Will summer 2009 be tagged as the COLA summer?

COLA is the acronym standing for Cost Of Living Adjustment, it is not meant as indirect advertising for some soft drink. It clearly seems that Yes, we’ll be hearing a lot about COLA during the next weeks and in the run-up to the next budget.

Everything seems to be moving in this direction as it’s very evident that the government media machine and its stringers have already embarked on a mission to convince the public that the current Cost Of Living Adjustment system is a thing of the past that we have to stash away.

The COLA system has been a point of discussion among the unions and employers. Some argue that the system was a very just one, others argue against the system.

The COLA system is used to calculate the rise of the cost of living during the previous 12 months, as a basis on which to adjust wages to offer proper financial compensation. This means that COLA is a retroactive and not a proactive system, and that the cost of living adjustment that used to form part of the budget, was simply intended to give back that extra money that families had to fork out during the year to catch up with higher prices on the market.

Obviously during the past 12 months we have seen price hikes in all sectors. I am not an economist but actually you do not need to be one to come to the conclusion that the high rise in the cost of living in Malta was not a result of the international credit crunch but government induced. Yes it was induced by the government itself because all sectors of the economy simply passed on to the consumer the higher priced production caused by the super water and electricity tariffs imposed by the government.

So we came to the first MCESD meeting during which the finance minister had to outline the situation we have and upon which the next budget will be framed. It was here that the shot was fired. According to the COLA system, if the government were to give the compensation due for the inflation registered during the past year, the amount would total something in the region of seven euros per week. Employers, including the government, indicated clearly that this is a “No Go” situation. So the solution was simply to discredit the system, brand it as inappropriate and obsolete and scrap it in the name of new economic practices.

If the government is trying to reduce the deficit and balance the economy, so are families. The cost of living has largely surpassed income. In Malta in 2009 we have a situation where more families are living below the poverty line and where social problems as a direct result of personal financial problems are on the rise. This is a fact and the government together with the social partners are obliged to do something about this situation.

We need to face reality and act accordingly. Let’s stop once and for all pretending that we have a different situation from the one we actually have.

Adjust fuel and utility tariffs. The Malta Resources Authority should roll up its sleeves and start acting as a regulatory authority. We do not need such an authority simply to rubber stamp government decisions. If they are not able to do so, then we should disband this authority and save hundreds of thousands of euros to the benefit of the government coffers. Presently, that’s the way it is. Has this authority acted according to the aims for which it was set up, the actual water and electricity tariffs would have never been accepted and passed over to the consumers.

Eliminate bureaucracy. Other government bodies whose duties are to attract foreign investment and create new jobs should work to fulfil their obligations. We’ve had enough of possible investors saying that they are moving out because they cannot cope with the high level of bureaucracy at Malta Enterprise. If we really want to create new job opportunities, we should be much more flexible and much less bureaucratic.

Price control. Not talking about any price freeze, but about a system based on the NECC one which, prior to the introduction of the euro in Malta, did great in keeping inflation at acceptable levels. The Labour Party has been proposing the setting up of such an authority to monitor market prices for every sector for a long time. The government until recently was all out against this proposal. Now we have the Prime Minister talking about the need to have such a structure in place. It would have been better if we had the system in place months ago. Better late than never.

These and much more can make a real and big difference and MCESD members should think, talk and decide on these lines while discussing the next budget. Most of all we need decisions that will lead to an improved purchasing power situation for consumers. We need this badly both socially and economically.

Gino Cauchi is a Labour MP