From a socio-political perspective, that presented by the Minister of Finance on Monday was a class Budget. Granted, we are assured by an impeachable source that the poor will be always with us. But that same source, the Good Lord Jesus, also inspired the deep principles of social justice. The Budget 2012 proposals ignore them completely. It totally forgets the poor. The minister blatantly aims to boost the pockets and spirits of the middle classes, turning his back on lower income groups.
The minister blatantly aims to boost the pockets and spirits of the middle classes, turning his back on lower income groups- Lino Spiteri
The family measures emphasised in the Budget speech are: relief for taxable working parents, to cost €10m annually in foregone revenue; an increase in the basic children’s allowance restricted to those on taxable incomes; and higher tax relief for those who send their children to private schools.
In themselves these proposals are reasonable. What is outright unjust is to put aside the needs of those who do not earn enough to pay taxes, a broad measure of the relative and in some cases absolute poor in Malta. The minister gave an indication of the extent to which he ignored this very large class. He calculated that 55,000 taxpayers will benefit from the parental income tax-exempt threshold.
That leaves the rest of the gainfully occupied population – close to a further 100,000 – without a penny-worth of benefits from this measure. Or from any other measure, in fact, other than the belated removal of the TV licence. For it is not unfair to assume that those who send their children to private schools and those who benefit from the restricted increase in the children’s allowance, are taxpayers.
Such beneficiaries are mostly hardworking contributors to public revenue. The minister, in fact, expects to increase the tax take from them next year, despite the gestures towards them. But anyone who cares about social justice must ask – is the government assuming that those who do not earn enough to pay taxes are undeserving knaves to a man and woman?
Seen from another angle, at the last National Office of Statistics count there were 61,278 individuals at risk of poverty, receiving less than the threshold of €5,961 annually (Statistics on Income and Living Conditions – 2009). As a matter of socio-economic reality those among that 15 per cent of the population are not simply at risk of poverty – they are actually poor. Certainly so, relative to those of us who earn a considerably higher income than that.
As the Budget speech unfolded and I was listening with one ear to the minister while rifling through the figures in the Estimates of Revenue and Expenditure, I was asked if this was an election Budget. I said I did not believe the Prime Minister would call a general election much before his full term expires. But the Finance Minister seems to have worked politically on the off-chance that Lawrence Gonzi might have to go early to the polls. No doubt with the agreement of the Prime Minister, he took a political decision to target the middle class, reflecting a conclusion that the government was weakened in that sector, perceived to vote mostly Nationalist, and must massage it with a show of generosity.
Politics is a game. The way that is reflected in the 2012 Budget reveals the unfairness lurking close to the surface of the sport. The relative and absolute poor, as represented by non-taxpayers, will not only remain with us in 2012. Their position, in a year when inflation will be considerable and jobs harder to come by, will worsen. I am surprised that the heads of the Malta Church, or at least some socially-oriented entity within it, have not remarked on the social injustice in the Budget proposals.
In a wider context, the figures in the 2012 Estimates suffer at close analysis. The revised totals for 2011 show that the government will again under-spend sharply under the capital budget. In economic terms that means public investment was well below what the government deemed was required a year ago. That affects future growth, which depends on real investment.
In financial terms, lower than proposed capital outlays (net of financing which would have been received from the EU) helped the government report a reduced budget deficit. That is deception. A lower deficit and, hopefully eventually a surplus, should come out of sustainable economic growth, not capital expenditure shortfalls.
The 2012 revenue forecasts seem overstated. It looks so even allowing for the fact that the minister will not revise upwards the tax-exempt portion of income – he will tax the €4.66 statutory increase meant to compensate for inflation up to last September, in addition to taking 10 per cent of it in social security contribution where applicable.
The Finance Minister has much further explaining to do, if he is to be convincing. Even relatively small forecast revenues raise questions. For instance, will the MFSA really be able to up its profits by a third to hand the Treasury an additional €2m? Will dividends from listed companies rise by 18 per cent? Where is the five-fold projected increase in sundry dividends, to €5.2m, to come from?
Meanwhile, the optimistic figures still leave a substantial absolute forecast deficit to be financed through fresh net borrowing, thereby increasing the public debt and the interest payable on it, even if the financing of the City Gate projects are still irregularly left out of the books.
In the economic context, the minister announced a number of piecemeal measures and top-ups which are positive. But as the employers’ representatives were quick to point out, there are no major macro stimulators planned.
Nor have concerns expressed by the heads of three top manufacturing companies, which dropped important investment plans or saw them taken up elsewhere in Europe by their group due to diminished competitiveness and higher government costs and bureaucracy, been removed.
In the tourism sector the €1million given to the Malta Tourism Authority seems far too low in the context of the unfolding austerity and low-growth or recessionary scenario unfolding in our main markets. Finally, the minister did not recall his commitment to reduce bureaucracy and its costs, much less give a progress report.
All this makes me wonder whether I was hasty in saying this was not an election Budget. Especially when I recall how Prime Minister Eddie Fenech Adami went quickly and early to the polls when he received a truth-report on the public finances in 1996. The report was not revealed to the Cabinet, let alone the public, who were instead told money was no problem.