Gozo Channel subsidies increase sixfold as staff costs, direct orders increase

Taxpayer subsidies to Gozo Channel have soared to unprecedented levels as the State company’s costs continue to rise, with direct subsidies shooting up from €700,000 in 2018 to €5 million in 2019.

Gozo Channel’s latest published audited accounts reveal that during 2019, Transport Malta made a staggering increase of €4.3 million over the previous year in direct subsidies. This excludes other indirect subsidies the company receives every year through various ‘ad hoc’ agreements with the government and other entities for additional services.

The increase in company costs is related mainly to the recruitment of staff and awarding of direct orders. At the same time, the accounts reveal a shocking level of waste, including €200,000 spent on the leasing of premises in Mgarr, which haven’t been used for two years.

The increase in subsidies in 2019 was carried out through an ‘addendum’ to an expired Public Service Obligation (PSO) contract, which was supposed to be re-issued through a public tender in 2017.

According to that contract, approved by the European Commission, Gozo Channel was only entitled to some €700,000 in subsidies each year.

However, company mismanagement and escalating costs have meant the company hasn’t been able to keep up with its expenditure and has had to rely heavily on taxpayer subsidies.

The company hasn’t published its accounts for 2020 yet, but these are expected to confirm millions of euros in losses for the company that was also hit hard by the pandemic. However, the government’s 2022 budget estimates earmark an allocation of €10 million in further subsidies.

This means that, in the space of five years, the government will be paying a total of €9 million in additional annual subsidies to keep the company afloat.

Tender on hold since 2017

According to state aid rules, the government should have issued the public service obligation (PSO) tender to continue to subsidise operators of passenger ferry crossings between the two islands beyond 2017, but this hasn’t happened yet.

Ian Borg’s Transport Ministry has been forced by the court to withdraw the PSO tender three times as it was found to be illegal. In the meantime, an ‘addendum’ to the expired Gozo Channel PSO was agreed in 2019 enabling the government to flood the ailing company with subsidies.

It is not yet known whether this ‘addendum’ is legal and whether the European Commission has given its approval. So far, the government has refused to publish this ‘addendum’.

Meanwhile, according to Minister Ian Borg, work on the publishing of a new tender is still “in progress,” four years after the expiry of the last agreement.

Leased Mgarr offices remain abandoned

While taxpayers continue to face the burden of increased costs, Gozo Channel is still awarding tenders and direct orders.

One example is the large premises which used to be a supermarket in Mgarr, and which was leased by Gozo Channel some two years ago to be turned into company offices.

Senior Gozo Channel officials told The Shift, on condition of anonymity, that while the company has been paying some €100,000 a year to lease the former Ta’ Miema supermarket – a few metres away from its Mgarr terminal – the place has been left idle for two years.

“We were told that although the company was paying hefty lease payments for this place, there are no funds to carry the necessary works and turn the premises into offices,” a senior official said.

Questions sent to Gozo Channel Chairman Joe Cordina were not answered.

Hundreds of workers joined Gozo Channel before the 2017 election in what was widely seen as a political move.

Contracts were awarded to various companies to provide all types of services, including cleaners, mooring men, seamen, security officials and other services which require tens of employees.

Since then, the company has been making massive losses requiring the injection of millions of euros in taxpayers’ funds in order to survive.