that tomorrow’s pensioners will get a pension that is adequate to meet their future needs and that the pension system is sustainable,” she said.

The minister insisted that reforms were necessary and that the amendments addressed the problems facing an ageing society where people were living longer and yet fewer babies were born.

She said that the number of births had gone down in 33 years from over 11,600 in 1974 to just over 4,000 in 2005. More than 5,800 people are expected to qualify for a pension this year, 1,300 more than in 2005. Expenditure on social welfare had gone up by Lm7 million last year and was expected to increase again this year.

The minister said reforms had to be based on two principles: adequacy and sustainability.

Ms Cristina gave a detailed timeline of the pensions debate over the years, starting in 1997 when the then Malta Council for Economic Development (MCED) was asked to looking into the matter, until 2003 when the Pensions Working Group was set up and presented its final recommendations in June of last year.

The minister said it was impossible to reach national consensus on everything but insisted that the time for discussion was over. She said various opinion-makers had expressed their agreement with the need for reforms although not all agreed with the speed the process moving at.

She said the government had examined a variety of models but believed that the amendments in the draft bill offered the best solution, while taking into consideration the needs of future pensioners.

Explaining the various amendments, the minister insisted that the reforms will not have an effect on those who receive a pension today or those who, on 1 January 2007, will be 55 years of age or over.

“Once and for all I want to make it clear: today’s pensions and pensioners will not be affected by the reforms,” Minister Cristina said.

With regard to the second and third pillar pension, Ms Cristina said the draft bill establishes the framework within which these will work and will be regulated. She said the majority agreed with the need to supplement the basic pension but the time was not yet right to introduce these two new pillars.

However, she said the idea was to encourage people to start saving again and to complement a person’s income and improve his or her standard of living.