Statistics issued today by the National Statistics Office and Eurostat confirmed that the government's expenditure was increasing and it was contributing to the increase in the government's deficit and debt, the shadow minister for finance, Mario de Marco, said today.
The deficit in the first quarter of 2015 reached €172 million which was the highest first quarter deficit recorded since 2011, Dr de Marco said. It was €35 million higher than the deficit recorded in the equivalent period in 2014.
"One of the main contributors to this increase is the additional monies going towards compensation to public sector employees. Public sector salaries shot up from €238 million in the first quarter of 2013 to €257 million in the corresponding period in 2014 to €275 million in 2015.
"This means that the wage bill for just the first three months of the year increased by nearly €40 million in a space of two years. This increase in wages is not the result of a new collective agreement, but is driven by the increase in public sector employment and the high wages being paid to people close to government. This employment is not resulting in any tangible benefits to the consumers. If anything, it is contributing to what the Prime Minister described as “silly mistakes” that are costing the countries tens of millions of euros," he said.
Dr de Marco noted that the rate of increase in government expenditure was, according to Eurostat, the second highest in the European Union. This confirmed the concern expressed by the Opposition that the country's economic growth was being fuelled by government expenditure.
"While such a course of action might reap short-term results, it cannot be sustained in the medium or the long-term. While government induced costs are increasing and putting more strain on government's finances, exports and industrial production are declining and are now a fraction of what they were two years ago," Dr de Marco observed.
He reiterated the Opposition's appeal to the government to maintain tighter control over its expenditure and to direct its energies towards sectors that could add real value to the economy in the long run, rather than on measures that benefit the chosen few.
GOVERNMENT REACTION
In a reaction, the Finance Ministry said the data confirmed how the economy and the government's 'make work pay' policies were bearing fruit.
The data showed that in the first quarter of this year, government revenue recorded an increase of €59.1 million across all revenue categories, the ministry observed.
The highest increase was registered in revenue from taxes on production and imports.
"This reflects the robust growth in private consumption which increased by €45.2 million during the same period. Of note is also the increase in revenue from current taxes on income and wealth and net social contributions which rose by €17.5 million and €8.9 million respectively, on the back of dynamic performance in the labour market largely thanks to Government’s success in making work pay and easing access to the labour market," the ministry said.
On the expenditure side, the highest increase was recorded in investment, which increased to €94 million. This, the ministry said, reflecting the commencement of various infrastructural projects which will continue enhancing the productive capacity of the Maltese economy.
Finance Minister Edward Scicluna said the increases in both revenue and expenditure were in line with the government fiscal targets.
"We are also pleased to note the strong increase in the tax base, namely income and consumption which is reflective of the increasingly strong performance of the Maltese economy.”
The General Government deficit stood at €172.3 million. This included one-off adjustments of €86.9 million mainly due to EU funded projects and the Air Malta loan to equity injection.