It is only reasonable to expect a Budget half way through a government’s legislature to offer a list of feel-good factors. And the one presented yesterday certainly lives up to this expectation.
Finance Minister Edward Scicluna is continuing with the approach he undertook two years ago, which has tweaked the Budget further from an accounting exercise down the road of an economic one: provide stimuli to encourage behavioural changes.
The government’s way of doing this is not to put money directly into people’s pockets, through children’s allowances, for example, but, rather, to provide the carrots to make people choose to go back to study or to get the second parent in a household back to work.
The same applies to businesses. The minister had made it clear he would not reduce electricity tariffs again, however, he is offering incentives to businesses that invest in renewable energy. There are a number of other adjustments and promises to help start-ups and to make Malta more competitive, most of which have been on the cards for some time.
Prof. Scicluna is a firm believer in the idea of measures that cost less to implement in the short term than what they will contribute to the economy in the long term or which, ultimately, save the government money.
Last year, the government paid for free child care, an expense it claims it is more than recouping from the tax and national contributions of women it enticed to work. This year, it is setting up a pilot programme to part-subsidise home carers who will allow the elderly to remain in their own homes and which will cost the government a fraction of what it would have to pay to look after them in residential care.
The Budget includes a plethora of measures aimed at placating little pockets of society, from amputees to police officers who work extra duties and income tax rates for athletes. It even includes a measure to encourage reading in schools. These are more about politics than about economics and are, undoubtedly, aimed at adding to the feel-good factor.
Prof. Scicluna mentioned figures to show that the measures of his previous budgets worked, from 13,450 new full-time jobs to 2,100 fewer people on benefits. This year’s measures, like the increase in minimum pension, changes to the income tax bands and initiatives for both parents to work, will cost €24 million. He boasted this is being done without harming the government’s intentions to keep its finances on track, with the deficit to GDP ratio falling from 3.6 per cent in 2012 to a forecast 1.1 per cent next year and the debt to GDP ratio from 68.3 per cent in 2014 to 65.2 per cent next year.
Against this backdrop, the decision to tax tourists 50c a day – no matter how euphemistically you describe it – is all the more controversial. The sector has long complained that its profits are being eroded by direct bookings for properties that are unlicensed. This measure is likely to make licensed accommodation even less competitive and possibly encourage more abuse.
There is also disappointingly little for the health sector, with many of the plans still at the study phase or being deferred to the private sector through public private partnerships.
And starting the Kappara Junction will mean two more years of traffic nightmares, to be followed by more disruption when the Marsa junction then starts, with nothing bold suggested to alleviate the prevailing situation any time soon.
Do we have to wait for Budget 2017 to get any answers?