The next COLA and beyond
We are past the halfway mark in between budgets.
We have become accustomed to budgets for the following year being presented in October, which means that the financial exercise that will draw up our plan for 2024 will soon start to be formulated.
Ministries will be asked to submit their requests and strategies for 2024, and the Finance Minister will be juggling through all their needs and come up with the budget presentation for next year.
The main topic that was on the cards in 2022 – for this year – was the increase in the Cost of Living Adjustment. As a result of the heavy inflation that hit Malta (and the rest of the world) from the beginning of last year, and which was exacerbated by the Russian invasion of Ukraine, the COLA for 2023 was the highest ever.
It was a staggering €9.90 per week per employee, and this had a great impact on many businesses, which had to find ways to make up for the extra costs they started to incur in employees’ wages. This inevitably continued to pushed prices further up, as products and services became more expensive.
The inflation in Malta was kept lower than what it would have been through the government’s decision to subsidise energy and fuel.
But we are still heading towards yet another heavy COLA, as inflation has continued unabated.
Last October/November, in the weeks surrounding the presentation of the budget, we were told that there would be a discussion on the way forward with regard to COLA. Constituted bodies came up with their ideas as to how this situation should be tackled. Naturally, employers were not happy to see COLA rise so much, while unions insisted that workers should get every euro they were entitled to. The government, as much as it could, tried to find the balance.
But now that we are getting closer and closer to the day when decisions need to be taken, not much has been made known as to how the matter will be tackled. As far as we know, no discussion is taking place to see whether the mechanism will be changed, or whether some form of agreement will be reached between employers and unions on how to proceed.
So we are risking arriving at the same point that we were at last October – with a hefty COLA to be introduced, and employers pointing out how difficult it will be for their business to survive and with unions defending the workers’ interests to the hilt. And January 2024 will come and, inevitably, prices will go up again simply because COLA has gone up.
“One needs to be careful of a spiral,” industrial relations consultant Gejtu Vella warned in an interview with The Malta Independent on Sunday.
That spiral, in our opinion, is already here, and the concern is that it is already out of control. The situation will become worse sooner or later, when the government will be pushed by the European Union to reconsider its position with regard to the energy and fuel subsidies.
We are in dire need of a plan which does not only cater for the now but will also see to the long-term future. Delaying an agreement on this will only make things worse.