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Decision to increase allowances taken by the Prime Minister
by Ivan Brincat
The decision to increase the expense allowance for public officers
serving in Scales 1 to 4 was approved by the Prime Minister
and was not submitted for Cabinet approval.
In a reply to questions sent by The Malta Business Weekly, the
Office of the Prime Minister said that decisions of this nature,
“that is decisions concerning minor adjustments to allowances,
are approved by the Prime Minister and are not normally submitted
for Cabinet approval”.
This answer was given in reply to questions regarding who had
taken political responsibility for this decision and whether
it was true that some ministers in Cabinet were against the
decision.
The OPM in its reply confirmed that in fact the decision was
approved by the Prime Minister and was not submitted for Cabinet
approval.
The decision to increase the expense allowances by 50 per cent
in some cases has irked constituted bodies such as the Federation
of Industry.
In fact, employees in scale 1 had their allowances increased
from Lm1,000 to Lm1,500, those in scale 2 from Lm800 to Lm1,200,
those of scale 3 from Lm600 to Lm900 and those on scale 4 will
get an increase of Lm250 from Lm450 to Lm700.
This increase came just at a time when the legal notice on fringe
benefits came into force affecting hundreds of employees and
also companies. Last week, The Malta Business
Weekly reported that companies had been faced with requests
for increases in salaries to compensate for the loss in income
due to the tax.
In a statement last week, the FOI said the fact that such a
move came so close to the battles with unions over pay increases
was “nothing more than a subtle way by the government to
compensate its top
public officials for the additional taxation which has eroded
their remuneration package after the budget taxed their fringe
benefits”.
The FOI criticised the fact that many public service officials
have received salary increases in addition to expense account
adjustments. It said: “In the coming months, the trade
unions will be negotiating with government for further increases
in wages and salaries that will apply to the whole public sector
in the coming three years. The country cannot afford any extravagances
at the present moment.”
However, the OPM said that this expense allowance was introduced
in 1991 to partially redress the inadequate compensation package
of the top management of the public service. This allowance
has remained unchanged over the past 10 years.
“As a result, the value of this allowance has eroded considerably
over the years,” the OPM said.
The OPM said it was therefore felt opportune to revise the allowance
and re-establish the relation between this allowance and the
salary pertaining to each scale.
Asked whether the government now expected companies to follow
suit and increase allowances to compensate for the loss in revenue
due to the legal notice on fringe benefits, the OPM said that
the government did not compensate its employees to make good
for the tax on fringe benefits.
“As a matter of fact, this allowance and other fringe benefits
forming part of the compensation package of public officers
are subject to 35 per cent tax.”
Sources close to the Cabinet told The Malta Business Weekly
that the decision to increase the expense allowances exactly
at the same time when the legal notice on fringe benefits came
into force was not only a case of bad timing but also a rather
contradictory move at a time when the government was trying
to curb increase in public expenditure.
Last week, Edwin Calleja, secretary general of the FOI told
this newspaper that it seemed as if only the government could
afford such luxuries.
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