Workers on a minimum wage and pensioners can hope for a Budget having measures to improve their incomes, according to Finance Minister Edward Scicluna.
When unveiling an 86-page pre-Budget document called ‘Delivering our vision’ yesterday, Prof. Scicluna acknowledged criticism the government had failed to help the poorer strata of society. But he was unapologetic for the direction taken over the past two years to cut taxes for middle-income earners and introduce schemes like free childcare for all.
Over the past two years it was important to give the economy a fresh impetus, he added, by helping middle-income families, which he described as “the engine of the economy”.
The Labour government has been receiving criticism from its core supporters, uneasy about its closeness to business and endearment to the centre ground.
“Now that the economy is performing well it is important for us to look at ways to help lower-income groups and pensioners to ensure they also benefit from the wealth generated,” Prof. Scicluna said.
This fresh direction is captured in the pre-Budget document, which dwells on social inclusion, “not just equality of opportunities”.
Asked whether income tax would be cut, Prof. Scicluna said adjusting the tax bands was not the way to help low-income earners.
He said various options would be considered, including equity release schemes for pensioners, who were cash-poor but asset-rich through ownership of their home.
Over the past few months, Prime Minister Joseph Muscat has, on more than one occasion, acknowledged that economic growth, which is above the EU average, had not reached all strata of society.
The pre-Budget document provides a technical breakdown of economic and finance figures but it does not delve into specific measures.
Prof. Scicluna said the health and education sectors were the next growth generators but expressed disappointment at the latest World Bank report on the ease of doing business that gave Malta a dismal ranking.
On the contentious issue of unfair competition among businesses caused by illicit imports from Sicily via the catamaran, Prof. Scicluna said he would shortly present Cabinet with a proposal for the creation of an intelligence task force.
“We need plainclothes officers to monitor and gather information that will then be used by Customs and other entities to take action against perpetrators that unfairly undercut the market,” he said.
Next year’s deficit would be 1.1 per cent of GDP, a further reduction of 0.5 per cent over this year’s target. This would mean more pressure to control expenditure, Prof. Scicluna said.
“But it is not just a question of cutting expenditure but creating innovative schemes that induce people away from benefits and into productive jobs.”
He said tapering schemes for social and unemployment benefits introduced last year had weaned off about 2,000 beneficiaries, who were now receiving less in handouts and more through employment.
People can make suggestions via the Finance Ministry’s website and at two public consultation meetings that will be held before the Budget, expected in the first half of October.
kurt.sansone@timesofmalta.com
Finances at the halfway mark*
| Actual | Forecast | Variance | |
| Revenue | |||
| Customs/excise | €112,531,000 | €111,369,000 | €1,162,000 |
| Licences/fines | €135,121,000 | €129,175,000 | €5,946,000 |
| VAT | €300,676,000 | €317,272,000 | -€16,597,000 |
| Income tax | €464,415,000 | €458,575,000 | €5,840,000 |
| Social Security | €324,411,000 | €322,619,000 | €1,793,000 |
| Non-tax | €270,244,000 | €263,634,000 | €6,610,000 |
| Expenditure | |||
| Wages | €341,193,000 | €331,536,000 | €9,657,000 |
| Operations | €77,306,000 | €77,570,000 | -€264,000 |
| Programmes | €881,106,000 | €890,622,000 | -€9,516,000 |
| Gov. entities | €143,558,000 | €132,888,000 | €10,670,000 |
| *January-June 2015; Source NSO | |||
ST drags down manufacturing
Electronics giant ST Microelectronics has dragged down an otherwise improved manufacturing sector, according to figures in the pre-Budget document.
Gross value added increased between three per cent and four per cent in almost all manufacturing sectors. But the electrical equipment sector registered a massive drop of 40 per cent.
Prof. Scicluna said growth in manufacturing was “hiding behind an elephant”. It was an indirect reference to ST Microelectronics that is the main player in the electrical sector.
Prof. Scicluna said the figures also had to be viewed in the context of the number of employees involved. While the electrical sector employed about 2,000 workers, the rest of the manufacturing industries together had about 18,000 employees.
Gas power station at ‘mid-point’
The gas power station project at Delimara was “close to mid-point”, Edward Scicluna said yesterday as he gave an overview of budgetary developments.
The Finance Minister said the new power station and a liquefied natural gas terminal, to be built and operated by private firm Electrogas, formed part of the government’s long-term energy plan.
Prof. Scicluna said the gas power project and the Chinese investment in Enemalta had enabled utility tariffs to be cut, giving the economy a big boost. “The impact should not be underestimated,” he said.
According to information given to him, Prof. Scicluna said work on the Electrogas project in Malta and abroad – the gas ship conversion to a storage facility and the building of gas turbines – had arrived halfway.
“The project will be on stream by June 2016 as planned,” he said.
Asked about the government guarantee for a bank loan taken out by Electrogas amounting to €360 million, Prof. Scicluna said this was a temporary guarantee that would be added to the 1,200 guarantees provided by the previous administration.
He specified that one of the guarantees was provided for a loan taken out by a special purpose vehicle set up by the previous administration to pay out the debt on the first Delimara power station built in the 1990s.
“The €340 million debt on Delimara One was never paid in 25 years and will have to be paid back over the next 25 years, when the power station would have stopped functioning,” he said.
New gaming rules hit VAT
Income from VAT has been impacted by changes to EU rules regarding where online gaming receipts are taxed, according to the Finance Minister.
Figures for the first six months of the year show that actual income from VAT registered a drop of €16.5 million when compared to government forecasts.
Edward Scicluna said changes in online gaming rules meant that VAT charged on services in Malta was now being levied according to the jurisdiction of the player. This resulted in VAT losses.
But the dip in VAT revenues was partially compensated by higher than expected income from other tax streams.
The government collected almost €6 million more than its forecast from income tax in the first six months.
An identical pattern followed in the tax category, licences and fines.
Prof. Scicluna said that almost €10 million more than projected spent on government wages in the first six months were a result of higher recruitment in the health and educational sectors.