Tuesday, October 06, 2015
Budget 2016 expectations
The Times of Malta 5 October 2015
Next Monday’s budget comes within a context of generally positive economic and financial trends for Malta. Nevertheless, there are challenges related to sustainability, good governance and social justice which should not be ignored.
A sustainability issue which deserves much attention relates to car traffic and pollution. Malta’s roads are increasingly gridlocked and emission controls are very poor. This has a plurality of negative impacts, such as on efficiency and people’s health. The introduction of proper enforcement measures and fiscal sanctions can help reduce the use of polluting junks on our roads. This should however be matched by concrete improvements in public transport.
Sustainability is also lacking when it comes to usage of renewable energy and as regards vacant properties.
With respect to the latter, Prime Minister Joseph Muscat recently hinted that measures can be introduced to regenerate dilapidated properties. I believe that the introduction of a good mix of fiscal incentives and disincentives can win support of both environmentalists and developers. Government can also increase expenditure on enforcement in construction sites.
Budget 2016 should also seriously tackle the lack of sustainability in Malta’s water policies. Given the free-for-all situation in the drilling for water through boreholes, ground water is likely to become more saline, meaning that Malta will likely increase dependency on costly reverse osmosis plants.
The more the government postpones this years-old problem, the more serious the problem will be for future administrations.
Sustainability is also a major concern with respect to other issues such as pensions. As I had written some weeks ago in this newspaper, it is positive that government is discussing pension reform, yet it is disappointing that an immediate debate on the possibility of second pillar pensions is being ruled out.
Another aspect relates to governance concerns the cash-for-citizenship issue. In principle I oppose this discriminatory policy, but I still expect transparency and good governance on its implementation. I hope that Minister of Finance Edward Scicluna gives a detailed overview of its financial performance so far. This would enable a proper analysis as to whether the scheme is financing sustainable needs rather than political patronage.
Good governance can also be enhanced if Budget 2016 increases funds for local councils, most of which have pressing needs, such as maintenance of roads and pavements, which is terribly underfunded. Yet, in the longer term, Malta requires a discission on whether local councils should be given more fiscal powers to finance ever-growing needs. Malta is currently in a situation where government devolves responsibilities to councils without increasing their fiscal rights.
Finally, Budget 2016 should give due importance to social justice. Malta is performing positively in relation to economic growth, stability and unemployment rates, yet there are various pressing challenges especially concerning low-income earners.
Precarious employment seems to have disappeared from government’s discourse, yet it is still very much in place. Is MCESD discussing the issue?
Government has also ruled out an increase in the minimum wage, but is it taking account of the very low wages of workers including those who have notably high responsibilities? This includes, for example, those in the caring professions such as child carers, carers of the elderly and LSAs. Wage inadequacy is even more pronounced when workers are employed on a part-time basis against their wishes.
In previous budgets, the Labour government introduced commendable welfare-to-work schemes which encourage persons to enter employment without immediately losing their benefits. Economic and sociological analyses would be able to shed light on whether their implementation is effective.
With respect to government’s welfare philosophy that people in employment should be rewarded for their efforts, one has to keep in mind that there are many persons who cannot work for various reasons. This may include age, mental health, certain disabilities and caring responsibilities. Such persons should not be excluded from measures such as free childcare and should be entitled to benefits that guarantee a decent quality of life rather than hardship.