The payment of children's allowances to every family in January, which the government had not forked out in 2007, was one of the reasons for the widening of the financial deficit by 36 per cent in the first seven months over the same period last year, Prime Minister Lawrence Gonzi said yesterday.

It was, therefore, obvious that the first half of 2008 would see a greater expenditure than the previous year, he said, expressing the government's commitment, nonetheless, to meeting the deficit target it had established in the last budget.

The government was determined to control its expenditure, which was higher than estimated, and continue increasing its revenue, which was higher too, remaining confident that "the economic rhythm is strong enough".

As to whether promised income tax cuts could be ruled out given the government's current financial situation, Dr Gonzi said "the final decision on whether they will be implemented and, if so, how, will be taken when a good analysis of surrounding economies and Malta's is carried out by the start of October".

The fact that the UK economy and that of other countries is not passing through a positive period was cause for concern, he said.

Dr Gonzi, who has kept a relatively low profile for some months, was speaking to the media after he addressed supporters at the San Ġwann PN club, under the banner Flimkien b'Impenn għall-Ġejjieni, the theme underlying the upcoming Independence Day celebrations, and on the subject of employment, which is at a record high.

Dr Gonzi highlighted that 70 per cent of the working population (101,300) are employed in the private sector. Over the last year, private sector full-time employees increased by 3,500 and those in the public service decreased by 500, Dr Gonzi was pleased to note. The gainfully occupied numbered 143,500 - a record number of full-time jobs and an increase of 3,000 over the previous year, he highlighted.

Full-time working women increased by double the amount (2,000) of working men over the last year, despite the closing of textile factories, which mostly employed women.

Dr Gonzi cautioned, however, not to rest on laurels and said that to sustain such results in the future, the government is determined to carry out the necessary reforms.

These figures were no coincidence but the fruit of a government policy that was based on faith in the capabilities of the Maltese, he said.

The Prime Minister underlined the need to embrace change and face the challenges ahead without fear and with the courage to take decisions.

He urged dockyard workers and their families not to be afraid of change, and strongly appealed to the General Workers' Union and the dockyard workers to find the best solution for the 'yards privatisation in the interests of the country.

Among the changes he was referring to were rent reform and the country's modernisation.

Speaking about the MLP's "positive" feedback to the government's White Paper on rental reform, Dr Gonzi did not think it was a good idea for the government, as in the past, to suddenly be faced with the Labour Party's proposals in Parliament.

The broad consultation process would be worth nothing if it were carried out in that manner, he said.

The government is committed to attacking monopolies, opening up markets and creating more competition, as well as serving as a watchdog to ensure value for money for consumers, Dr Gonzi said.

Finance Minister Tonio Fenech, who spoke at the same activity, said 850 pensioners have chosen to return to work and continue receiving a pension - a measure that was announced in the last budget.

With the expansion and opening of factories, it is estimated that, over the next two years, the manufacturing industry alone will generate 4,800 jobs and see an investment of €170 million, he said.

Mr Fenech also said that, in the next budget, the government intends to further improve incentives for women to return to work after stopping to have children. Now, they would benefit from a tax-free year for every child they have and could return to the labour market before five years are up.

Social Policy Minister John Dalli also addressed the event, saying he has instructed the Employment and Training Corporation to concentrate on training workers in more than one skill, improving their flexibility and employability.

He also said the government's subsidies to employers could not be considered permanent and were an incentive for a limited period.

As regards abuse, MEP Simon Busuttil yesterday said he had written to Mr Dalli about those who work full time but whose contracts show they have four part-time jobs instead, meaning they are being denied their rights. The minister had immediately started addressing the issue, he added.

He said Malta has reached a situation where "work is running after the workers", and not vice-versa, and that the labour market has to grow and be more flexible and dynamic.

No one should work illegally, and whoever has a work permit should pay tax, Dr Busuttil insisted.