A Santa or Scrooge Budget?

Something for almost everyone might be the best phrase to sum up last night’s Budget as the Government attempted to inject a dose of feel-good factor in several sections of society.

With a general election looming – there is no doubt this was the final Budget of this legislature which may come to an end within the next fortnight – few will be surprised by the approach the Government has taken, even if its defenders will point to the fact that the major measures had to be cleared with the EU.

Tonio Fenech went to pains at the beginning of his speech to highlight the economic strife that has afflicted, and still afflicts, fellow EU countries as well as much of the rest of the world.

After alluding to the austerity measures that have plagued other nations, he happily used this as a springboard to distinguish Malta which has plotted a steady course in the rough seas that surround it.

The most obvious trump card in this Budget was the introduction, finally, of its 2008 electoral pledge to reduce the top income tax rate from 35 per cent to 25 per cent.

Critics will either point to this as a cynical move or a half-baked one. Yet while the former accusation will justifiably attract some supporters, staggering the cut over three years at least displayed a measure of responsibility – though the Government seems to lack confidence in the argument it had itself advanced in 2008 that the measure would incentivise spending.

The Government has also answered calls from the property sector to incentivise home-buying by extending the 3.5 per cent stamp duty ceiling to €150,000 (from €116,000) for either first time buyers or those who sell their home to buy another one. This is likely to go down well with developers as well as buyers across all sectors of society. And it is not the only positive move in this area.

This Budget also provides help for the disabled, raises children’s allowance, provides help to service pensioners and contains initiatives that will be welcomed by the tourism sector – while the Government says the deficit for this year will almost achieve its 2.2 per cent target (it is actually 2.3 per cent) and the projection next year is 1.7 per cent, which seems rather optmistic.

However, there are stings in the tail. The Government has wastefully extended stipends to students wishing to carry out voluntary work up till the age of 25 – a most ill-timed measure in the circumstances – as well as raising registration tax on vehicles that do not have a Euro 5 rating and, of course, raising tax on fuel at a time when some people are struggling and when the public transport service is not up to scratch.

In short, in an indirect manner the Budget will be least liked by low-income earners who will also be hit by the announcement by Liquigas yesterday that the price of a gas cylinder is to rise once again.

Yet for all its trouble and strife particularly in the past year, the Government has reached the finish line – as its target all along was to present this Budget to voters before the election. The main message it is trying to convey is that it is highly competent when it comes to economic performance.

However, that has never really been in doubt. What has crippled this administration are internal strife as well as a series of public relations disasters. So whether this Budget will achieve its aim – which is not fiscal this time round – has yet to be established.