Government will fail to reduce deficit below 3% target - Tonio Fenech

Contrary to its projections, government will not reduce its deficit below the 3% by the end of the year, Opposition MP Tonio Fenech said, blaming the government's lack of effort.

Speaking during the Parliamentary debate on the budget estimates for the finance ministry, Fenech added that the government cannot really square the circle because it was increasing expenditure by €200 million and cutting the deficit while projected a conservative growth of 1.7%.

The budget plans a deficit target of 2.7% of GDP in 2013, however the European Commission has said that Malta's deficit will be of 3.4%, because of lower growth in revenue from indirect taxes.

Pointing out that the European commission had based its evaluation on the actual 2014 Budget figures and not the pre-budget document, Fenech said the Commission did not trust the government's plans to reduce the deficit to 2.7% of GDP by the end of the year.

Fenech insisted that government's plans were confused and said that the country would face problems if the deficit was not at least reduced to 2.7% in 2014.

Explaining that the Commission had clearly stated that "there is a risk that the correction of the deficit may not be achieved, owing to the apparent lack of a sufficient effort to support it," Fenech sounded a note of caution and insisted that the government will not achieve its targets.

"It is clear that the commission does not believe the deficit will be reduced and the report makes it clear that the government is not doing enough to achieve its deficit targets. The finance minister owes an explanation to the people."

The government will have to introduce new measures to achieve its targets, Fenech said, stressing that the government "will not reduce the deficit below the 3% threshold by the end of this year."

Pointing out that the government had willingly entered the commission's excessive deficit procedure to have a two-year cushion, Fenech accused the government of sending out a wrong message through the implementation of the Individual Investor Programme.

"You have sent a message of despair. This was uncalled for. You have given an impression to the world that we are in desperate need for money when you are planning to rake in €15 million in a budget worth over €3 billion."

However, Fenech said that the opposition was prepared to seek consensus over the scheme which allows foreigners to obtain a Maltese passport against a €650,000 donation.

The former PN finance minister added that the government would cover the €200 million increase in its expenditure by increasing the national debt.

Saying that the finance minister was saying different things to the country and to the European Commission, Fenech said, "Although you are reluctant to admit that you have increased taxation, you have told the Commission that tax income will increase from 36.1% to 36.8%."

Quoting the budget speech's announcement that MCESD will be drafting an economic plan, Fenech pointed out that the 2014 Budget lacked an economic blueprint and the government was overlooking plans for the creative industry set by previous governments.

He also shed doubts on the government's plans to refund VAT paid on the registration of vehicles between 2004 and 2008, asking whether the government would only pay the refund to persons who purchased second hand cars.

Describing the 2014 Budget as a "good PR exercise," Opposition MP Kristy Debono said that the government was giving an impression that the tax burden would be reduced when in fact it would increase.

Debono said that the government did not have the "guts" to expose the full extent of tax increases introduced in the budget.

Asking whether further taxes would be introduced in the coming months, Debono accused government of concealing the car registration tax increases.

Quoting a 2003 article penned by Prime Minister Joseph Muscat, Debono said the Labour government's decision to host the next Commonwealth conference (CHOGM) in 2015 without cost-effectiveness study contradicted the Labour leader's past criticism.

In the 2003 article Muscat had slammed the then PN government for committing itself to host the CHOGM without carrying out a proper cost-benefit analysis and the MP said the government had committed itself to hosting the conference without carrying out a financial analysis.