EDITORIAL | Tuesday, 16 October 2007

Very generous, very close

Yesterday’s budget has addressed the concerns of all sectors of society. All and sundry have come under the government’s radar from Gozo all the way to the armed forces. It is generous and goes a far way to leaving more money in people’s pockets, which is the final destination of this budget. Saying that it is being presented on the eve of an election is an understatement.
It is clearly and unashamedly dictated by political expediency. It looks like the work of a political analyst who has just worked through the concerns of each and every sector of society. Not one group has escaped government’s attention. The undercurrent of the budget is its bias in favour of the least strong groups in society and also people that work giving them a stronger control over how to spend their well earned money. Accordingly, tax bands have been adjusted, pensioners are being taxed less and larger families are being encouraged. Government has carried on investing in education and the health services with the elderly particularly in its sights. The goodies seem to have been shared with all with no stone left unturned. Concerns addressed over the last number of years have been addressed in one simple scoop. Theatre VAT rates have been reduced, sponsorships to Maltese artists have been given tax consideration, a film fund has been launched and cultural groups are being given tangible support.
The budget targets are particularly ambitious setting the target of reaching surplus budget within the next two years. This places the local budget in the favourable situation they were in the late seventies. No mean achievement if realised. It is the strongest point of the budget, it sets a clearly defined target, surplus budget in two years time. The setting of targets is the elixir of business, in this sense the budget is the essence of good business management.
It is clear that the majority of the four thousand odd budget related addresses to the office of the prime minister were dominated by the plight of persons in low income brackets, pensioners, the newly weds, the cultural organisations, members of the security services, the self employed and persons suffering to meet and fight cancer. Government has rightly reacted to these concerns and concretely improved their welfare.
The increase in the cost of living possibly the most felt issue at this moment has driven government to leave the pricely sum of twenty one million in peoples pockets. Government is clearly calculating that with the increase in disposable income as a result in the fall in taxation rates, spending power will increase and as a consequence the economy will grow. Government is envisaging an increase in its revenues of fifty eight million pounds. The budget speech does not concretely identify from where this increased revenue is going to come but it is presuming that this is the direct result of increased economic activity, which proved realisable last year. The prime minister denies that this is a leap in the dark.
It is clear that government finances are in a much stronger position than they were up to a few years ago. Government spending although still high and indeed higher than last year is more controlled. The deficit is at an even lower level than projected for the year and government revenues have increased. The gainfully occupied have increased, as have the persons in full time employment and the self-employed. Particularly encouraging it that the public sector is leaner and unemployment at its lower level in years.
The vision government is projecting is that of a society where the private sector is the main motor of the economy allowing government to concentrate on governing rather than on running commercial enterprises which it rarely did with any measure of success. Its vision seems clearly that of attracting further investment to the island banking on its good workforce, which is English, speaking ready to take full advantage of all the opportunities facing us in Europe.
There is an increased commitment to the tourism industry with low cost airlines being once again helped to bring more persons over to Malta.
Our prime concern is the manner in which the wage increase has been dealt with. We have serious reservations on how the COLA mechanism has been dealt with. Government claims it in no way has it been compromised. However the effects of the anticipated wage increase on the country’s competitivity could be damaging
We also have serious reservations on how the children’s allowance regime has been twisted and the trend reversed. Slowly but surely throughout the last ten years this benefit was being watered down to fewer and fewer persons. The trend has now been reversed in full acknowledgment that the middle classes too have been feeling the pinch. Government could have found a more sensible way to benefit such income earners as indeed it did with the drastic rate cuts for persons paying the thirty five percent of taxation. The way forward is no longer government handouts but cutting of taxation, which this budget has rightly done much of.
The Labour party has put up billboards reading too little too late. In all fairness the boards should read too much too close to an election.
The budget has certainly increased government’s chances of winning the forthcoming election.