‘It’s by no means an expansionary Budget’

Malta Employers’ Association
Rating: 7/10

“Investing in yourself” was the strong message delivered through the Budget, urging companies to be innovative and individuals to improve their prospects through lifelong learning, the Malta Employers’ Association said.

Association director general Joe Farrugia said the Budget was limited by “strong constraints” aimed at reducing the deficit which stopped the government from implementing many recommendations made by social partners.

In a statement issued after the Budget, the association described it as a “challenging balancing act”. On the one hand it aimed to cut down government expenditure by reducing the number of people employed in the public sector, setting efficiency targets and cutting abuses.

On the other, it included numerous initiatives which increased government expenditure in education, health and in welfare spending aimed at improving the situation of vulnerable groups.

The MEA praised the investment in education and training and the incentive aimed at encouraging people earning the minimum wage to undergo training.

The increase in funds allocated to University, Malta College of Arts, Science and Technology and Church schools, as well as tax incentives for parents with children in private schools, established education as a major priority. However, an increase in expenditure should be accompanied by defined targets, MEA said.

Other positive measures included increased expenditure in childcare services and incentives for second income earners through the option to pay reduced national insurance rates.

However, the Budget did not specify whether the reduced NI applied to employers’ contributions as well. The MEA noted with satisfaction that the “overdue” microcredit scheme for enterprise would be in operation next year. It welcomed incentives to SMEs including the quality improvement programme. Scrapping old cars was a much needed measure to establish a level playing field between new-car importers and the importation of second-hand cars.

The association criticised the increase in VAT from five to seven per cent on hotel accommodation as “untimely” given that the sector was still recovering from two bad years and austerity measures taken abroad, particularly in the UK, may have a negative impact on tourism in 2011.

“The Budget for 2011 is by no means an expansionary budget, as the government is struggling to achieve expenditure cuts as painlessly as possible.

“It is evident that a number of measures proposed by the social partners, such as partial payment for maternity leave, were not taken on board because they were not affordable in the present circumstances.

“However, the Budget contains incentives and initiatives to maintain the momentum in economic growth experienced in 2010, and it is only through such growth that the fiscal targets can be achieved,” the MEA said.