Last year would go down in the annals as a great watershed year for Malta. It was the year that Malta finally reined in more than three decades of crippling deficits to post a surplus in the general government finance. A deficit of €362 million in 2012 was turned around into a surplus of €101 million. It was the second highest surplus in the European Union.
It surprised economists at Moody’s credit agency who had forecast a year end deficit of 0.8 per cent. It helped to ease the country’s debt burden, which was driven below the 60 per cent criteria set under the terms of the EU’s Stability and Growth Pact a year ahead of forecast.
It was the year in which economic activity and growth boosted employment levels to historic heights. The creation of new jobs, which over the whole legislature to date have risen to 28,000, slashed the unemployment rate to reach the lowest levels in Europe.
More importantly, for my ministry it was the year in which the number of persons suffering from material and severe poverty fell to 19,000. It was the biggest year to year drop in EU countries. The 3.7 per cent drop came in the wake of another of 2.1 per cent the previous year, cutting down the number of people at risk of poverty and severe material deprivation to the same levels recorded 10 years ago and erasing the increase of 20,000 registered between 2008 and 2013.
These achievements were interlinked with and fed off a pace of economic growth among the highest in Europe, fuelled by strong net service exports, record inflow of tourists and dynamic investment activity, and supported by robust domestic consumption. It was sustained by a stable environment without resort to austerity measures or taxation increases. Inversely, tax rates have been eased and utility tariffs cut down.
There are more lengths to be covered to meet our goal of bringing down poverty to the lowest levels possible. Surely, no easy task
The social protection net has been strengthened by the activation of social reforms and benefit enhancements aimed at keeping the social security system abreast of changing social needs. The package included measures devised to strengthen the sustainability and adequacy of pensions which have already had positive effects on the status of pensioners and persons edging closer to retirement.
Similarly, the Making Work Pay initiatives rolled out in the last three years have markedly impacted employment levels, the fight against poverty and in improving the living standards of low and middle income households, especially those with children. The response to these initiatives comprising the In-Work Benefit, the tapering of benefits, free childcare and the youth guarantee scheme has been reassuring and significantly.
The employment of persons with disability has gone up by 1,000, thanks to fiscal incentives offered to employers, and through the enforcement of a law enacted in 1969 to reserve two per cent of the manpower of companies with more than 20 employees to persons with a disability. At the same time, persons with disability in employment and earning more than the minimum wage have been given the right to retain their disability pension.
People are said to be living in poverty if their income and resources are not sufficient to have a decent standard of living. The Severe Material Deprivation is one measure by which the EU gauges poverty. The aggregate rate is based on the proportion of people living in households that cannot afford or face up to at least four of nine items.
They focus on their ability to afford unexpected financial expenses, eat meat or protein regularly and have a week’s holiday away from home. People are further questioned on their ability to pay arrears on mortgage or rent payments, hire purchase instalments or other loan commitments, and to afford to buy a car, television set, washing machine or a telephone.
The Eurostat statistics published in April gives a better understanding of the progress made to reduce poverty in our country. Compared to 2015, at 7.5 pp Malta’s was the highest drop among EU countries on the question of whether people could not afford to holiday once a year. The proportion of people who in 2016 said they could not afford meat, fish, or chicken every second day decreased year on year the most in Malta by 5.8pp.
The Eurostat statistics also show that the severe material deprivation rate for working age adults aged between 18 and 64 years was halved to 4.1pp between 2013 and 2016. Over the same period the rate for the under 18 years of age fell from 11.8pp to 6.3pp and for those aged 65 and over decreased from 7.1pp to 3.5pp.
It is worth noting that the Eurostat statistics for 2016 were heavily influenced by the results of surveys in 2015 and did not take into account the social reforms and tax rebates activated in 2016 and this year. Next year’s data should show brighter results.
The strides forward have been huge and accomplished in a relatively short time. But it would be foolish to believe we can rest on our laurels as there are more lengths to be covered to meet our goal of bringing down poverty to the lowest levels possible. Surely, no easy task.
However, the newly signed pact between social partners and brokered by the government on the national minimum wage and other initiatives in the pipeline portend well.
Michael Farrugia is Minister for the Family and Social Solidarity.