Sociologist from Malta

Friday, December 07, 2012

The Budget of uncertainty

Michael Briguglio

The Times 7th December 2012

The Nationalist Government’s proposed Budget is a Budget of uncertainty for more than one reason. To begin with, the Budget comes within a political context of uncertainty that has been characterising the Maltese public sphere for over a year. Malta has been in election mode since and the presence of billboards in all corners of the island is ample proof of this.

The fact there will be a political ‘truce’ in the Christmas period, where political campaigns will stop for some days, also confirms we have had too much politics in the past months. Many people are exhausted of the situation, which could have been avoided if a general election had been called earlier on.

Given Franco Debono’s statements, it seems that the Budget will not be approved, meaning that an election will surely be held in the coming weeks. This also adds uncertainty because nobody knows for sure whether the Budget will be implemented or whether it actually can be implemented.

Indeed, despite the statements made by both the Nationalist and Labour parties on implementation of the Budget, I have serious doubts on its sustainability, given its electoral considerations. In particular, it is strange that the Government is planning an €83 million revenue increase, from €840 million in 2012 to €923 million in 2013, when the same Government is proposing an income tax cut for those earning between €19,500 and €60,000, down from 35 per cent to 32 per cent in 2013 and to 25 per cent in 2015.

For such an increase in revenue to take place, the economy must grow at a rate that goes beyond recent trends and which is beyond belief given the global economic crisis. Notwithstanding Malta’s relatively positive economic performance when compared to fledging economies in Southern Europe, the predictions of the Nationalist Government are too optimistic to be taken seriously, especially when a general election is round the corner.

It is evident that the tax cuts proposed by the Government were targeted at persons who are more likely to be within the Nationalist Party’s strategic interests in terms of votes. Should such tax cuts be approved, we will subsequently be likely to have to pay up for their impact on public finance through a reduction of public services, more borrowing or compensating tax elsewhere. This is surely not sustainable.

The Government’s proposed tax reduction also lacks a social justice dimension. Indeed, deductions are regressive as they are not benefitting the vast majority of workers who earn less than €19,500. Should the Government have really afforded to carry out tax deductions, these should have primarily targeted those in need by revising the lower tax bands. This would have also been of benefit to higher earners.

The Government’s regressive stance is also confirmed when the minimum wage has once again not been increased and when the disability pension has remained anchored at a miserly 55 per cent of the minimum wage.

The otherwise positive initiatives in the Budget, such as increases in children’s allowance (and a further topping up for minimum wage earners) and extension of eligibility for disability pensions only partly compensate for inequalities. Hence, the situation of low- to mid-income earners and many persons with disability remains at best uncertain.

The Budget of uncertainty also characterises Malta’s energy policy. While proposed incentives for renewable energy and energy efficiency are welcome, it is clear these are still not being considered a priority by the Government. This is not only because years-old wind energy promises remain unresolved but also because the positive budgetary proposals for usage of government property for solar energy and access to solar energy for persons who are denied such usage are vague.

Besides, the reduction in the feed-in tariff (despite the extension of the scheme in terms of a number of years) will probably act as a disincentive to low- to mid-income earners who would have been interested in investing in solar energy. All in all, it is clear that the Budget does too little to stop Malta’s dependency on fossil fuels, which are likely to experience price increases in future. Once again, we will all pay the costs for such policies.

As regards water, the distribution of energy efficient water tap equipment is welcome, yet the elephant in the room, namely theft of water from boreholes, remains largely ignored. It beggars belief to see that the Government keeps downplaying the environmental, social and economic repercussions of its laissez-faire policies in this sector.

As regards the work-life balance, social policies remain restrictive. For example, the Government’s investment in childcare centres remains too low to ensure universal accessibility. What Malta needs is a holistic social policy approach ensuring that everyone has opportunities to find employment and that work pays. The increase in precariousness and inequalities is not encouraging in this regard.

The number of positive initiatives in the Budget do not compensate for its regressive and unsustainable orientation. Universal public services require progressive revenue measures and a sustainable economy requires sustainable social and environmental policies. Instead, we face an uncertain Budget in the middle of a seemingly eternal electoral campaign.

Michael Briguglio is chairperson of Alternattiva Demokratika.

No comments: