The energy subsidy – to remove or to keep?

The energy subsidies that the government put in place at the start of the Covid-19 pandemic, stabilising the cost of fuel and power at a time of crisis, are still in place. Covid-19 cases are still being reported, but “normality” has returned more than a year ago as Malta – as well as many other countries – emerged from the difficulties that were brought about by a long period of social restrictions.

Yet the government persists in maintaining its subsidy on fuel and electricity, resisting calls for a gradual winding down by both the European Commission and the International Monetary Fund.

The government, that is, the taxpayer, is forking out hundreds of millions of euros in these subsidies. But a time will come – it will have to – when these subsidies will have to be removed. The government, as yet, does not want to listen.

The government knows that when it decides to phase out the subsidies or remove them at one go, it will be an unpopular move – the “gratitude” that was expressed when the decision was taken to keep the price of energy and fuel as it was at the time the pandemic hit will be transformed into dismay, even though everyone and his dog knows that, sooner or later, this subsidy will have to stop.

Malta has been praised for the way it tackled the economic woes stemming from the pandemic but we have been told over and over again that the government must start planning how to remove the subsidy on energy and fuel because it is not sustainable. Day after day, the country’s debt is growing and we will be paying the price for it, or future generations will.

Maltese businesses have suggested that they are given a sixmonth advance warning before the subsidy is cut down or removed. They would like to make plans for the change in costs. Even families will be seeing a huge difference in their energy bills and fuel costs when the subsidy is removed.

So far, the government has not given any indication that the subsidy will be removed or cut down. It continues to insist that it is not the time to do so. It has not even said whether it agrees that a six-month notice is given.

It is likely that this position will not change anytime soon. We are fast approaching an election that Labour wants to win, and it is trying its hardest not to bring about a negative sentiment that could dent its hopes. The removal, or even the cutting down, of the subsidy, will not win votes for Labour.

So in all probability June will have to come and go before we hear the government bring up the subject again. Maybe, by the time October comes and the budget for 2025 will be presented, the government will be ready to make up its mind.

As things stand, it is only delaying the inevitable.