The Malta Independent 19 August 2019, Monday

‘Economy growth took infrastructure by surprise’ – Prof Edward Scicluna

Helena Grech Monday, 31 October 2016, 10:49 Last update: about 4 years ago

Finance Minister Edward Scicluna believes that, on the issue of traffic, the biggest challenge is removing the memory of bad experiences and the negative association people have with public transport in Malta. Speaking with The Malta Independent shortly after the budget, he said that infrastructure falling behind, 24,000 more people out to work since March 2013 and increased tourism have all contributed to the problem. This interview is part two of a longer interview that took place days after the 2017 budget was announced. In this second part, Professor Scicluna responds to questions on traffic and to fears that the rate at which social benefits are being provided could be unsustainable.

Malta has lower than average EU spending on transport. Some have argued that the allocation of funds in the 2017 budget is inadequate in view of the traffic problems plaguing the nation. What is your reaction to this?

I would place this issue within the broader infrastructure issue. We are having new concerns. Before the concerns were finding a job, the future of your kids, not being able to go out to work for various reasons and inflation. Inflation is low, both locally and internationally, people are finding work and they are better off in general than they were three and a half years ago. Two things happened: the concerns of the people turn to health, education, traffic, housing, roads and so on. Then there is the fact that since the economy grew so fast over a three-year period it took infrastructure by surprise, infrastructure has to keep up. Look at hotels, they are building additional floors now – well, they did not do it in 213, they are doing it now. They reasoned that it is worth closing their hotel and looking towards the future and investing.

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The infrastructure was taken by surprise. We have 24,000 more people on the roads, leaving their homes and going out to work than we did in March 2013 – most of them will use their own car.

We are reaching the record number of two million tourists. This situated is creating the problem that we have. The infrastructure now has to cope with it. That is why the developers immediately eyed these big developments and high rise projects, that is what it's all about. They are responding to the high rent and property value by increasing supply and like this, I can assure you, prices will fall. It's simple economics.

At the moment demand is exceeding supply, then when everyone increases supply prices will moderate.

Let’s go back to the issue of traffic. I do not wish to be political, but the truth is that public transport was in shambles. The government tried a bold reform, which unfortunately, because of bad planning and some mistakes, did not work. Arriva, the German company, made losses of €100 million in one year. Being the German company, they did not grumble; they just wrote off their debt and left. Now comes another public transport company, so far it is doing fairly well. People have had many bad experiences with public transport, made worse because after 9pm there was no more service. We then had a system, which for various reasons could not address the needs. Now there is an improvement, still there are people who complain of course. The challenge is to wean back all those people who say ‘do not tell me about public transport, I want my car'. It is that simple and that is the target. There is no other way. It reminds me of that saint who used to pray: please God I want to go to heaven, but not for now. It is the same with the car. I want to solve the problem, but do not penalize me if I use my car.

There are not many options, we either go a Singapore way and we penalize people further, keeping in mind our already high registration tax, to get them into public transport. I think we need to take a gradual approach. There are many ways, one of them is to have a separate lane across Malta for public transport, that would allow buses to pass freely.

Has the government considered a subsidy on taxis? Making them cheap enough that they become like a viable alternative? Barcelona is a good example of this.

Greece and Athens also have a similar approach. It is not so simple, it is a question of supply and lobbying and so on. We are planning a pilot programme for this coming year. It is a good one. It’s like we did with St Vincent de Paul and those who are in the waiting list for the retirement institution. We made a deal whereby we provided the salary of a carer. It’s a pilot project, we are seeing it succeeding and are keeping it.

Young people who turn 18 in 2017, whether they are students or not, will get a free tallinja car for a whole year. Not for 2017, for a whole year, and those who already bought it will be refunded. There are some conditions; they have to apply for it and have to use it a number of times per month otherwise there is no use in getting it. We also have a small budget, which I hope we will incorporate with the bicycle association, to have bicycle racks and showers in various localities in local councils. I am quite friendly with the association and support their efforts. We want to try this route but it is a comprehensive approach. You want to encourage use of bicycles but you don’t have bicycle lanes, respect etc. We must admit that we have for a very long time ignored the problem, we cannot say that we can solve it one year. It is a process, but the more effort we put in, people will cooperate because they do not want congestion on the roads, so there will be improvements. 

Some have cautioned that the rate at which government is providing social benefits could be unsustainable, should economic down turn impact the island. Does the government have some form of buffer or cushion in place? 

We see it differently, we see it more as an issue of redistribution.  The government is collecting the revenue and spending it on schools and education so on. When you are spending it you are distributing it. Sometimes you are distributing it to the rich rather than the poor. I might shock you, but with free education/university you are giving more to professional and high income people than those lower income households, because these households don’t send people to university. The distributive effect is slightly towards the top.

We still believe it should be free. That is why there is the left and the right, the right believe there should be no benefits, everybody should be entrepreneurial and the other extreme believe that everyone is equal and the same.

It’s a question of where you want the distribution to be. If you give too many benefits, making people comfortable, you will get less work. So this is why with our reforms we made we were generous but still, we made it in a such a way that it benefits you to work because we still kept the tapering and in work benefits higher for those who go to work – so we do not have those worries.

 

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