The state of public finances will not get off the political agenda for quite a few years to come. The problems that have to be tackled are awesome and political talk of mastering them in the early medium term is another exercise in giving hostages to fortune, one indulged in by both major political parties.
Assuming other things remain equal, which they won’t, the principal tasks that have to be addressed are two. One is the fiscal balance, the other public debt. Both are irrevocably linked.
The objective as regards the fiscal balance is to bring it down to below three per cent. The public debt has to be brought down to not more than 60 per cent. Both are monitored by the European Commission but the objectives of control are in the interest first and foremost of the Maltese people, not the rest of the European Union.
Public revenue and expenditure are not static items. Expenditure tends to be always on the increase. Yet, it is not enough. For instance, this government, through its most energetic minister, is committed not only to bringing down poverty, but also to improve the lot of those who are at risk of poverty.
That is a commendable objective, but an extremely tall order. Then there is education, run by the most focused of the ministers, along with the energy minister. A dynamic education system which will give tomorrow’s generation the skills that will be required by tomorrow’s economy requires continued physical improvement in our schools network. But that is only one factor of the multi-faceted issue. Training teachers to upgrade their input to the level required will be a worthwhile investment, but costly. So will giving a computer tablet to each student in the primary level.
Public transport has to be addressed. If a solution is found to the Arriva question it will probably cost more and it will be short term. Alternative means of public transport are required. Eventually a metro will have to be created. And thought may be given to the possibility of introducing a tram system. Either of these alternatives requires heavy investment.
EU funds will not last forever. One can go on addressing each ministry. The conclusion is clear: More expenditure is required now and will be required in the future. The answer lies on the revenue side. Will recurrent revenue rise enough to meet present expenditure requirements, let alone currently uncovered future ones?
As for the public debt, it is not enough to reduce it – if we can do that – as a proportion of the Gross Domestic Product. It is massive in absolute terms with servicing gobbling up a chunk of recurrent revenue. We must aim to reduce it. That can mostly be done through a constant budget surplus – the Enemalta China deal, if it does transpire, is probably a one-off.
No wonder then that the Ministry of Finance is always at its wits’ end as to how to generate more revenue, especially when expenditure also includes holy cows like student stipends and free medical care. That, I should think, is how the recently launched Individual Investment Programmes came about. It is to be run by Identity Malta which is run by Joseph Vella Bonnici, one of our finest economists who to me is wasted in that position.
The scheme has attracted controversy from both the political as well as the private sector fields. The Nationalist Opposition opposes everything as a knee-jerk reaction. Yet in this case it has made valid points, if somewhat wildly put. It is not right, for instance, that due diligence of applicants should be carried out by a foreign, or for that matter, a local firm. The Malta Financial Services Authority is best suited to do that, even if under the aegis and ultimate responsibility of Identity Malta.
Demanding a one-time payment from applicants for the right to citizenship is too bald. They should be tied more closely to the country they want to use for their ends. For instance, they should be required to acquire property in Malta – aside from the boon to developers, its running and maintenance would generate some jobs.
In conjunction with that they should be required to spend some minimum time residing in Malta, a requirement that will have to be carefully balanced for tax implications elsewhere.
Citizenship is not just picking up a tin of fairly expensive caviar off the shelf. Linking it to investment in Malta, as the Nationalists propose, would probably move it into a different sphere. That idea could be considered for a separate scheme.
The objections raised by the private sector relate to competition. Competition has to be part of the picture. But it has to be fair. The subsidiary Malta company of the mother firm involved in the scheme does seem to have unfair advantages over local practitioners.
It shouldn’t be amiss if the scheme were given a fresh look to take into account reactions to it. Collecting €30 million quickly is not enough. There has to be best practice and sustainability, built on sound principles and transparency. There seems to be no valid reason why the beneficiaries of the scheme should remain anonymous, especially since they are also being given the right to vote.
One final point. If the scheme is successful in attracting the right sort of applicants who want more than an indirect entry into the EU, it might be necessary to cap it on an annual basis. We need more revenue but Malta should be mainly for the Maltese.