News • 24 November 2002

Hoping for, in tomorrow’s budget

MaltaToday asked the following questions to Malta’s political parties and social partners what they will be expecting out of tomorrow’s budget speech:

Q. Has the government achieved the targets it set out in its 4 year plan to decrease the deficit by 2003?

Q. How would you interpret ‘

a generous budget’?

Q. What is the main issue that should be tackled in this budget?

"I don't like the expression. It is stupid. We need a realistic budget. The public sector is too large and there is no money in the coffers. We do not need a budget made by politicians but one made by economists. A budget which truly makes sense would be one with incentives for the small businesses which are the backbone of our economy. These need not necessarily be financial incentives but more possibility for these businesses to keep their hard-earned money, consolidate their funds and expand further. These last 4 years we have repeatedly prepared packages of proposals for the Government to consider in order to help small businesses. But the increased taxation has stalled expansion. We need to help this backbone to become stronger. Three years ago the middle bracket wage earners were castigated. This year we expect this group of workers to be relieved of their burden, without the government going overboard.

"We need to clearly identify the pockets which can generate economic growth. There should not be an increase in taxes as this will not solve problems. We need to create more wealth by helping the entrepreneur who in turn generates commerce and helps pump money back in the economy.

"We expect this to be a generous budget, meaning that where hardship exists, it is eliminated. For instance in the middle bracket of the income tax system there should be some alleviation. This budget should be based on a long-term plan not on an instant gratification but a basis for the future."

"Government should keep addressing the deficit in a responsible manner and continue its reduction in a sustainable manner. We should create stronger structures for the future especially to tackle measures taken in view of involvement with the EU. The budget should address this issue by re-arranging our financial resources to ease our way into the EU.

"The international economic situation is not ideal to assist Malta in proceeding in its privatisation strategy without the interruptions experienced in the recent past. Naturally, within a climate of less international uncertainty, the country would have found itself in a better position to realise the privatisation proceeds estimated for 2001 and 2002 and consequently to consolidate its public finances position."

"The Chamber cannot tolerate ‘generous’ budgets if these imply the granting of benefits which the country cannot afford. This term has been used recently within the context that there is every reason to suspect that Government may be tempted to be somewhat ‘generous’ in the next budget because it is the last before the electorate is called to vote in less than a year’s time.

"The Chamber’s budget proposals insist that Government must not be conditioned by this forthcoming election. The country cannot escape economic realities and the challenges it faces and the Chamber prefers any remedial action not to be postponed because of political and election sensitivities. Otherwise, the country would have to endure hard and drastic measures at a subsequent date.

"Stimulation of economic momentum through entrepreneurship and work, and the taking of bold decisions vital for the enhancing of the country’s competitiveness.

"Government has to foster a business environment in which initiative in the formal economy can thrive. SMEs must be encouraged through adequate fiscal tools and the elimination of avoidable costs and bureaucratic harassment.

"It is augured that the forthcoming budget speech will include measures that will assist private economic operators in overcoming extra costs and risks in competing in foreign markets rather than restricting themselves solely to struggle against each other for a tiny fragment of a very small market called Malta."

Our bi-partisan follies are an extravagance in the face of objective economic reality and the country is beginning to make out the political trap which ensnares every single-party Maltese government destined to be too weak to take the tough measures we all need to achieve sustainablity.

"A generous budget should look towards raising the tax ceiling for middle income earners, increase pensions and seriously invest in projects which can give a surge to our quality of life – education, health, services available to everyone such as public transport, and air quality for example. Incentives for rational energy use have the multiple effect of improving our balance of payments, reducing our cost of production and improving our health. Our forist consideration should be to be generous with the future by being prudent now. "In these last years there has been a continuation of the impoverishment of middle-income earners. Serious tax-compliance is necessary not only to secure government revenue but also to permit a rational control of welfare expenditure through means testing. Taxpayers need to be reassured that their hardearned cash is not being squandered on undeserving cheats but in helping people truly in need."

"As regards the deficit, this will not be going away soon, nor can the Minister of Finance alone determine Malta’s economic future. It is increased productivity and a cost-effective government that will allow us to restrain our public debt. A government boasting that it has things under control and an opposition claiming that the government has failed to press the right buttons complete the illusion that Malta's economy or indeed any economy can be totally controlled. "Uncertainty over EU membership is a damper on foreign investment and the sooner it is removed the better it will be for us all. This year's budget remains a leap in the dark until the country decides on its future."

"A generous budget has to be a budget aimed only towards Malta’s benefit. We hope this will not be a budget that will be more generous with foreigners than with the Maltese."

"Definitely unemployment. This budget has to address unemployment by taking serious measures and foster initiatives to create work and new employment opportunities. This budget has to seriously address those areas which so far have burdened the people following earlier budgets. There should also be an adjustment in tax payments and to start decreasing the amount of anomalies in pensions, and also address pensioners who do not receive any increments for the increase in the cost of living."

"Government has so far managed to massage these figures to say that the deficit was being contained, but EU reports have so far painted a different light on the actual deficit figures.

"Government corporations are currently having recourse to commercial banks for funds, obviously due to the enormous burden of our public debt. Government itself is not creating new sources of revenue when it offers stocks since these are just closed and then re-opened, rather than issuing a new stock.

"Basically, Government is camouflaging this deficit. It would be interesting to see what the deficit looks like for October. Minister Dalli said that the deficit would decrease after summer, but so far this has not happened, and the October figures should make for interesting comparison."

"I suspect a generous budget would mean a series of pre-electoral goodies. I wouldn’t exclude the government will be playing the same game it has played before in election years, where tax concessions will be offered and probably have the tax burden eased of for lower- and middle-income earners."

"Government has to contain its recurrent expenditure, but so far it has not managed to do so. There is also considerable wastage in the public sector. The EU reports say the increase in public debt include ‘costs related to implementation of the EU acquis’. Although Government says its recurrent expenditure is made of wages, it is failing to control this expenditure. Minister Dalli has never tried to cap recurrent expenditure."

"One of the main areas in which Government has managed to achieve its target is in the fiscal sector. Government has succeeded in bringing the deficit down to 5 per cent of GDP, while until fairly recently it used to be around 8 per cent.

"When it comes to employment figures, I also think that government has been successful. True, unemployment figures have gone up somewhat, but when you keep in mind the number of companies that folded with the ensuing redundancies, coupled with the high rate of workers that were reabsorbed, the outlook is quite good. This reflects the positive effect of re-structuring.

"We did less well when it comes to attracting foreign direct investment. This could be due to the uncertainty created by the indecision surrounding the EU referendum. After this there will be a sense of direction once again and hopefully investment will come our way again."

"A budget should be realistic, neither particularly generous nor mean. It should not be there to gratify anyone. The budget should be designed so that it will manage the economy effectively. As elections come and go, extravagant budgets will cause suffering. Thrifty budgets on the other hand, will suffocate the economy."

"The two main challenges for the coming budget should be to control the national debt and secondly, to ensure that nothing is done that will increase the cost of production. If that had to happen it would negatively affect our competitiveness."