The Minister of Finance made an honest declaration which demonstrates how dishonest politics can be. He told Herman Grech, interviewing him for The Sunday Times, that he had to ensure "we don't wreak havoc in the public finances just for the sake of keeping promises". (ST, October 5 ).
The "we" in the statement, it is evident to all, is not as in "We, the people". The Minister's 'we' refers to his government. The interviewer reminded the Minister that the PN had promised a reduction in the maximum income tax rate in its electoral manifesto (for the 2008 general election). "Is it a foregone conclusion that we are to expect nothing this year?" Mr Grech asked.
This time the "we" in the question did stand for "We, the people". We had actually been promised something very different to a reduction in the maximum income tax rate. According to the detailed tax promise, the maximum rate of 35 per cent was to remain, but would come into force on the basis of a much higher mini-max point - the distance between income attracting the lowest rate and that to be taxed at the highest cut.
Furthermore, in between the tax threshold was to be very sharply raised for each tax band, to the extent that the Prime Minister projected that the government would forego Lm20 million in tax revenue, or all of €47million. And that was to be announced in the next Budget, for implementation in 2009.
The moment the promise was uttered, well before it reached the PN electoral programme, economic analysts like yours truly pointed out that the Prime Minister was making a very rash statement. In the most normal of years, or in a year when a Keynesian oriented government wishes to stimulate the economy, a reflective Finance Minister would hesitate to commit to such a bonanza at one go.
At the time the slash promise was made it was very clear that the future was not going to be normal at all. There were clear and definite signals that crude oil and its derivatives were on an upward trend. Apart from related factors which also signalled that higher government outlays would be required, such as in assistance to Enemalta, the government knew that it would have to tackle the shipyard issue by the end of this year.
It would be a very irresponsible government that had no idea whatsoever of how much its plans to approach privatisation would cost. The government knew, make no mistake; its advisers would have told even in the heat of a pre-election political campaign.
The incumbent Finance Minister cannot be taken seriously when he answers his interviewer's probing as if he had no idea that the government would be allocating a huge sum (initially €49 million) to try to be the shipyard workers' acquiescence to privatisation. He can be taken even less seriously when he indicates he had no inkling that a crude oil price already on a sharply rising upward trend might get out of hand.
In that clear context the promise - nay, commitment - to slash income tax revenue was a very deliberate attempt to mislead the electorate that could and would be done with impunity.
Boomerangs inevitably return even as chickens come home to roost. We have passed through weeks of communications massaging, with the Prime Minister telling us that we must bite the bullet, while the Finance Minister hints and nudges that, well, hmm, yes, the Budget deficit would be somewhat off track of the forecast €68 million.
The humming and the nudging are part of the efforts being made to prepare us - that's still "We, the people" - for what will be packaged in the forthcoming Budget for 2009. The Finance Minister did not confirm to Herman Grech that it is a foregone conclusion that there would not be a reduction in income tax.
He said that the government always goes to the Malta Council for Economic and Social Development "with options". He added that the government "had not excluded any of the promises" it had made.
It was a light mouthful later than he came out with the sober declaration that he must ensure the government did not wreak havoc in (the) public finances "just for the sake of keeping promises".
The reflection is sensible, yet brazen to an extreme. It suggests that the Finance Minister will try to sweeten the inevitable bitterness that lies ahead, what with a clumsy implementation of the cost-recovery objective as regards power and water supply in a monopolistic context, and with the sound of crushingly broken promises.
How he will attempt to do that remains to be seen. It would be better if, having started coming clean with the implication that the income tax promise was rash, he would be less than wise not to stick to that approach and present a budget which really takes into account the bleakness of the situation.
The political cycle is ripe for him to do that. He has this year and next year to ladle out most of the bitterness that lies in store. Whether shorter-term political considerations, such as the election of members of the European Parliament allow the Finance Minister to do that remains to be seen.
The "we" in the statement, it is evident to all, is not as in "We, the people". The Minister's 'we' refers to his government. The interviewer reminded the Minister that the PN had promised a reduction in the maximum income tax rate in its electoral manifesto (for the 2008 general election). "Is it a foregone conclusion that we are to expect nothing this year?" Mr Grech asked.
This time the "we" in the question did stand for "We, the people". We had actually been promised something very different to a reduction in the maximum income tax rate. According to the detailed tax promise, the maximum rate of 35 per cent was to remain, but would come into force on the basis of a much higher mini-max point - the distance between income attracting the lowest rate and that to be taxed at the highest cut.
Furthermore, in between the tax threshold was to be very sharply raised for each tax band, to the extent that the Prime Minister projected that the government would forego Lm20 million in tax revenue, or all of €47million. And that was to be announced in the next Budget, for implementation in 2009.
The moment the promise was uttered, well before it reached the PN electoral programme, economic analysts like yours truly pointed out that the Prime Minister was making a very rash statement. In the most normal of years, or in a year when a Keynesian oriented government wishes to stimulate the economy, a reflective Finance Minister would hesitate to commit to such a bonanza at one go.
At the time the slash promise was made it was very clear that the future was not going to be normal at all. There were clear and definite signals that crude oil and its derivatives were on an upward trend. Apart from related factors which also signalled that higher government outlays would be required, such as in assistance to Enemalta, the government knew that it would have to tackle the shipyard issue by the end of this year.
It would be a very irresponsible government that had no idea whatsoever of how much its plans to approach privatisation would cost. The government knew, make no mistake; its advisers would have told even in the heat of a pre-election political campaign.
The incumbent Finance Minister cannot be taken seriously when he answers his interviewer's probing as if he had no idea that the government would be allocating a huge sum (initially €49 million) to try to be the shipyard workers' acquiescence to privatisation. He can be taken even less seriously when he indicates he had no inkling that a crude oil price already on a sharply rising upward trend might get out of hand.
In that clear context the promise - nay, commitment - to slash income tax revenue was a very deliberate attempt to mislead the electorate that could and would be done with impunity.
Boomerangs inevitably return even as chickens come home to roost. We have passed through weeks of communications massaging, with the Prime Minister telling us that we must bite the bullet, while the Finance Minister hints and nudges that, well, hmm, yes, the Budget deficit would be somewhat off track of the forecast €68 million.
The humming and the nudging are part of the efforts being made to prepare us - that's still "We, the people" - for what will be packaged in the forthcoming Budget for 2009. The Finance Minister did not confirm to Herman Grech that it is a foregone conclusion that there would not be a reduction in income tax.
He said that the government always goes to the Malta Council for Economic and Social Development "with options". He added that the government "had not excluded any of the promises" it had made.
It was a light mouthful later than he came out with the sober declaration that he must ensure the government did not wreak havoc in (the) public finances "just for the sake of keeping promises".
The reflection is sensible, yet brazen to an extreme. It suggests that the Finance Minister will try to sweeten the inevitable bitterness that lies ahead, what with a clumsy implementation of the cost-recovery objective as regards power and water supply in a monopolistic context, and with the sound of crushingly broken promises.
How he will attempt to do that remains to be seen. It would be better if, having started coming clean with the implication that the income tax promise was rash, he would be less than wise not to stick to that approach and present a budget which really takes into account the bleakness of the situation.
The political cycle is ripe for him to do that. He has this year and next year to ladle out most of the bitterness that lies in store. Whether shorter-term political considerations, such as the election of members of the European Parliament allow the Finance Minister to do that remains to be seen.