It would seem that the European Commission has done for the Government what it failed to do when it presented the Budget for this year – assess the impact of a tax cut, over a three-year period, from 35 per cent to 25 per cent for income below €60,000.

In its spring economic forecast, the Commission did not take the Government’s calculations at face value and raised the deficit forecast, as projected by the Government, from 2.7 per cent to 3.7 per cent, which is above the three per cent threshold allowed by the EU.

Except for one or two revisions, one of which involves greater expenditure in the running of the country through the appointment of a super-size Cabinet, Joseph Muscat chose to keep the Budget that the Nationalist government had presented before the election. But the Commission put its foot down, as it were, stating clearly that the amount the Government planned to net from income tax is “projected to decelerate on the back of measures to gradually reduce the overall income tax burden in 2013–2015”.

This newspaper made exactly the same point a few days ago, arguing that the economic situation today calls for prudence rather than cutting taxes.

The Government revised the Budget deficit upwards for last year, but, despite its decision to go ahead with the implementation of the income tax proposal in the Budget for this year and considering also the added expenditure involved in bringing into force the collective agreements, it is still projecting a deficit for this year of 2.7 per cent.

The Commission has shot the figure down, arguing the Budget is expansionary and that the higher tax revenues expected as a result of greater growth would only partly compensate for the disappearance of one-off revenues registered last year.

Was not the minister aware of this before presenting the budget? He certainly was but his reply raised more questions than it answered.

He was specifically asked how, in view of the fiscal slippage, was it possible to cut the tax. Would it not mean loss of revenue to the Government? The minister replied: “Not necessarily because these taxpayers are the main contributors of income tax”.

They may very well be, but in the uncertain times of today, it is not unreasonable to expect that many will choose to save what they gain from the tax cut.

But what struck a somewhat discordant note was his admission that the Government had yet to assess the economic impact of the tax cut.

The Commission now appears to have done the job for the Government and raised the projected budget deficit to 3.7 per cent.

However, despite this, the minister says his government is still committed to keep the deficit below the three per cent threshold and honour its pledge to end the financial year with a deficit of 2.7 per cent. This is all very well but the question is: how? The Government owes an explanation.

It was a politically wrong decision to keep the tax cut when the Government had yet to find its feet in the management of the island’s financial affairs.

Maybe it felt it could hardly do otherwise as the impact of doing away with the cut would have rocked the boat for the Government so soon after being swept to power.

However, the cold reality of the situation is now staring it in the face.