Editorial | Wednesday, 09 March 2008

Tackling the cost of living

One month after the general election and the political agenda is still dominated by the leadership battle of the Labour Party and the Mistra saga involving Jeffrey Pullicino Orlando.
While appreciating fully the importance of these two events, it is equally in the public interest that the cost of living is put back at the centre of the agenda. The current and prospective scenarios need to be discussed and tackled in a concerted way if the living standards of our citizens are not to suffer.
Public pronouncements being made by Gordon Brown that the world is facing a serious financial crisis brought about by the collapse of the sub prime market and the American economy being likened to the 1929 depression period are a cause for major alarm. These events are further complicated by the price hikes of oil and cereals.
It is envisaged that by the next six months the price of oil will reach levels never imagined of $125 a barrel. The increases in the cost of cereals will have a devastating effect on the cost of living with experts predicting that the days of cheap food are well over.
Our country no differently to the rest of the world will suffer the shocks of a worsening global situation and needs to prepare itself for a new way of living. Of particular importance to our situation apart from the increases in the price of oil and cereals is the coming to an end of the price stabilisation agreements.
Importers and providers of services who had voluntarily entered into a wide-ranging price-freeze agreement will now be able to review their prices and price structures leading to increases in consumer prices. These will lead to pressures on employers to increase wages.
The guiding principle in the fight against a spiralling cost of living must remain the acceptance that there should not be price controls. This must remain the golden rule as past experience in Malta convincingly shows that price controls led to inferior products being placed on the market and did not work in the long term interests of the consumer. However, since our small market does not make for a perfect scenario it is essential that the monitoring of prices takes place in a scientific manner as possible to be sure that cartels are eliminated and monopolies, whether government induced or by default, are regulated to European norms.
The Office of Fair Trading (OFT) already has the legal mechanisms in place to ensure that abuses do not take place and we urge government to strengthen its operations and presence since it has an increasingly important role to play.
The OFT can regularly present monitoring reports to the MCESD where the social partners can analyse the market conditions in a transparent manner.
Government also has a role to play in the control of price increases since many of the increases over the years have been government induced simply to cushion itself in view of the high costs of running the public service.
We are not convinced that the public sector is not bloated and generally has low productivity rates.
Many public services, licenses and permits have seen increased prices over the years, something which if absolutely necessary should have been accompanied by greater efficiency and productivity.
The country needs to strike a happy balance between the legitimate right of the business community to a fair profit and the consumer’s legitimate expectation to buy products and services at a fair price. Finding this happy balance is the foundation for a socially just society.
It will be hard to achieve at a time of global uncertainty where external forces weigh down heavily on all and sundry. But hard as it may be to strike a balance, government and the social partners must sit down and plot a course of action that keeps the ship steady.