All in all, a fair and positive Budget

A fair Budget. This is how I would de­scribe last week’s Budget. I would also describe it as being neutral but mature and responsible. It was mainly aimed at reducing the deficit, both because this is required for any healthy economy and also, of course, because of constraints from the European Union.

There has been no significant increase in taxes and, therefore, burdens on the people. There have been increases in proposed expenditure in key economic sectors – primarily education and health.

If one were to consider the scope and aims of human life then one would seek, above all, well-being and the quality of life.

We all live life in the hope of being happy and being looked after by the state. This is mainly brought about by good education and proper health care as well as increased spending power, not to mention a pleasant environment. We also look towards job stability and new employment opportunities.

All these aims are targeted in the Budget. Notwithstanding the international crisis, Malta has survived (unlike many other countries, like Ireland, Spain, Portugal, Greece, Italy and others), and we have largely fared well. The lack of constructive criticism from the Opposition is evidence of this.

Of course, there are a number of perceptibly negative aspects of this Budget and I would mainly pinpoint tourism and income tax.

To start with the latter, we were promised a reduction of the income tax ceiling to 25 per cent in the Nationalist Party’s last electoral manifesto. This has not taken place. The government argues on two points, namely that the economic situation does not allow this at the moment and that a manifesto is for a full term of five years, therefore entitling it to implement such a reduction at any time during that term.

The Opposition argues, on the other hand, that Prime Minister Lawrence Gonzi had pledged to introduce this income tax threshold within the first year of his governance and there appear to be clips to evidence this. He had also declared before the last election that the International Monetary Fund had predicted turbulent times ahead. Yet, the size and effect still had to verify themselves at the time. I would have thought that, perhaps, the reduction in income tax could have been introduced gradually over the years, reaching the limit of 25 per cent after a five-year period. This would have been more equitable and in line with the manifesto and the Prime Minister’s declaration. It would have stimulated the economy by providing more spending power when it is needed. And, after all, the situation in this country is not bad at all.

There is, of course, the national debt. It may be heavy but borrowing is not bad in itself if the funds are used for capital projects, which will enhance the well-being and quality of life we referred to. On the other hand, a deficit which is kept under control, as ours is, is not negative. Someone mentioned in a recent radio discussion I took part in that we have not had a positive balance between our income and expenditure since Dom Mintoff days. But then do we want to remain without colour television sets and computers or have to consume inferior products, such as chocolates, pasta and toothpaste (which I hope we do not consume anyway)?

As for the tourism sector, the government increased the VAT payable on hotel beds from five to seven per cent.

The two percentage point rise is quite hefty and will affect hotels negatively, particularly because they are struggling to break even and were enjoying a remarkable recovery in tourist numbers. This, coupled with the reduction in Air Malta flights due to our national airline’s crisis (it has been mentioned that the reduced flights planned will cause a reduction of some 300,000 tourists a year!), does not augur well for the sector.

The Malta Hotels and Restaurants Association claimed this was a bolt from the blue. The government argues there had been discussions over the issue for the last two years or so. Again, perhaps the proposed increase in VAT could be introduced gradually in order to cushion any negative effects. There are ongoing talks. I hope a compromise can be reached and a solution found.

However, I will repeat that the Budget was, on the whole, fair and positive. We look forward to better times and more incentives next year. Malta has the potential and the right government to make this work.