Slashing the top income tax rate now would “simply be an electoral gimmick” and “irresponsible” according to the Labour Party.

The government has so far not implemented its electoral pledge to lower the top income tax rate to 25 per cent from 35 per cent for those earning €60,000 and less.

But Labour Finance spokesman Karmenu Vella yesterday said that cutting income tax now would be an electoral gimmick “like it was when the promise was made”.

Mr Vella said he expected government to re-allocate its financial resources judiciously in the Budget.

When the Prime Minister had made the pledge in 2008, the government was proposing it as a measure to speed up economic growth. It had projected that a loss of revenue would be recouped within three years.

Mr Vella said that if the tax-cut had been introduced in the first budget as promised, it could have been the right response for the country as it entered the recession.

But introducing the measure now was irresponsible and Labour expected the government to act in an honest manner.

For more than an hour, Mr Vella; Economic affairs spokesman Charles Mangion and Labour MEP Edward Scicluna talked about a plethora of issues in which they presented their expectations for tomorrow’s Budget.

On water and electricity rates Mr Vella said he expected the government to guarantee it would honour its pledge that if the cost of oil went down, bills would be reduced.

Asked what could be done to lower utility tariffs, he said that while in the UK energy companies were allowed to recoup investment expenditure at a yearly rate of 4.4 per cent from bills, the Maltese regulator had accepted an annual rate of 8.5 per cent.

A proposal put forward by the PL to stimulate growth urges the government to stop opposing an increase in maternity leave (government to extend maternity leave, see page 1). “The Labour Party had even presented a study to show how increasing maternity leave by four weeks would have a positive impact on growth by encouraging more women to stay employed,” Prof. Scicluna said.

Dr Mangion referred to comments given to The Times Business this week by three chief executives of top companies that further investment by their mother companies was conditional on competitiveness.

Their biggest problem was not wages, Dr Mangion said, but government- induced costs, including transport, factory rents and energy prices.

Dr Mangion called on the government to give an account of how red tape had been cut and costs reduced over the past three years to facilitate businesses.

But the harshest words were those of Prof. Scicluna who chided the government’s “light” approach to the European Commission’s deficit warning earlier this week.

“The government is acting like a puppy in front of a ferocious dog and it is not realising that this dog has now been unleashed by the six pack directive,” he said. Prof. Scicluna added that the Commission was now empowered to take action and impose fines.

Malta was one of the countries to receive an “early warning” letter from Brussels and was asked to send the Commission convincing evidence, by the end of December, of “sufficient and permanent fiscal measures” to rein its structural deficit in a sustainable manner. He said that unless Malta gave a satisfactory explanation on how it intended to reduce the deficit and debt, the Commission could impose a €12 million fine that could increase to some €30 million.

ksansone@timesofmalta.com

The Times Budget focus

Tuesday’s edition of The Times will carry a special supplement on the 2012 Budget being presented in Parliament tomorrow evening.

The measures unveiled by Finance Minister Tonio Fenech will be carried in detail in the newspaper and also be uploaded at once on the most popular Maltese website www.timesofmalta.com.