The 2014 Budget was described as positive one, albeit in varying degrees, by two economists and a sociologist, with their reactions ranging from euphoric to cautious.
Veteran economist Karm Farrugia was the most enthusiastic, saying the Budget would have been a perfect “pre-election” one.
This, he said, was a reflection of the Government’s confidence in its abilities to the point that popular measures, which one would have expected in the final year, were introduced much earlier.
Describing his former student Finance Minister Edward Scicluna as a “top-class economist”, he said the Budget was “credible” as it was not based on over-optimistic projections. The 1.7 per cent growth estimate for next year was rather conservative considering that Europe was exiting recession. At the same time, the decision to consult the Auditor General on the revenue projections also inspired credibility, he said.
The veteran economist remarked that contrary to the PN’s claims, the increase in taxation will not be spread evenly but proportionately according to one’s income. “This is a Budget with a conscience.”
While saying that Malta was not ready for second-pillar pensions, he welcomed the commitment to third pillar.
Leading economist Gordon Cordina said in many respects the Budget represented a continuation of the economic policy of previous administrations, but he identified two major shifts.
“Rather than targeting specific sectors for growth, the Budget took a more broad-based approach to the development of specific economic sectors.”
Reducing utility tariffs and measures affecting transport, as well as others intended to make work pay, were clear testament to this.
“The second shift was the introduction of social measures such as the tapering of unemployment benefits for those taking up a job.”
It remained to be seen whether the public sector would be efficient enough for these measures to bear fruit.
Regarding pensions, Dr Cordina said that ensuring a strong first pillar was of utmost priority. Unlike other countries, Malta could not put too much stress on second and third-pillar pensions.
On job creation, he said measures like Micro Invest and Jeremie, as well as the emphasis on broad-based economic growth, pointed in that direction.
Sociologist and former AD chairman Michael Briguglio described his initial reaction as positive, while warning it would be premature to come to any definite conclusions before economic trends were analysed.
He reiterated his objection to income tax cuts for middle and high-income earners, questioning their financial sustainability.
Trends abroad showed that income tax cuts resulted in loss of revenue and subsequently the Government might have to sacrifice some essential services.
While welcoming the introduction of tapering unemployment benefits, he called for a clear policy on short-term contracts.
Regarding job creation, he said that the priority must be to eliminate precarious work.
On pensions he said second and third pillar would be of little help to the most vulnerable and the solution might be to spend more on the first pillar, “but not if it continues with income tax cuts.”