The government this evening announced a range of incentives to create jobs and safeguard the environment.

It also launched a new Vehicle Registration Scheme which will see registration fees falling for small and medium sized cars and rising for the bigger ones.

Higher licences fees, dearer fuel

Vehicle licence fees will rise for older cars and there is also a price increase at the petrol pumps, with duties on petrol and diesel rising by 3c5 and 2c per litre respectively. The increase in vehicle licences is aimed at reducing the average age of cars in Malta.

Income tax cuts, tax breaks for mothers

The budget, presented for the first time by Finance Minister Tonio Fenech, includes income tax cuts totalling €12 million, a €4 weekly wage increase to cover the cost of living, and a number of incentives for businesses aimed at encouraging employment and investment in energy saving measures and research.

The tax breaks given to women who return to work after five years have been extended, and there is also a new tax break of one year for all women who gave birth since 2007 and have returned to work, a saving of up to €1,600 each.

Those on a services pension will see an increase of €200 in their incomes.

SMEs in towns and villages that invest a minimum of €10,000 are being given a tax credit for two years in a move aimed at promoting business in the localities.

Incentives for energy saving

Measures to help the environment also include vouches for five energy saving lamps for all households, but a tax is being imposed on traditional bulbs and neon tubes in an effort to discourage their use. An energy performance certificate will become a requirement for development permits.

There will be cash grants of up to two-thirds of the cost of the installation of domestic solar heaters for up to 4,500 households. Some 200 families will be given up to 50% of the cost of the installation of photovoltaic units. There will also be grants of up to €300 for those who install double glazing or insulate their roofs.

A discount of 15% will be given for those who buy bicycles.

Higher taxes on plastic bags, yacht and swimming pool licences

The eco-tax on plastic bags is to rise to 0.15c per bag and a duty of 0.1c per 80g is to be introduced on magazines,leaflets and other commercial literature having advertising content of more than 50% and distributed through the post , through the newspapers or for free by hand.

There are increases on yacht and swimming pool licences. Plans to privatise the yacht marinas remain on track.

Cigarette prices will rise by 0.20c per packet.

More to be spent on tourism, roads

The budget features a boost in the financial allocation for tourism for a total of €28m. However as from January 2010 there will be a new tax of 0.50c per night per tourist.

The tax free threshold to host families is being raised to €3,500.

€29 million are being directed towards the road-building programme and there is also more investment on school-building.

The budget also features plans for the creation of a Bio Technology Park at San Gwann, a new law to regulate SMEs and an infrastructure programme on Information technology while will see fibre cables extended to households.

Long-term unemployed to do community work

In other measures, the unemployed who have been registering for work for more than five years will be required to work a minimum of 30 hours per week in the community and they will be paid 75% of the minimum wage.

Drinking age to be raised, duties reviewed

Duties charged on the importation of alcoholic drinks are to be adjusted to stop the price disparity with Sicily which has seen some people prefer to go to Sicily to stock up. As a result, most prices will drop, although some will rise.

The minimum age for drinking is to be raised from 16 to 17.

Balanced budget target postponed

The review of the economy shows that the deficit has risen to €200 million (3.5% of GDP) from a projection of €68 million (1.19% of GDP). The projection for next year is a deficit of €98.8m, which would be 1.85% of GDP. Mr Fenech said revenue targets had been reached but expenditure was higher than projected owing to increase outlay on the dockyard and Enemalta. Plans for a balanced budget have been postponed by a year to 2011.

Economic growth reached 3% this year and is expected to slow to 2% next year. Inflation is expected to be stable.

The budget includes provision for the building of two child care centres, night shelters for the elderly and facilitators in private schools. It also provides the first funds for an extension of the Mcast complex and for a study into the reintroduction of the tram.

See details in the individual stories in this section.

The full text of the budget (in Maltese) can be found here.