With the Labour Government largely retaining the economic direction taken by the Nationalists, Kurt Sansone asks whether Joseph Muscat’s first Budget has finally buried the ideological divide

When Joseph Muscat stepped on to the stage of the Labour headquarters auditorium five years ago, he presented himself as the son of a self-employed man.

In his first address to an ecstatic crowd 48 hours after securing the Labour Party’s leadership, Dr Muscat sowed the seeds that led to March’s election victory.

He knew that for Labour to win it had to reach out beyond its core working-class vote. The party he sought to create would eventually embrace the self-employed and businessmen.

So when on Monday Finance Minister Edward Scicluna presented the Labour government’s first Budget, it came as no surprise that the Malta Employers’ Association described the exercise as a continuation of the economic policies of previous years.

Dr Muscat has often described his economic outlook as liberal, refusing to be bound by the strictures of that brand of socialism that frowns upon privatisation and liberalisation.

In many ways his Labour Party has followed in the footsteps of other social democratic parties in Europe that have moved towards the centre, blurring the ideological lines between Left and Right.

It is this re-positioning of Labour that some believe was confirmed by the Budget, with its emphasis on cutting income tax for medium income earners and refraining from changing the economic direction.

Former Nationalist minister Michael Falzon, writing in The Sunday Times of Malta (see page 22), argues the Budget is not ideologically driven.

In a piece entitled Goodbye Ideology, Hello Populism, Mr Falzon says the Budget relies on the prospect that the private sector will keep on growing and remain the motor of the economy.

He says this is the big transformation that 25 years of successive PN administrations have managed to bring about.

“(Dr) Muscat is simply building upon this legacy, not destroying it.”

But while the first Labour Budget may have come as an ideological surprise to some, Godfrey Baldacchino, a professor of sociology at the University of Malta, is not impressed.

“We live in a country where lip service to democratic socialism never closed the door to foreign investment by industrial, capitalist multinational corporations,” he says.

Even as then Prime Minister Dom Mintoff was getting close to the likes of North Korea and Libya in the 1970s and 1980s, he was courting SGS-Thomson, Dowty and Brandstatter to set up shop in Malta, Prof. Baldacchino argues.

This was the result of unavoidable strictures that came with a small export-driven, open economy. “Malta could never allow itself to be driven by radical principles of economic management and development.”

But Prof. Baldacchino steers clear of describing the Budget as the end of ideology, a highly ideological statement in its own right.

“This is not the end of ideology, but perhaps the triumph of the ideology of liberalism in this day and age,” he says.

With a 29 per cent upper tax rate for middle income earners, Malta is closer to low-tax countries like the US and South Korea, moving further away from high-tax regimes in Scandinavia, the crucible of social democracy.

But unlike fellow social democrat parties in Europe, Dr Muscat is not threatened by more radical parties on the Left, Prof. Baldacchino says, and this will help him to strengthen his appeal to the middle class that had largely voted PN before the March election.

The pessimism and antagonism shown by the European Commission by doubting the Government’s targets worries me

“Dr Muscat must be looked upon enviously by his European peers: he leads the strongest government in Europe... where no coalitions are in order and just one political party holding an absolute majority of votes and seats,” he says.

Prof. Baldacchino believes that in the Budget, Dr Muscat continued with his overtures to “an impoverished and overtaxed middle class”.

He insists the Prime Minister translated the party’s political rhetoric into practical incentives that are aimed at getting people into work, keeping them there and paying taxes.

Former General Workers’ Union militant Sammy Meilaq insists the Budget has a social element that distinguishes it from those presented by previous PN administrations.

However, he also has some reservations. “I would have preferred a more progressive income tax regime that benefited low-income earners rather than the higher income brackets and an increase in the minimum wage.”

But a lingering concern of his lies with the EU’s current leadership and its obsession with austerity. Mr Meilaq fears the EU will not allow Labour to continue down its pre-planned road.

“The pessimism and antagonism shown by the European Commission on the same week the Budget was presented by doubting the Government’s targets worries me,” he argues.

And the EU may very well turn out to be the single most determining factor to influence budgetary direction.

Whether this will have ideological undertones is another matter altogether.

ksansone@timesofmalta.com

Sign up to our free newsletters

Get the best updates straight to your inbox:
Please select at least one mailing list.

You can unsubscribe at any time by clicking the link in the footer of our emails. We use Mailchimp as our marketing platform. By subscribing, you acknowledge that your information will be transferred to Mailchimp for processing.