On Monday Finance Minister Tonio Fenech presented the Budget for 2010. You do not need to wear shades to see that certain measures are good, others are bad, whilst some are decidedly ugly...
The Good
The good things begin with the economic data supplied by the Government, as our real Gross Domestic Product will next year register minimal growth against negative growth – contraction – experienced this year.
The Government got its priorities right. It identified that the economy needs to provide investment to generate wealth and jobs whilst upgrading the national educational levels to achieve a society with a stronghold of knowledge. The exchequer is ready to invest more money in the country’s infrastructure – but then this is something that has been repeated every year ad nauseam and regularly the targets are not met.
All the 120,000 owners of credit cards will benefit by not paying the €16.31 levy on credit cards. Those lucky few who own a boat will also save on registration and license fees.
The government made a pledge that was possible in working out the 2010 budget figures of Government departments’ expenditure; it maintained the same level as this year. Moreover, the government will continue to decrease the number of employees in public sector and will decrease the government entities’ dependency on subsidies. Hopefully, these agencies would not turn on consumers to fund for their shortfalls.
Government is ready to increase the Malta Enterprise vote and the incentives vote to assist industry. Certain schemes are geared at small and medium enterprises.
Other measures are being proposed for the set up of funds for research and development together with certain tax exemptions or refund on expenses for Innovation. A specific allocation is dedicated to SMEs. There will be a €10 million fund for micro-credits of up to €25,000 for 1,500 SMEs to obtain the necessary liquidity for investments. Additionally, those small enterprises that operate in Gozo will get increased tax credit than their Maltese counterparts.
For the rest of us, the process will start for public entities and Government departments to adjust their working hours for the needs of SMEs. Being in the 21st Century it is quite an achievement! The tourism sector is also benefiting from a special package of €5 million to address the international crises.
At long last the Malta Fair Trading Authority will be set up so that there is the necessary Consumer protection. The mechanism to strengthen the monitoring of prices of medicines as well as the revisiting of the operations of the vegetable market are two measures that have long been waited.
The cost of living adjustment will be €5.82 per week. This is positive.
Meanwhile, let us all shout “hooray” as the Government is voting €400 million in Capital Projects with over 10% of this investment being in roads. There is also an increase in direct allocation to Local Councils, which should benefit the community and the quality of life at a local level. Other allocations for Environmental projects will only improve the ‘health’ of the Maltese citizen but should reduce the regular infringements from the EU norms.
The Bad
Next year, the Government expects the unemployment rate to increase and the public debt, as a percentage of GDP, to stand at 70%.
Budgeted deficit next year is expected to reach €258 million. The definite black mark on the Government’s record is how its projected deficit of €98 million which actually will end up €258 million. Where has all the extra spending gone? How did we end up with such a ‘mistake’ in figures?
The government justifies this in terms of lesser income from taxes – as a result of subdued economic activity – and certain expenses such as one off payments linked to shipyard closure and early retirement schemes.
But then, this time last year we did not know of these expenses! So why did the Government not include them in the budget?
For us citizens, especially those in the commercial sector, next year the Government will be expecting to raise more income from tax and social security, as well as customs, excise duty licences and VAT. Seeing as individuals are getting a COLA adjustment with no corresponding change in tax bands, this means that all will be effected negatively in taxation.
The Government is still trying to allocate more funds for childcare services. Although this is positive, it just shows that there are not enough job opportunities for mothers with children to return to work.
The cost of living adjustment will be €5.82 per week. Before we stated that this is good. But in a sense it is also bad – our employers will find it hard to bear. Remember that this also affects their share of National Insurance as an employer.
This must be the first time in the budget for Gozo where we have not been promised that the roads leading to Marsalforn, Ta’ Pinu or Xlendi will be finished. The amount allocated for Eco-Gozo, €5 Million, is only a token of the €25 million needed. We fear that in saying it is a three-year plan, the Government will simply in future lengthen the project period.
Another bad is that the increase in Education vote is dependent on EU funds. Had these not existed, or much worse not be obtained, we would suffer.
The Ugly
Definitely, the International Trade figures show a very poor result of our economy. In 2009, for the first nine months the value of Imports decreased as did the value of Exports. Moreover, this was reflected in the number of gainfully employed where mid-way during this year this has gone down compared to end of last year. To cap it all, the Government figures also show that there is less cash in hand and deposits: some of which went towards financing the lending of the private sector in bonds and equities.
The cost of living adjustment will be €5.82 per week. Earlier we classified this as both good and bad. But it is also UGLY. The COLA reflects the 2009 increase in retail prices. It does not take into account the increase in water and electricity prices which we have been notified will surely happen.
The compensation of €25 per household and the €30 per family member must surely not be enough seeing that the Government has increased the utilities vote within the Ministries and here the activity during working hours next year will remain the same.
For a fistful of Euros...
As far as the plot-line is concerned, Budget 2010 has a good story with plenty of action, but it is bad in that it has an unhappy a sad ending – a higher deficit – and downright ugly in that it excludes any detailed information on thehikes in Water and Electricity prices expected next year.
If the Government knew that the situation is bad enough to justify €10 million compensation, why not give an indication of the expected price hike?
Businesses also need to know as solidarity does not mean assisting only those in need, but making sure that those who have something will not lose it.
The fact that the Government could not lessen the taxation impact means that its finances could not sustain his electoral pledge. However, the investment vote of €80 million to generate employment and economic growth, an investment of €228 million in the country’s infrastructure and a bill of €1.3 billion for healthcare, education and social protection makes one ask – Is it sustainable or are we living beyond our means?
Only time will tell. The figures indicate that the future is bleak for Malta and for all of us citizens that bless this nation.
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