Frans Ghirxi, spokesman, Ministry of Finance
Over the last four years Malta has experienced an economic miracle with unprecedented growth rates, falling unemployment, low inflation and also a budget surplus.
The reduction in taxes and in water and electricity tariffs, the increase in pensions and take-home pay all contributed to improving household income. The government was able to meet the dual commitment of greater social justice and social inclusion.
This is the present legislature’s starting point. A far better one than the 2013-17 legislature. I firmly believe that, against such a proven background, people now want the government to look at things in the long term and talk more about quality of life rather than quantity of money. While money will always be an important medium, there are also public goods to be considered. That is, finding solutions related to cleanliness, the environment, free space and less traffic congestion.
There is no magic wand available to fix all the issues the day after. But, yes, the government is doing and will continue to do its best to keep on addressing the issues.
In this Budget, the experience of a prosperous economy will become increasingly connected to improving the quality of life
During this legislature, the government aims to continue on the path of turning manifesto pledges into concrete policy proposals, of turning promises into policy implementation that will continue to improve the quality of life of our citizens and the next generation as deemed fit for a modern and successful economy. Budget 2018 will be focused in this direction.
It goes without saying that the last four years saw the Maltese economy successfully progressing to a higher level of growth. This new level brought about new challenges with the most pressing being the need to invest and upgrade the existing infrastructure to support the increased economic activity and pave the way for further growth.
For Malta to make a quantum leap in its developmental process and meet EU average living standards, it is paramount for the country to invest in infrastructure to ensure that the latter does not become a bottleneck to economic growth. Increased investment in infrastructure, in fact, is expected to bring about a higher degree of income convergence with the EU.
Over the past four years, the government managed to successfully consolidate public finances, turning a deficit of 3.6 per cent of GDP in 2012 to a surplus of one per cent of GDP last year. The gradual but consistent improvement in the budget balance positively impacted the debt ratio, which fell below the 60 per cent target to 58.3 per cent of GDP in 2016, down from 68.1 per cent in 2012.
We are strongly preparing Malta for the future: by reducing the national debt, by creating a wealth fund, which we are doing through the Individual Investor Programme, and putting people in charge of investing that wealth, by generating investment that will put us in a good position for the next generation.
The biggest saving is certainly reducing the national debt, which is a scourge and a burden. We have seen countries that went under as a result of it. Looking at what happened in Greece is a lesson for all.
In this Budget, the experience of a prosperous economy will become increasingly connected to improving the quality of life. A prosperous economy deserves a high-quality infrastructure of technology, roads and housing as well as investment in high-quality education and high-quality healthcare that complement and contribute to continuing economic success.
This is what our people deserve. This is what the government is striving for. This is what the Budget for 2018 will see to continue achieving while paving the way for better times yet to come.
Mario De Marco, Nationalist Party Deputy Leader and Shadow Finance Minister
Our economy is on a positive run, so it is important to remember two things. Firstly, that economies work in cycles. Secondly, economic growth does not necessarily mean everyone and everything is better off.
Why is it important to keep these two things in mind?
The cyclic nature of economies means that, in a few years’ time, the economy is inevitably going to go through a period of recession. We need to harvest and prepare ourselves for those times. We are strong today because of the wise and considerate actions taken in the past. Likewise, we need to think ahead for when the economic going gets tough. Unfortunately, through its reckless increase in daily expenditure, the government is making government less able to withstand a recession when this hits us.
The daily cost of government soared. While it is possible to meet those costs today when revenue is streaming in, one must ask what will happen when such streams slow down. Moreover, it is pertinent to ask what new business streams is the government attracting to ensure the economy remains relevant in the years to come? Today’s economy is not yesterday’s as much as today’s is not tomorrow’s.
It is imperative that the Budget addresses these concerns.
We need to think ahead for when the economic going gets tough
It is equally important for the government to address issues that exist today. It must ensure economic growth cascades through the whole society. This is not the case today. Unfortunately, there are large pockets of society who are seeing their quality of life deteriorate through inflation in food prices and inadequate increases in income.
Steep increases in property prices and rent have amplified this concern. The economy is being driven by the phenomenon of inbound labour migration. Our economy is booming and attracting additional labour, which, in turn, is creating more economic activity thereby increasing the demand for more labour.
All this is happening within the confines of our geographical limitations. This is causing a strain on certain elements of the infrastructure. The roads and transport system are clearly suffering. The increase in residential property prices and rent is also a result of this phenomenon, affecting young couples and families who may not necessarily be social cases but can quickly become so.
There seems to be no planned system to tackle this situation and the government, in particular, seems to be a bystander, albeit a happy one, to this evolving situation.
The government should be doing much more. It should be directing and planning ahead. It should be ensuring the infrastructure is adequate and meeting the huge increase in demand. It is telling that, over the past two years, capital expenditure as a percentage of GDP was the lowest in years. This at a time when the demand on our infrastructure is at an all-time high.
There are other issues that need to be addressed head-on in this Budget. The environment and the economy seem to be moving in opposite directions. Unfortunately, our lack of regard for both the built and unbuilt environment has led to a rapid deterioration of our environment. The negative impacts are impossible to avoid. We need to reverse or, at least, stop this process of uglification.
There is also need to improve the education system to ensure students can access the best jobs being created. Most of the better-paid jobs are going to foreigners.
The government also needs to ensure pensioners receive adequate income to support decent living. Government statistics again point to more pensioners living in poverty or at risk of poverty, when the economy is peaking.
The Opposition has published its thoughts on these matters in its pre-Budget document. I hope the government gives due consideration to the issues we raise in the interest of society.
If you would like to put any questions to the two parties in Parliament send an e-mail marked clearly Question Time to editor@timesofmalta.com.