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SPEECH BY THE HON. JOHN DALLI, MINISTER OF FINANCE, AT THE CORINTHIA MALTA BUSINESS & FINANCIAL TIMES BREAKFAST SEMINAR, ATTARD – WEDNESDAY, 4 JULY 2001

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05/07/2001

Good morning ladies and gentlemen,

First of all I would like to thank Network	Publications for this kind invitation and I would like to take this opportunity to wish them well with their business newspaper, Malta Business & Financial Times, which has been published in its new format today, and is a newspaper that looks fresher and that it’s contents do it justice to the nice presentation and print that we have. I have made some comments with the Editor of the newspaper and said the niche and vision of the Malta Business & Financial Times and other newspapers of the same genre is to push for transparancy in the business sector. In Malta unfortunately when we talk about transparancy, everyone thinks of its politicians, however transparency should be, throughout the Maltese society, and I believe that it is opportune that papers like Malta Business & Financial Times , dig deeper into how business is done in Malta and validates and crusades for better transperancy in business.
It is opportune that this exchange of views is being	done when we in Malta have decided to adopt statistical methodology that conforms to international standards and which therefore make our figures comparable to those published in other countries.
This enables us to see our positions in various areas	in reference to other countries. While in the past we based our figures on actual bias account of the variables involved, we are now moving towards surveys with parameters that differ from the ones that we used in the past.
This leads to adjustments in the way we look at the	figures. However I must say that today I don’t have to argue or debate the merits of statistics against ‘pjazza comments’. Recently we have had thoughts being expressed, by the Opposition unfortunately, even suggested basically, that we should discard our statistical information and base what is happening in Malta on comments that we can gather by people who come to talk to us or by people who frequent bars and collect information that way. At least today we don’t have to debate that issue.

I would like to talk about my views and statistics. Before I get started I must declare my bias. I do not come from from the plains of scientists who excel in methodology formulea, curves, astros and shapes. Rather I come from the base of users who see statistics as a means of expounding intelligence and as a basis of decision making.

The Arabs invented figures to keep accounts. Figures	were invented to explain and define activities that had happenend. It was a language that was devised to tell a story, in a graphic manner, actions that were taken. Actions that were quantified and instead of cutting whole paragraphs of parchment or papyri, figures were used to tell these stories that otherwise would hve taken whole slates to tell in words.
In fact the practice contined and today we have a	situation where managers and people in various walks of life look at sets of figures which we call statistics, which help us understand situations and eventually project decisions. While looking at these figures we have to see them as a simple system of measurement, and we have them in various aspects of life, financial statements, production figures, management accounts, production statistics etc. At all walks of life, every profession has the function which generates its own set of parameters, criteria and rules of measurement of those parameters, criteria which will finally give the results of actions that are taking place and therefore when we talk statistics I see them in them in the following steps.
We have to address the population of the data, the	assessment of the data, the interpretation of the data and then the separation which has to be done from that data. This has to be complied in an unbiased and as objective way as possible. This is where we have to be careful.
One finds instances, for example and accountants	sometimes are very much blamed for this way of producing statistics, that one starts the compilation after what the results should be. Compilation has to be unbiased and objective. Because of this government has taken the step to create an independent National Office of Statistics that is attested with the compilation of all statistical data in the country, as we have already done in other instances. This is a government that belives in subsidiarity and acts on subsidiarity.
This is a government that believes in sharing of	power and acts to share power. This is a government that has acted in this way and created a National Audit Office. This is a government that created the Ombudsman, the same government that created the Local Councils and the same government that acted in the same way when it created the Independent National Statistical Office, reponsible not to a Government Minister but basically responsible to Parliament. Autonomous, totally autonomous in collecting and converting data that is published for statistical purposes.
Therefore one regrets that one is still hearing, over	and over again, unfortunately from the Opposition, beating and twisting of the figures, because of the process I have mentioned, compilation, assessment, interpretation, policy, we should put ourselves up from the policy stage, unfortunely today’s Opposition is fighting it’s wars, at the very beginning, at the compilation stage and this is simply a waste of precious time.
When it comes to assessment we have to read the	figures in their context, and here again, the figures that have been thrown out by my friend Leo Brincat. Figures being thrown out and compared without really looking at the context at which these figures were compiled. Again numbers are like words, as much as words can be put out of context so can figures be read of context. It is so much easier to read figures out of context than one reads words out of context. We have to be careful when assessing statistical data that we don’t take figures at their face value but see the context in which they have been compiled and presented and dig deep into the genesis of the figures. What was the methodology which finally gave that result? Then and only then can one make a correct assessment.
For example I partake the present debate of	unemployment figures. We have two sets of statistics. One compiled in the traditional way as we do in Malta, which is a count of how many people between the ages of 16 and 61 want to work and who express their will by registering with the ETC. That is the way that we have measured unemployemnt so far in Malta. We define that as the registeredunemployed. To register one has to be of working age and one cannot be beyond retirement age.
International standards of statistics of people	looking for work and the parameters that are used are different. They are not based on head counts as this is difficult in such large countries. So they come up with surveys, which always have a margin of error. We are talking about a population that is between 15 and 65 and people who would like to work. Not people who are actively seeking employment.
We have to understand exactly what we are talking	about, how we can debate, what is the more indicative figure? We can debate the figure or target of job creation. But we cannot say that one figure contradicts another. That’s where the rubbish lies, and its wrong to try and generate distrust in the general statistical figures in Malta by trying to project this type of argument.
We also have other examples. By reading through the	Opposition’s view on the economy performance of Malta. One particular draft struck me, and this was the draft of government revenue. This shows a sharp downturn in 1997 on Government revenue and the conclusion was, and this is their interpretation now; ‘Look the Labour government was so benevolent that it reduced taxation on the Maltese nation.’ There was a sharp drop in Tax Revenue but we all know that this was due to gross inefficiency in tax revenues by the government!
It was a result of the ‘hotch potch’ made by	direct taxation which cost government millions and millions of pounds. So in effect, a figure which depicts figures which have been generated should be given once one knows the right context. The genesis of the figures, the right assessment and then the right interpretation. And this was not how efficient was government to reduce taxation but how inefficient was government in making decsions that were completely uncalled for and which cost the country many millions of pounds in revenue and which then resulted in a 12% deficit to GDP.
That was the reality and this is interpretation,	because interpretation should shows a certain respect to the integrity of the figures and the facts which would be shown and depicted and then we should string these facts into a story.
Figures do tell a story, maybe my training has taught	me to read stories in figures, if they are interpreted correctly. Once the right interpretation is made, then one can extract the moral of the story.
And then comes the last stage. What are these figures	for? To fill newspaper pages? To repeat over and over again during Parliament? No, figures are there to explain situations and to be a basis for decisions. And therefore anyone in a management position should reconcile the story that is being told by the figures with its objectives. And he should say "where does this put me?"
If I want this country, in my position as Finance	Minister to go that way and to arrive at a certain point in time, where are we now? Depending on the information that I’m getting from these statistics. Once you position the objectives that you want to reach, then you have to extrapolate the factors where action needs to be taken, so you can manage a situation that will make you arrive at the position that you want and identify the areas that can be influenced by action and decision and which can redirect action and activity to the direction that you want.
I would like to emphasise that for us statistics is	not a play with figures. It’s not playing around with figures, but are important to explain situations and take decisions on them. My friend Leo’s last comments were about the Government using grants from the EU to reduce expenditure, again this is all rubbish, because the modern accounting convention by governments is that if you have specific programs that are based on the fact that you are receiving grants, than the accepted international convention is that you reduce those grants from the expenditure that you have embarked upon.
If for example we are in Europe and hopefully we will	be very shortly, and we receive structural funds for a specific project, to build a large windmill in Castille Place, to exaggerate a little bit, who knows, it may be good for those Don Quixotes who want to charge at it, it would make a good target!
We embark upon this project on the sole premise that	it will be financed by the EU. The convention is that once you spend that money, the grants that you are receiving on behalf of that project in your budget will be deducted from your total expenditure and you only show the local content, own resources that are used in the project as part of your budget balance calculation. That is the international convention.
Now Labour has started up with this cooking the books	and whatnot. We also heard about the fact that because we don’t have an accrual system, now they are converts to an accruant system. Some figures are shown in one year against another, but I must remind Leo and everybody, that when I published very early in this legislation, a legal notice which permitted government to accrue expenditure that was extended in a particular year but not paid and therefore allowed government to charge that expenditure to that particlar year, Leo Brinact piloted a motion to stop government from doing so! This is exactly doing what Leo has been telling us that we don’t do, which in fact we do.
If for example, a road has been built and is not paid	for during a particular year, we don’t wait until the payment is made before we charge it to expenditure but we charge in the year the road was built and than we accrue for it, we reserve the money, so that when the payment comes through and arrives, then it will be paid and the consolidated account will not be charged again. This is the first step towards accrue accounting which was objected to by the Labour Party when we started to introduce it. They said that ‘John Dalli is going to start building up a slash fund which he will use in the elections!’ That was the argument.
So we have to take things as we see them unfolding in	front of our eyes. My emphasis today, ladies and gentlemen, is that this government has every intention of bringing forward this macroeconomic policies, which are deeply rooted in these following considerations:
The first is boosting long term growth, and this we	are doing as a result of our focused intention to attain full membership of the European Union and a careful programme of restructuring and privatisation. We continue to believe that membership will bring opportunities for growth.
Secondly: we have worked hard and have succeeded in	lowering unemployment, and this we will continue to do in the future.

Thirdly: we have battled to tame inflation.

Fourthly: we have addressed the large current account	deficit and most important of all to reduce dramatically government deficit.
We are also making inroads here and have registered	noticeable progress.
Since day one of this government, we have made the	reduction of the government deficit a priority. We are not alone in this world as we all know globalisation is a moving force but let us come back to Malta.

As in all things the proof is in the pudding.

In 1997 under a Labour administration there were 7,149. Registered unemployed in 2000 there were 6,583 and recently the figures have come down below the 6,000 figure.

The inflation rate was 3.11 in 1997 but 2.47% in 2000.

Ordinary Revenue is up. And contrary to what Labour tries to debate it’s not simply up because we have increased taxation, we have increased taxation, yes, but we’ve also increased efficiency and also the effectiveness of enforcement. These are major contributors along side economic growth that contribute to increase taxation and therefore it is farcical to hear over and over again, Labour quoting increased tax revenue as an increased burden on the tax payer and here is where push comes to shove, as they say.

Do they believe in tax collecting efficiency? Do they believe in effective enforcement or not? Would they continue with this thrust or would they stop our efforts to continue to improve on tax efficiency, effective enforcement because it would be in their own words ‘a burden on the taxpayer?’ I’d like to hear this.

During the first five months of 2001 increased by 5.4 per cent, and amounted to Lm258.2 million.

Revenue from VAT increased by 12.7 per cent. At the same time receipts from Income Tax added Lm2.3 million or 4.3 per cent.

Total Expenditure during the first five months of 2000 and 2001 were both within the 42 per cent benchmark when comparing this year’s data with the budgetary estimates. Even here as far as the expenditure is concerned we hear huffing and puffing from the Opposition about reducing expenditure without ever getting down to a concrete programme of how this can be done.

We hear what they say, we read what they write and we’re still in cloud 9.

We are acting on expenditure growth and on reforms for existing practices. We will soon have the opportunity to know whether the Opposition is serious about these things or whether it is opportunistic. We are definitely on the road to recovery from our deficit problems and the fruit of this will be there for all to see in the very near future.

Ladies and gentlemen, surely the future is ours.

I thank you.

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