Budget will not raise tax – PM

No tax increases will be imposed in the next budget, the Prime Minister said yesterday.

The aim will be to balance the deficit by controlling expenditure, Lawrence Gonzi told an audience of Nationalist supporters in an interview during a party activity at the Ċittadella in Gozo.

“We are to expect a budget that is realistic, understanding of current and future challenges and that offers solutions and reforms that equip our country to be competitive,” he said.

The government’s pre-budget document issued in August had not given a clear indication of the direction the government could be expected to take in order to reduce the excessive deficit.

The document had pointed out that cuts in recurrent expenditure would have little impact in view of the government’s reluctance to lay off civil servants and cut social services.

This called for consideration of other items “particularly public investment and the revenue side of the budget”.

What was already certain was that there would be no income tax cuts.

Last month Finance Minister Tonio Fenech had made it clear that the cuts promised in the run-up to the last general election would not be possible in the next budget because, in a situation where no significant economic growth was expected next year, the government needed to ensure stability in its revenue.

Dr Gonzi yesterday said the budget would show how Malta had managed to ride the waves brought about by the economic crisis, compared to other countries. Spain and others were increasing taxes – something which Malta would not do in the budget.

The deficit of close to four per cent, instead of the projected 1.5 per cent, was due to various factors that included higher prices of oil and cereals, he said.

The government also forked out millions for the shipyards’ retirement schemes to pave the way for the privatisation process. This was a one-time payment that ensured that, in future, the shipyards would no longer make the notorious huge losses.

“I think it was the right decision. We had the courage to take it. Had it been for the Labour Party we would have left the shipyards as they were, which would mean losses one year after the other,” he said.

He criticised the PL for failing to make its political voice heard when it came to issues of national importance adding that this was because the party wanted to be popular.

“It’s easy to play that game, and try to be liked, when you are in opposition. But when a party is in government, important decisions need to be taken,” he said.

Dr Gonzi added that, given the current economic scenario, Malta had not been spared. But although jobs had been lost, the government’s intervention had saved about 2,500 jobs. Moreover, in the first nine months of the year, more jobs were created than lost.

He added that difficult reforms which would eventually bear fruit were being undertaken for the benefit of the country so that in four years’ time, at the general election, the Nationalist government could present the people with a better country than it took on.

When asked about entrepreneurs’ claims that the government was taking too long to pay for services, Dr Gonzi said discussions were underway to find a solution.

“The government needs to ensure that services are paid and soon. But those who owe money to the government also ought to pay up,” he said.

One possibility was allowing both sides to sit at a table and negotiate payment. “Our priority if protecting existing jobs and incentivising the creation of new ones,” he said.

Earlier, Dr Gonzi welcomed the Irish yes vote saying this was an important step for the future of the EU.