Before Malta’s budget is presented, the social partners declare their priorities and make proposals to the Minister of Finance at a meeting held at the Malta Council for Economic and Social Development. The main issues that emerged from this dialogue in October 2011 were taxation, the Cost of Living Allowance, incentives and initiatives to boost the Maltese economy and the participation of women in the labour market. Some measures announced in the budget addressed these issues.

Background

It has become established practice in Malta that before the annual budget is presented, a meeting is held between the Minister of Finance and the social partners, during which each organisation makes proposals about the measures it would like to see included in the budget.

Such a meeting was held on 28 October 2011, and although no comment was made by the participants afterwards, the social partners had issued a document beforehand setting out their recommendations.

Social partner proposals

Malta Employers Association

The Malta Employers’ Association (MEA) warned that many companies could not afford the planned weekly increase in the Cost of Living Allowance (COLA). Each year, wages are adjusted in accordance with the inflation rate as measured in percentage terms by the Retail Price Index. The increase in wages, calculated on the minimum wage and referred to as the COLA, is mandatory for all employers and given to all workers (MT1107019I). The COLA for 2010 is set at €4.66 a week, compared with €1.16 in 2011.

The MEA called on the social partners to be responsible about any proposals that might increase business costs, particularly wage increase. In its proposals, MEA called on the government to:

  • revise tax bands and conduct a tax elasticity exercise to determine the impact of a revision on income tax. It argues that ‘pushing up the ceiling of the 35% tax band would increase aggregate demand’ in the economy and would thus help business;
  • consider paying part of the benefit paid during maternity leave, to relieve employers of this cost. Malta remains one of the few EU countries where employees on maternity leave (which lasts 14 weeks) remain on full pay and are paid by their employers;
  • set up an entrepreneurship fund to incentivise business in Libya. Libya is one of the few countries with which Malta has a trade surplus, mainly due to the business operations set up by Maltese entrepreneurs in the country. The aims of this fund should be to help these Maltese entrepreneurs recover some of the losses they incurred during the political crisis in Libya and incentivise others to start up business there;
  • protect the interest of legitimate businesses by controlling trade and tendering processes.

The other countries where maternity leave is paid at 100% salary are France, Germany, Netherlands, Spain and Romania. In Belgium, the Czech Republic, Denmark, Italy, Portugal and Slovakia, maternity leave payments range from 70% to 80%, although the length of maternity leave in these countries is more than the 14 week minimum set by the European Commission. Sweden has a flexible parental system which can be transferred to the father and which can be extended to 480 days with up to 80% of salary.

General Workers’ Union

The General Workers’ Union (GWU) urged the government not to introduce new taxes, tariffs or any other government-induced costs to economic operators. Noting that the growth of the Maltese economy has become too dependent on financial services and online gaming, it urged the government to seek more diversification of the economy. Its other proposals included:

  • setting up a special commission within the Malta Council for Economic and Social Development (MCESD) to monitor competitiveness;
  • holding a serious discussion within MCESD to help develop a sustainable economic strategy for the country;
  • conducting serious studies on the state of the manufacturing sector;
  • setting up a venture capital fund to support research and development.
  • a review of the COLA mechanism, which it says should be calculated on the average wage rather than the minimum wage, revised twice a year and paid in full;
  • a revision of the national minimum wage;
  • the full compensation of COLA to be passed on to pensioners;
  • the establishment of equal rights for self-employed women, entitling them to the same maternity leave allowance paid to women in full employment.

Forum Unions Maltin

Forum Unions Maltin (FORUM), a loose confederation of trade unions whose request to be represented on the MCESD has to date not been accepted, also publicised its recommendations. It urged the government to provide more flexible hours for working mothers and make childcare facilities more affordable. It also proposed:

  • the revision of marketing schemes to provide a more level playing field, especially in air transport. Although the subsidies given to low-cost airlines have attracted more tourists to Malta, they have adversely affected Air Malta by making its fares uncompetitive. FORUM says measures need to be taken to ensure fair competition.
  • more synergy between industrial and education sectors, with the aim of providing more apprentices schemes;
  • extending maternity leave from 14 to 18 weeks;
  • extending the favourable family-friendly measures enjoyed by government employees to employees across all sectors.

Budget measures meet some demands

The measures announced in the budget of 14 November 2011 are in tune with recommendations made by the social partners. They include tax relief for the two-income family and a four-week extension of maternity leave (from 14 to 18 weeks), which will be financed by the government at a fixed rate of €160 per week. This extension will come into force if there is agreement at the MCESD.

The GWU was not satisfied with the COLA, arguing that it does not reflect inflation and high electricity and water tariffs.

The Chamber of Commerce acknowledged that the budget included some measures aimed at enhancing competitiveness in Malta. But it expressed disappointment at the extension of maternity leave, and said the move required serious evaluation and an in-depth study with all social partners before it was implemented.

Saviour Rizzo, Centre for Labour Studies


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