One of the central proposals of the MLP is cutting the surcharge on water and electricity by half. I have been trying to find things to like about Labour but everytime they come up with something to push me away. This proposal is sheer madness.
Cutting the surcharge is bad in many ways. Subsidies, hidden or otherwise, are usually wasteful and distortive. Like food, water and electricity do not come for free. Both require expensive economic resources which are imported. It is up to each and every individual to consume wisely and efficiently. If the price of these services is subsidised, the result would be waste. When people feel the pinch of higher prices, people willl tend to economise and use it wisely. If the Government has money to burn it should use it encourage people to find ways to use these resources efficiently. It would be much more productive if Government spent the money on subsidising energy saving lamps and encourage people to replace incandescent lamps.
Secondly energy efficiency is important in view of the need to cutting co2 emissions. Subsidising consumption would be counterproductive.
Furthermore the Labour leader has failed to explain how he proposes to finance this subsidy. After the sacrifices we have made to sort out the mess in Government finances created by Fenech Adami and Cachia Caruana, I do not want it messed up again. In any case since we are now part of Euro land and the Maastricht criteria have to be adhered to, a future Labour Government would have to make up the shortfall from somewhere else. Unless Euros start falling from the sky like manna, a future Labour finance minister would have to resort to new taxes or hikes in existing taxes such as VAT and Income Tax. There is very little room for cuts in expenditure since the bulk of Government spending is in the form of salaries and social services.
Very bad idea indeed.
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2 comments:
I agree with your main arguments - however I feel there is place for subsidy when it comes to energy - and that is in investing or subsidising in research/alternate sources of energy.
When people feel the pinch of higher prices, people willl tend to economise and use it wisely
Unfortunately since the surcharge was introduced, electric consumption hasn't decreased. As an inelastic product, electricity will hardly decrease drastically; just enough to reduce waste.
I do not know if electricity consumption decreased or else slowed its rate of increase. Perhaps the powers that be can educate the public how to be more efficient.
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