Prime Minister Lawrence Gonzi defended growth projections for next year and insisted the Budget was an exercise in “prudence” despite the figures being optimistic when compared to the European Commission’s forecasts.

Rejecting any notion that the Budget measures were unsustainable, Dr Gonzi said he was confident that the Commission would accept the government’s plan.

Lawrence Gonzi addressing the post-Budget press conference in Parliament. Photo: Chris Sant Fournier

This is not a time to risk or be adventurous- Prime Minister, Lawrence Gonzi

Under new EU regulations, the Commission will not only review the Budget but also has the power to impose fines if it deems the exercise is incorrect.

The Budget forecasts economic growth will reach 2.3 per cent next year, which Dr Gonzi said gave the government some space to provide a stimulus package for businesses and help families with children.

In its latest autumn forecast, the Commission said the Maltese economy would grow by 1.3 per cent next year, a full percentage point less than the government’s projections.

The Commission’s forecast was based on its assessment that the European economy will not grow or even descend into recession next year as the eurozone crisis deepens.

But although Dr Gonzi acknowledged the Commission’s bleak assessment, he remained defiant, adding that, even though this year was challenging, economic growth had still reached 2.6 per cent by September.

Flanked by Finance Minister Tonio Fenech and with his parliamentary group, except Jesmond Mugliett, sitting to one side, Dr Gonzi told journalists in the customary after-Budget press conference that “this is not a time to risk or be adventurous”.

“Our projections are prudent in full knowledge of the economic turmoil around us,” he said, adding the economy was stable because the government’s finances were on track.

The Prime Minister added that, in the circumstances, the government was not in a position to deliver the major tax cut promised in the manifesto, which would have seen the top rate drop to 25 per cent from 35 per cent for those earning less than €60,000.

This measure would have cost €40 million, which the country could not afford at the moment, Dr Gonzi said, and instead the government wanted to focus its efforts to safeguard the family by introducing a new income tax band for parents. This measure would cost €10 million, he added.

Mr Fenech also defended the figures, noting he was “fairly confident” that targets will be met.

Asked whether the VAT amnesty announced in the Budget for those who have hefty arrears did justice with those who always paid their dues on time, Mr Fenech insisted the tax owed would still have to be paid.

He denied it was an amnesty, adding the scheme would reduce the fines and interest accrued.

“In some cases, businesses miss out on their payments and then fines and interest accumulate, creating a vicious circle. Sometimes, such a measure has to be taken to give businesses the chance to start afresh and, at the same time, help generate income for the government.”

Opposition Leader, Joseph Muscat

Joseph Muscat: “We should compare ourselves with the best achievers not those in crisis.”

The government is hiding its debt problems and offering “small solutions” instead of tackling the real issues facing families, a stern Opposition leader Joseph Muscat said yesterday.

Let’s hope this Budget does not end up like a bus, where you don’t know if it will ever arrive as promised- Opposition Leader, Joseph Muscat

“Let’s hope this Budget does not end up like a bus, where you don’t know if it will ever arrive as promised, it takes the most complicated route to get there and ends up jammed in the traffic of bureaucracy.”

He said the government was postponing its debt problems as it had done in the pre-election 2008 Budget which it then followed up with disproportionately high water and electricity tariffs.

Addressing a press conference just after the Budget speech, Dr Muscat said people expected solutions to the hefty utility tariffs, petrol and diesel prices, hospital waiting lists and poor working conditions.

He welcomed the Prime Minister’s “U-turn” on increasing maternity leave but said he wished it was more decisive rather than leaving final approval to the Malta Council of Economic and Social Development.

A similar U-turn on the controversially hefty ministerial wages would have been appreciated, Dr Muscat said, pointing out that Cabinet salaries will increase by €4.66 per week with the cost-of-living-adjustment.

He also welcomed the €10 million worth parents’ tax band but said this was a far cry from Lawrence Gonzi’s pre-electoral promise to reduce income tax by €160 million over four years.

Dr Muscat said the Budget was based on revenue forecasts that were difficult to justify, particularly when the European Commission projected slow economic growth. “We will hold the Prime Minister and Finance Minister responsible for their calculations.”

Dr Muscat accused the government of being dishonest with people because, he claimed, it did not say National Insurance would increase or that the government planned to continue raising water and electricity rates.

He also pointed out that the Budget raised car registration tax, mobile phone charges and the prices of cement, cigarettes and alcohol, even though these were scarcely mentioned.

He promised that a Labour government would reduce water and electricity rates in a “sustainable and realistic” way, arguing this was the best way of spurring economic growth, tackling the deficit and dealing with the spiralling debt.

Asked what else he would do differently if he were in power, Dr Muscat said he would have been more honest with the public and more decisive on maternity leave. He would have also prioritised families and the “abandoned” self-employed rather than spend money on “a bridge to nowhere” and a new Parliament.

He pointed out that the expenditure on the City Gate project was nowhere to be seen in the government’s calculations because it was being financed by a special purpose vehicle. However, this would still add to the government’s debt even if it was hidden in the deficit.

He said the government debt increased by almost €80 million more than predicted and he could not blame this on the Air Malta restructuring or the problems caused by Greece.

Dr Muscat added that the Maltese should compare their country with “the best achievers” rather than the countries in crisis.