Revisiting energy, water and fuel subsidies

There is definitely a case to make in favour of subsidised energy and water use in this particular time of crisis. This should be aimed at mitigating the social impacts of an increase in energy and water rates for as long as the impacts of the Ukraine invasion remain. We should not, however, take the easier way out and splash public funds around indiscriminately. Subsidies should be focused on those who need them. Why subsidise those who can cope?

The basic energy and water consumption of residential households should definitely remain protected and subject to subsidies in the medium term. This is a social necessity in order, primarily to protect the vulnerable and low earners. However, beyond subsidies applied to basic and essential energy (and water) consumption, there are no valid reasons for the current across the board energy/water subsidies of residential households. Those who can afford to run large domestic properties should be able to shoulder the increased cost of the energy and water which they consume.

This is not rocket science. It is in fact the manner in which we are already billed for our water consumption: basic water consumption is billed at subsidised rates whilst beyond that, commercial rates apply. It should not be too difficult to understand: it is how our water bills have been computed for the past thirty years or so!

The matter is also debatable when considering non- residential energy and water consumption. When protecting existing employment, in the short to medium term, subsidies to energy and water rates are reasonable. Beyond that, however one needs to be more focused and revisit the workings to determine whether and the extent to which such subsidies may be reasonable and affordable to the national exchequer.

Blanket long-term energy and water subsidies for non-residential use are not on. We must be capable of living within our limited means.

The case of subsidies applied to fuel consumption, that is to say subsidies applied to petrol and diesel use is completely different. Government has already after a few weeks tweaked its original decision and removed the applicability of subsidies when applied to fuel consumption (primarily diesel) in the case of large boats.

There is generally no social need to subsidise petrol and diesel. The small number of cases where private vehicle use is required to address issues of disability can be addressed directly by introducing adequate focused help.

Removal of fuel subsidies would signify a substantial increase in the price of petrol and diesel. The primary impact of the removal of subsidies applied to petrol and diesel would be beneficial as it would signify an immediate reduction of cars from our roads and a consequent immediate improvement in air quality.

Some may need to be reminded that 50 per cent of private car trips on our roads is for the travelling of short distances. Most of these trips could, as a result of a realistic price of fuel, be shifted to public transport or other alternative modes of sustainable mobility.  As we know public transport is free of charge.

The Parliamentary parties are at present arguing on two diametrically opposed views. On one hand Labour is emphasising the need of complete subsidisation while the PN is in favour of the complete removal of these subsidies. The contrasting views on the retention of subsidies or their negation, advocated by PLPN, are not at all helpful. We need reasonableness even when considering the application of subsidies in such situations.

Our resources are limited. We must use them judiciously in order to be able to continue helping the vulnerable.

Carmel Cacopardo
ADPD Chariperson
Published in The Malta Independent – Sunday 30 April 2023