UPDATED:Labour leader calls for mid-year mini budget

Labour leader Joseph Muscat said today that it was shameful that in the first quarter of this year, the government deficit had soared to €256 million, almost equal to the €266 million deficit in the whole of last year.

Speaking in Marsa this morning, Dr Muscat said Prime Minister Lawrence Gonzi had lost control of the financial situation and had he been the CEO of a private company, he would have been sacked.

Last year, before the general election, the government projected a deficit of just €68 million for 2008. By the time the budget was announced in November, that figure had ballooned to €200 million and now it had resulted that the actual figure was €233 million – for the central government alone.

When one saw the figures for the extended government, including its companies, that figure grew to €266 million.

As if that was not bad enough, new figures for the first quarter of this year showed a deficit of €265 million. Government spending in the quarter had risen by €60 million over the same outlay last year, even when the government had projected an increased outlay of €7 million for the whole of the year. And one had to remember that spending last year was high in the run-up to the election.

The question was, where was all this money going?

Dr Muscat said the government could no longer blame the dockyard or Enemalta. One understood that in difficult times, one had to show solidarity and also invest. But capital investment in Malta had actually declined by €34 million.

This was also the government which promised significant income tax cuts in its first budget, and had not delivered.

Just recently, Dr Gonzi came up with a figure of 7,000 new jobs having been created, but in Parliament he had not been able to give a proper account, Dr Muscat said. Indeed, many of these were part time jobs or the replacement of other jobs. The net increase in jobs was actually only slightly more than 2,000.

One had to wonder, Dr Muscat said, what the government's strategy was. It appeared, he said, that the government was throwing money at its problems and hoping they would go away by the time the general election came.

He insisted that Malta needed proper job-creating investment and a reduction of the tax burden in order to get the economy going. Like all other serious governments, the government needed to come up with a clear economic policy drawn up after talks with the stakeholders and should consider a mid-year mini-budget that would review and correct its projections and measures.

GOVERNMENT'S REACTION

Finance Minister Tonio Fenech in a reaction to Dr Muscat’s speech said that in the face of an economic and financial crisis, the governemnt was intervening to protect jobs. The Opposition, on the other hand, was showing that it wanted the governemnt to pressure the commercial sector so that it could raise its revenue. Such a strategy would lead to job losses.

The Opposition proposal to hold a mini-budget meant that had Labour been in government, it would have presented a mini-budget in order to raise tax revenue and narrow the deficit.

The minister said the widening of the deficit was a direct consequence of the international crisis. While the government was committed to keeping an eye on the deficit, it could not endanger jobs.

The government was helping the private sector to overcome temporary cashflow problems and thus safeguard employment because that was what seriousness demanded, the minister said.

The choice between jobs and the deficit was an obvious one for the government, and jobs came first.

The minister also regretted that Dr Muscat had tried to introduce partisan politics in the VAT fraud investigation.

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