Finance Minister Tonio Fenech’s excuse that he did not have the fiscal flexibility to cut income tax jarred with his insistence that the country’s finances were stable, the Labour Party said.

Reacting to an interview Mr Fenech gave to The Sunday Times, PL spokesman Charles Mangion slammed the government for breaking yet another electoral promise: to reduce income tax by 25 per cent. He said this failure proved that the Nationalist Party based its economic decisions on the electoral cycle rather than in the national interest.

Dr Mangion said the government was also delaying cutting income tax “despite the fact that, through its administrative measures, it has significantly reduced family’s purchasing powers and despite the fact that it is now saving about €80 million a year in electricity and water subsidies”.

He called on Mr Fenech to explain the circumstances and criteria which determined when the cuts would be made. Dr Mangion also pointed out that the government’s stability programme for 2009 to 2012 did not include tax cuts, asking whether this meant this would not take place before 2012.

The comments sparked an angry reaction from the PN, which criticised Dr Mangion for making comments “which showed the people that they could not trust the Labour Party because it was wholly detached from reality”.

It defended the decision to delay the reduction in income tax saying the government managed to overcome the effects of the international recession because it was wise and serious.

The party said that while some countries had unemployment hitting the 20 per cent mark, salaries and social services were being cut, taxes were being raised and governments were begging the International Monetary Fund for assistance, Malta had avoided such dramatic upheavals.

It pointed out that when Dr Mangion started his political career, at the time of the Labour government, the top rate of income tax was 65 per cent and it took Nationalist Administrations to reduce the rate to what it was now.

The PN highlighted the fact that Dr Mangion had been part of a Labour government between 1996 and 1998 which imposed extraordinary water and electricity tariffs when the price of oil was just $12 a barrel.