The findings of a World Bank study on pensions are brighter than EU projections, Finance Minister Edward Scicluna said this morning, seemingly indicating that contributions will not need to increase by as much as previously thought to reach sustainable pensions.
Speaking at a business breakfast organised by The Malta Business Weekly, Prof Scicluna said the World Bank had carried out a study going as far as 2060. The indications were more positive when compared to previous predictions by the EU. The new projections have now been sent to the European Commission to be analysed.
“It is a fact that people would either have to pay more in NI or on private pension schemes, but this should not be overdone. People to not need to pay too much or save too much for sustainability to be reached.”
Prof. Scicluna also repeated that NSO statistics are giving a “perverse” picture of the economy. He said that two indicators – on manufacturing and retail – later taken on by Eurostat were showing significant drops but this was not the real picture.
The Finance Minister, a former EU representative on Eurostat’s Advisory Board said: “I am not trying to fiddle with data, but if two out of thousands of indicators are giving perverse results I will point it out. I am just critical of two indicators.”
Professor Scicluna said some of the data are based on surveys, but even election surveys, no matter how close then can be, are not a direct reflection of the real picture.
He also gave a detailed presentation of the economic reasoning behind the budget and went into detail on several of its measures, including incentives to encourage people to work and the decrease in energy tariffs.
Replying to questions on the eco-tax, Prof. Scicluna said there was already an eco-contribution on tyres and this has now been switched to an excise tax. The idea is for industry to look after its own pollution. Before, the government used to collect an eco-tax to take care of it for them but the system was not being administered well.
He also ruled out a revision of the minimum wage, saying that only 3.6% of the Maltese population earns a minimum wage. Malta has a mid-level minimum wage when compared to other EU countries. This is similar to the UK and Portugal. In Turkey, for example, 43% of the population earns a minimum wage or less.
Prof. Scicluna also referred to criticism on an increase in public service employees. Many new public service employees were replacing others who retired. Almost 700 of new jobs were taken up by ex-Arriva employees, who will move back to the private sector in January.
The government has cut income tax by 40 million on middle-income earners, taking a heavy burden off the shoulders of those who really want to work. Prof. Scicluna reiterated that COLA is a form of compensation not a wage increase. The government could have increased the COLA by doing a deal with the private sector but it did not want to interfere with industry.
On the budget theme of ‘Making work pay,’ the Finance Minister said the government could have just stopped all benefits but the plan is to wean people off them and encourage them to work. Long-term unemployed will not lose their benefits immediately if they find a job and employers are being encouraged to engage these people.
He also spoke on the need to further reduce bureaucracy. “Simple things are not that simple for foreign investment. Bureaucracy has to be decreased further. The process for setting up foreign companies in Malta has to be simpler.”
Video: Paul Jones, Photographs: Jonathan Borg