Last Monday’s Budget reaffirms the trend adopted by the Labour government in formulating its economic policy, namely that it has rejected the left-wing polices of the past and has moved to the political centre.
A cut in income tax, incentives to wean people off social benefits, tax benefits to encourage retirees to Malta, an emphasis on indirect taxation, fiscal incentives for third pillar pensions and the involvement of the private sector in a number of projects, including reducing hospital waiting lists and drafting a master plan for St Luke’s Hospital, all bear the hallmarks of a centre-right Budget.
Last Monday’s Budget must not have gone down particularly well with a good number of Labour’s working class supporters, some of whom have abused the social services system for way too long. The biggest issue now is whether the promise to clamp down on abuse will indeed by followed up by inspections.
Joseph Muscat must continue resisting any attempts to reduce abuse, and carry on emphasising that it is only through economic growth – brought about through low taxes and a strong private sector – that our generous social model can be maintained.
The two Budgets presented by Dr Muscat’s government have more or less continued along the same lines as the previous Nationalist budgets.
Labour’s move to the political centre does present a major challenge to the Nationalist Party and Simon Busuttil. Most of the measures in Dr Muscat’s Budget are welcome to many traditional middle class PN voters (who can see beyond the cost-of-living allowance), a large number of who abandoned the party and voted Labour in 2013.
The Nationalist Party, therefore, must be guarded in its criticism of this Budget and must not give the impression that its overall thrust is misguided. It must welcome what it sees as positive – especially the move away from direct taxation, a clampdown on benefit cheats and the involvement of the private sector in major projects – and criticise where the government has failed to act and where it has not delivered.
There are a number of issues that one can criticise about this Budget. The government chose not to address the country’s decline in exports and has not come up with any new initiatives to help the manufacturing sector. True, the reduction in utility rates for businesses as from March should help local industry, but as the Chamber of Commerce pointed out, Malta’s declining competitiveness levels need to be addressed.
The country’s high rate of debt, 70 per cent of GDP, is also cause for concern, and this Budget presented no long-term plan for its reduction to more sustainable levels.
The government’s refusal to announce a proper timeframe for the new power station is now worrying, as is its reluctance to state what income the Treasury received through the citizenship scheme.
The Budget speech also presented half-hearted attempts at reform. A clear example is the plan to “discuss” the removal of the unpopular eco-tax.
With the exception of the laudable incentive to encourage the recycling of plastics and aluminium, there are hardly any initiatives to boost the environment. But by now we know that this government sees the environment as nothing more but a means for land exploitation, thinking it could fuel economic growth.
As a footnote, could the Finance minister make it a point to cut the fluff and do himself and the rest of the country a favour by delivering a shorter speech? It becomes somewhat awkward when the duration of a speech overshadows its content.