'No new taxes planned, hence no mini-budget'

The government had no intention of introducing new taxes at a time when the economy was passing through a difficult patch, Finance Minister Tonio Fenech said, ruling out a mini-budget.

"A government holds a mini-budget if it decides it wants to collect more revenue in between budgets. We have no intention of doing this and if that is what the Opposition Leader is suggesting we will not be heeding his advice," he told The Times.

On Sunday, Labour leader Joseph Muscat called on the government to admit its financial gaffes and hold a mini-budget.

Labour lambasted Mr Fenech's assertion that Dr Muscat's suggestion was equivalent to raising taxes in the middle of a financial year.

"It seems that (Prime Minister) Lawrence Gonzi's concept of budgeting stops at raising taxes. Joseph Muscat has been arguing in favour of tax cuts all along. He has been consistent and will remain consistent on this matter," a Labour spokesman said when contacted.

He insisted a mini-budget was required to help stimulate the economy because the 2009 budget was not working and contained "flawed financial and economic projections".

"Malta needs immediate corrective action and not a post-mortem in the next budget speech. The fact that Lawrence Gonzi got it all wrong in his budget prediction increases the need of taking stock of the situation. We need to see that the predictions being made are realistic and the investment pledges are implemented," the spokesman said.

Data published last week by the National Statistics Office showed that the deficit for the first three months of the year stood at €265 million, an increase of €55 million over the same period last year.

Mr Fenech reiterated that safeguarding jobs was a higher priority than balancing public finances. The government has had to fork out money that was not budgeted to assist companies in dire straits because of the recession. "Our priority is to safeguard jobs and by increasing taxes now, as Dr Muscat seems to suggest, I will not be helping the situation," he said.

"When the economy is passing through a difficult time the government can expect to miss its deficit targets if it means sustaining the economy. If we manage to sustain it in these difficult times I have no doubt we will be able to reach our targets once it starts to recuperate but everything needs to be done at the right time," he added.

Mr Fenech criticised Dr Muscat for attacking the government on the high deficit it was running while at the same time asking for more public funds to be pumped into the economy. The Labour spokesman defended Dr Muscat's position, insisting he was criticising Dr Gonzi for running a high deficit for the "wrong reasons".

"Even though we had all this talk about investment, capital expenditure is actually down by 40 per cent. Labour would not have criticised a higher deficit as a result of more investment in the economy," the spokesman said.

He added that in the medium-term, the deficit could be controlled by ensuring job and wealth creation, which would lead to higher government revenues without the need to increase taxation. At the same time, recurrent expenditure had to be controlled.

The budget for 2009 forecast a deficit of €99 million for the whole year. However, it did not take into consideration the additional expenditure in government assistance to companies in difficulty. Furthermore, it was based on optimistic growth prospects, which have already been downgraded by the Central Bank.