Finance Minister Edward Scicluna has told the Opposition not to be alarmed at the 5.5 per cent increase in expenditure this year as this had been planned on conservative estimates of GDP growth.

Introducing the debate in second reading of the Fiscal Responsibility Bill, Prof. Scicluna said Malta’s GDP was growing at a stronger rate and the government was well within its planned parameters. The growth was being reflected in government income such as from VAT receipts.

On the other side of the scale, he said, there were unexpected but explainable losses such as the €40 million owed by Enemalta and which would be paid once the Enemalta agreement was finalised.

Prof Scicluna said the financial statistics showed that the economy was facing a rosy future with increases in work and employment. Eurostat had just confirmed Malta had an unemployment rate of 5.7 per cent – the third lowest in the EU after Austria and Germany. This was also less than half the rate registered in the eurozone. The rate of inactive people was slowly but steadily going down and had reached an all-time low.

The economy is facing a rosy future with increases in work and employment

Earlier, Prof. Scicluna said the Bill provided for the setting up of a Fiscal Council, a regulatory body made up of the various components of the financial sector which would be responsible for evaluating the strength of proposed fiscal measures. It sought to regulate in a strict way the manner in which the government not only operated but also planned fiscal disbursement.

These regulations would be five-fold. In the first part of any fiscal plan, the law required that the plan always contained a direct link to the rules and regulations of the EU. This would mean a direct relation between the plan proposed and the financial parameters of the EU. The law however permitted a government deviation from established plans so that it would have room for manoeuvre in case of emergency.

The second part provided for the accumulation of surplus after the deficit had been eliminated. Prof. Scicluna recalled the Kenysian principles of reducing taxation in lean times and increasing it in affluent times which tallied with the forma mentis behind this section.

The third section related to ensuring the good health of financial institutions, which would include the setting up of the Fiscal Council, and the fourth obliged the government to present a medium-term fiscal plan using the concept of top-down budgeting and eventually an accrual system of accounting.

The fifth part provided for independent monitoring of the law and how it was implemented.

Former Finance Minister Tonio Fenech and Labour MPs Charles Mangion and Silvio Schembri contributed to the debate.

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