They said the Budget would have no surprises, but the promise was kept only up to a point, as for many, it was an almost pleasant surprise.
And it confirmed the previously ‘leaked’ measures that were reported in the media on the eve of Budget day: a downward revision of registration tax on small vehicles as well as increases in excise duties on alcohol, cigarettes, cement and bunkering plus car licence fees on one hand, with increases in disability allowances and widowers’ benefits and reductions on taxes for part-time work on the other.
The Budget speech also announced measures to promote childcare and female participation in the labour market, together with the promised reductions to electricity and water tariffs.
Apart from encouraging people to work, the Budget’s target seemed to be attempting to make almost everyone happy. Everyone except those who are still itching for a job with the State so as to be paid for doing nothing, besides smokers and alcoholics, of course.
One can say that the Budget lacks focus, or that efforts at job creation are not as concrete as one would expect. What is undoubted is that this was no ideologically-driven Budget. One can see Joseph Muscat’s streetwise populism lurking behind every paragraph of the speech that the Finance Minister struggled to read last Monday.
Yet two issues stand out.
First: the reduction of the deficit. The promised cuts in expenditure will only happen in the long term, if they ever will. Cutting waste and introducing new management structures to increase efficiency in the public sector are pious hopes that are easier said than done.
Shedding employees in the public sector by replacing every three employees with two is a long-term objective. It will not bring down the deficit overnight. I doubt if it will ever happen, but if it happens it will help make government spending more sustainable only in the long run.
In the short-term, the Government is resorting to the ‘selling’ of Maltese citizenship to create a substantial source of revenue that does not involve any taxation. The political and ethical issue on how we comprehend and value our citizenship and the possible consequences on Malta’s reputation in the international scene are the two most negative aspects of the Individual Investment programme (IIP). Assuming that things do not get complicated by some short-sighted slip in the due diligence procedure, the IIP will be a convenient source of foreign income for the government. It is obvious that without this income the government’s deficit reduction target cannot be reached and that the Maltese exchequer is depending on it to make ends meet.
This explains the unholy haste with which the IIP is being introduced. It explains why it is called an ‘investment programme’, while the people participating in the scheme need not invest anything in Malta. They can even stay abroad, post the cheque and get their Maltese passport by return mail, all without ever having set foot in our country.
Is this worth it? Ask all 400,000 patriotic Maltese citizens how much money they are prepared to pay more in taxes in order to avoid this national ignominy. Alas, the answer will be quite down-to-earth. They like the money-no-problem notion driving the idea, as they will not be forking out the money. Muscat knows this and does not think he will be losing any votes over it.
The other issue that notwithstanding the bragging about a new direction in our economy, there is no such thing. This administration is pushing our economy in the same direction in which it was being pushed by the successive PN governments that preceded it. It can claim it is giving it a new push, a new impetus; but the direction has remained the same.
Judging by its reaction to the Budget, the PN is still underestimating Muscat
Last Sunday, another newspaper quoted the Minister of Finance as comparing turning the direction of the economy with turning the direction of a supertanker. He gets full marks for imagination but zilch for accuracy.
The direction is the same as before: economic growth through the encouragement of investment by the private sector and through ensuring that having a job is a big advantage over not having one.
Nothing new here. Only time will tell whether the efforts towards this end announced in the Budget will prove more effective than the efforts towards the same end made by the preceding PN administrations.
It is true that the Budget does not indicate any new substantial government projects that will contribute to easing unemployment and relies on the prospect that the private sector will keep on growing and remain the real motor of the Maltese economy.
This is the big transformation that 25 years – less 22 months – of successive PN administrations have managed to bring about. Muscat is simply building upon this legacy, not destroying it.
Yet, judging by its reaction to the Budget, the PN is still underestimating Muscat.
In politics, nobody can hope for a victory over an opponent without acknowledging and appreciating realistically the potential and wherewithal of the adversary.
micfal@maltanet.net