Debt growing faster than economy – PL

Labour has accused the government of “correcting” its economic figures and falling short on all of its targets since 2008, while unjustly blaming the economic crisis for its failures.

The government worked on fewer projects but still missed spending targets

Malta’s debt is growing faster than its GDP (gross domestic product) and taxpayers are forking out €630,000 per day on debt servicing, according to Labour spokesmen Karmenu Vella and Charles Mangion.

They said the Budget tried to “fill a pool with a glass of water” and ignored the pressing issues.

Questioning figures given in the Budget, the spokesmen noted that this year, the government had planned to spend €440 million on capital projects but instead spent €303 million. This meant less of a boost for economic growth, said Dr Mangion.

On the other hand, the government spent €36 million more than it had forecast in recurrent expenditure such as in health and education.

Mr Vella said the government worked on fewer projects but still missed deadlines and spending targets.

Fewer projects were delivered also because the government had to make up for the overruns in recurrent expenditure by cutting back on capital expenditure.

Despite projecting a smaller economic growth than last year, this Budget claims that the government will rake in some €46 million in National Insurance, without explaining whether this would mean a hike in NI rates.

Mr Vella said many of the Budget measures focused on quantity rather than quality and in some cases, put people in a worse position than they were before.

He pointed out that the new tax band for parents only made sense for couples who both worked – otherwise single and married parents would benefit more with the old rates.

He, therefore, questioned whether the new tax band would really affect 55,000 people, as was being claimed, and, if not, whether the measure would still cost €10 million as projected.

Dr Mangion pointed out that the Budget made no mention of Smart City, despite the fact that it was meant to spur economic growth.

Mr Vella quoted the European Commission saying that the government had many ideas and plans but poor delivery and implementation. He also showed that while Malta had one of the lowest unemployment rates in the EU, this was not the only measure that had to be analysed.

The government also consistently said it would collect more in tax revenue than it actually did and brought in less EU funding and other grants than it had forecast.

Mr Vella pointed out that the government had planned to reduce its debt to a very specific €3,368 million by 2010 but instead this kept growing over three years, reaching more than €4,600 million.

Adding to this the government’s guarantees, the debt figure swells to €5,560 million.

Although Finance Minister Tonio Fenech had been quoted in the Commercial Courier as claiming Malta always reached its deficit targets, it actually failed on each of the past three years.

“Coincidentally”, Mr Vella said sarcastically, its forecast for this year was reached perfectly.

Mr Vella said water and electricity rates should be reduced to spur economic growth but the government had no intention of doing so and had opted for an oil power station instead of a gas power station, only to blame the energy prices on the price of oil.

The government could not keep saying its forecasts were missed because of the economic turmoil, because a pledge to the electorate was like a promise of sale which could not be defaulted on because it had started “raining”.

Mr Vella refused to say how the Labour Party would reduce water and electricity tariffs but said reducing Malta’s dependency on oil would already put the country in better control of the rates. However, the government opted for a power station fired by heavy fuel oil, rather than the gas option the Labour Party had suggested.

Reacting to the press conference, the Finance Ministry accused the Labour Party of not understanding the economy and of being in a state of panic due to the government’s successes.

The ministry said for EU funds to be used they must be allocated in the financial estimates from the beginning of the implementation of the projects. Malta had one of the best absorption rates in the EU.

It insisted that the new tax band for parents would be enjoyed by 55,000 people and was the second income tax reduction in this legislature.

The ministry said the opposition continued to deny there was an economic crisis out there, showing its disconnection with reality. The Labour Party also had absolutely no positions or policies except to promise everything to everyone.