Chamber of Commerce President David Xuereb (left) with Prime Minister Robert Abela
Employees will be the biggest losers from the stimulus package to businesses announced by Prime Minister Robert Abela this evening, the Chamber of Commerce has warned.
In a statement, the Chamber said it regards the measures as “very disappointing” and that they certainly fall short of its repeated proposals to the government to help businesses cope with the COVID-19 coronavirus crisis.
“The Prime Minister declared that these measures were intended to protect jobs and ensure that employees suffer no reductions to their salaries,” it said. “In reality, the Chamber can responsibly declare that the employees will be the biggest loser from the support package announced this evening.”
“The Chamber is in a central position to make this claim because it is in touch with the needs and pains of business during these challenging times.”
It reiterated that the government should temporarily subsidise salaries of employees in the private sector to ensure that affected businesses maintain employees on their books whilst business is at a standstill.
“Such support would serve to avoid large-scale redundancies which would inflict social hardship on affected families and increased recurrent expenditure for Government by way of unemployment benefits,” it said.
“At the same time, such assistance would ensure Maltese companies’ strong competitiveness position upon resumption of business. To this end, the Chamber had suggested that in cases of companies suffering in excess of 25% loss in turnover, Government should pay 50% of the employee’s salary up to a maximum of the average salary with the employer covering a further 25%.”
“The announcement made today is equivalent to a mere subsidy of 20% of the employee’s salary at the level of the minimum wage.”
The Chamber warned that the measures will make it impossible for employers to avoid significant redundancies and that, in a scenario of looming mass layoffs, even the deferment of payment of payroll taxes and VAT, which accounts for the bulk of the package, becomes a redundant measure.
“This amount will not be paid after recovery but lost forever if there are significant job losses and declines in local sales,” it said.
The Chamber also voiced its disappointment that the government’s package made no reference to measures that the government will be implementing measures to reduce public sector spending.
The government’s package is worth some €1.8 billion, around 12.9% of Malta’s total GDP last year. However, the Chamber noted that almost half of this stimulus packages is composed of loan guarantees for business which may be leveraged to €4.5billion via the banking system.
“Indeed, government-guaranteed loans were an integral part of the Chamber’s proposals for business. Nevertheless, the Chamber fears that their potential effectiveness has been placed into serious doubt by the insufficiency of the wage subsidy measure,” it said.
On a more positive note, the Chamber welcomed the Government’s pledge to partially offset the employers’s cost for Quarantine Leave at a rate almost equivalent to the minimum wage (or €350 per employee).
However, it warned that this measure won’t fully compensate employers for abuse by employees who intentionally self-inflict quarantine.
“The Chamber also noted a comment made during the Press Conference by the Minister for the Economy to the effect that Government may announce further incentives in the coming days, however, it fears that any further announcements may now be too late to avoid any undesirable consequences on the economy,” it said.