Sociologist from Malta

Thursday, November 06, 2008

A budget that was nearly balanced and fair

The Times, Thursday, 6th November 2008

Michael Briguglio, Spokesman for social and economic development, Alternattiva Demokratika - The Green Party, Sliema

Were it not for the hefty increase in water and electricity bills, the first budget under the new Nationalist administration could be considered as being balanced. Yet, the utility bills issue is overriding, resulting in much concern across the economic, political and social spheres.

Malta's economy is vulnerable to changes in the global scenario, and the current crises around the world do not augur well. The energy issue is definitely no exception.

Yet one would have expected the government to carry out proper consultation with civil society and to carry out scientific studies before imposing the new tariffs. Though one cannot escape from the financial bottom line, there are different methods how the energy bills could be paid. A more sensible way forward would to be to analyse the specific realities of different types of households, businesses and organisations through economic and sociological analysis, and to follow this up with bills which penalise wasteful practices and not normal consumption.

Otherwise, the budget has some good ecological and economic incentives, but could have been stronger in the social sector, especially to make up for the increasing burdens that are being faced by low and middle income earners as regards the cost of living.

It is definitely positive to incentivise alternative energy, and the incentives offered to industry are most welcome. Yet it should be emphasised that on a household level, incentives could have been more generous, especially since many people will probably still find it prohibitive to afford the capital expenditure required for solar energy. One would also have expected the re-introduction of schemes to incentivise use of energy efficient appliances.

As regards the new car registration scheme, it is positive that clean transport will be incentivised, yet one would have expected mechanisms to ensure that low income earners who cannot afford new cars do not bear the brunt of the new scheme. Otherwise the new scheme will be socially regressive, as the transport mobility of thousands of persons would be limited.

Promotion of clean practices such as taxation on plastic bags is most welcome. Suffice to say that use of plastic bags in Ireland was reduced by 90 per cent through such a mechanism.

Another positive measure is the scheme which helps first-time home buyers, even though it would have also been positive had the scheme been more universally accessible, and if fiscal incentives and disincentives had been introduced to encourage rent of properties and discourage speculation respectively. It should be made clear whether the scheme is open to certain social groups, such as persons entering pensionable age who are not home owners, who can have problems coping with the cost of housing. In general, the more universal the scheme, the more inclusive and equal it would be.

Other positive aspects in the budget include the increased investment in tourism and research, and the decision to introduce further obligations for the long-term unemployed as a step for re-integration in the formal labour market.

In addition to the cost of living increase, the Budget further reduces income tax, which can have positive multiplier effects in the economy. Yet it must be said that reductions shall be carried out in a regressive way, whereby low-middle and middle income earners are the least to benefit from the cuts. This situation is further aggravated by the fact that purchasing power is decreasing due to the decline in value of real wages. Various social categories and classes, including pensioners and workers, surely deserve better social protection amid the storm ahead. It is difficult to believe that the compensatory measures in this budget are enough.

The Budget also includes gender-related measures such as introduction of breast screening for women aged 50-59 and incentives to have more women in formal employment. Malta is unfortunately still miles away from social models which balance work and family life in an equal way. Universally accessible and affordable childcare centres, and flexible working hours are essential in this regard.

Other areas mentioned in the budget - such as Eco-Gozo and the public transport reform are not specific enough. One hopes the government will listen to civil society when carrying out such reforms.

In the prevailing economic circumstances, the government was receptive to certain proposals from civil society, yet this was absolutely not the case in the utility bills issue. Unfortunately, the negative effects of the latter are determinant.

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