In simple diction, the budget is supposed to be the government’s balance sheet and planner. But on the eve of a general election it has mainly become a PR vehicle in the hands of the Prime Minister.
In two days, he “heard Mass” at the Ministry of Finance and toured the Ministry. Does it have to be budget day for the Prime Minister, as Minister of Finance, to go round his Ministry? Or is Tonio Fenech the de facto Minister of Finance, and the PM his mouthpiece?
Gonzi’s budget speech is full of buzzwords, the most frequent being the “family”. Incidentally, the government’s “discovery” of the family came soon after the Labour Party had issued a lengthy document explaining that for a future Labour government the central theme would be the family.
The government’s new devotion towards the family is also based on surveys which the government conducted to discover what were the concerns of the electorate. The Prime Minister admitted that the communications he received from the public “confirmed our surveys”.
For many years the government did not consult us on the budget. We were asked to make huge sacrifices, we paid substantial amounts by way of direct and indirect taxation and ended up as one of the nations most taxed in the EU .
Now government is telling us that our sacrifices will be repaid in kind by a benevolent administration. Timing? The “novena” of the general election.
The government has been drumming the tune that we have reached a peak: the peak of success for Gonzi’s government. In the past years, the Nationalist government deprived many Maltese families of their eligibility for children’s allowance. Those thousands of parents who saw their children’s allowance vanish into thin air have no remedy once their children have reached the age of 16. I am one of them. Those lucky few, who will be entitled to qualify for children’s allowance irrespective of income, do not owe a thank you to the government. When children’s allowance was introduced in the 1970s, all children qualified irrespective of the family’s means. Successive Nationalist administrations have reduced children’s allowance to such an extent that while 50,000 families qualified for it in 1997, by 2005 the number had decreased to 36,000. While the government saved Lm7m from children’s allowance, it is only giving Lm5m back. Those families who lost their children’s allowance along the way are not being compensated.
The government announced a revision in tax bands. This would cost the government about Lm12m. The purpose behind the revision is purely electoral: to attract the votes of the middle class. But in my opinion this is a very weak attempt. The middle classes have seen their standard of living eroded day by day, and if the Nationalist Party is re-elected the same class of people would once again be asked to carry the burden and make good for the inefficiency of the government.
The government has also announced that it would invest in more schools. In itself investment in education is always to be commended. However, as I had the occasion to write in this column on various occasions, government planning in the educational sector did not reap results. Among EU countries we are the one with the least success in keeping our youngsters at school after e compulsory age schooling. We have a high rate of illiterate youngsters who also lack basic skills to cope with a changing industrial environment.
It was a good idea to set up an IT Faculty at the University of Malta. Although we are lagging behind (many countries have done so years ago), this innovation is one of the plusses of this year’s budget.
The budget withholds more information than it gives. The government has not announced how it would increase its efficiency in controlling public expenditure. Over the last few years, government projects cost the country Lm190m more than projected. Surely there was a lot of waste and corruption along the way. For many years no one controlled the Mater Dei Hospital bill and many other projects were the savannah of a few blue-eyed contractors who were also PN contributors.
The budget also contains some tricks. While the government is reducing income tax for the coming year it is still projecting to collect Lm20m more from VAT, meaning a transfer of tax from income based to VAT.
It is true that government has reduced the deficit. This was due to increased taxation and the sale of valuable assets, and not because the economy has performed better. Very often we confuse efficient tax collection and reduction in deficit with good economic performance. Direct investment has declined, meaning that we are not planning for economic growth in the future.
In a nutshell, this year’s budget is a political one intended to attract lost votes rather than a budget with foresight to improve our economic performance. The reduction in direct taxation is a one-off on the eve of elections, and the taxpayer would end up paying more VAT to meet the government financial targets of collecting Lm45m more in total taxation for the coming year.