The Budget: now and the future

Like every other Budget speech, the one read by the Minister of Finance, Edward Scicluna, last Monday has two aspects: how it affects the ordinary citizen today and how it looks at the country’s future.

In his speech, the Minister announced measures that are clearly aimed at tweaking the distribution of wealth so that the vulnerable and others who have been left behind in our economy’s recent mad rush forward will be able to regain some of the setbacks they have had to suffer.

In normal circumstances, a mid-term Budget is not a happy one. This is usually the time when the government husbands its financial resources in order to strengthen its financial war chest for an upcoming election that would be looming over the horizon. But we are not living in normal times. Malta`s economy has been going through unparalleled growth in the last few years. Malta has become the darling of the international financial trackers, with a growth rate that is more than double the European average, the national debt going down to 40% of GDP, a good inflation rate and, to top it all, a current account surplus for the last three years – with more of the same next year.

The government did not succumb to the temptation of splashing this bonanza. From this aspect it is certainly a sober Budget. It moved in a tactically segmented manner by giving increases to those who have not been able to keep up with the breathtaking speed of the last years and moved to suppress the cash black economy as well with the new €10,000 cash limit.

No doubt, one can perceive the professional stance of a hands-on economist – the finance minister Edward Scicluna.

The usual suspects – the cost of living allowance; the increase to pensioners; the increases in incentives for couples to buy their first abode; the application of the 15% final withholding tax system on the sale of developable airspace; the increase in the minimum wage for disabled who are unable to work; and the decrease in tax charged on income from overtime work were all there.

Other innovative ideas were also brought out of Scicluna’s magic hat: the €300 bonus for every newborn or adopted child; free public transport for those over 75; financial aid on deposits for low-income home buyers; the reduction of fees NGOs pay for appeals against PA decisions; a roof over the Royal Theatre in Valletta and over the Santa Venera bypass; and initiatives regarding climate change including ones for green vehicles and sea transport. These also address many common present-day problems.

One could always find concerns that were not addressed but, by and large, the Budget tackled the problems of those struggling to cope in a vibrant economy that has led to them falling behind. This serious situation in which many find themselves was somewhat covered, even if it was not enough for some.

It seems that government’s main concern is to keep voters happy while its attitude to the future is the Maltese ‘għada min raħ’ (whoever saw tomorrow?) except for the reassurance that Malta’s debts are on the decrease – not a mean feat, of course.

Opposition leader, Adrian Delia, reacted to the Budget speech by claiming that it failed to address people’s concerns as families still have to find ways to cope with the rising cost of living and as the announced measures are “a far cry” from the Prime Minister’s promises of wealth.

This may have been just a politically acceptable exaggeration. But he was entirely correct when he described the Budget as having no vision.

In my opinion, the Budget speech leaves everybody trying to guess where this country is heading to, unless “more of the same” has suddenly become the future. Even the infrastructure projects announced were actually ones about which the country has long been talking about. The pious wish for diversification into new activities like encouraging businesses involved in space research to set up shop in Malta hardly counts as some new important initiative.

One hopes this vague idea will not end up in the sort of failure that seems to be the fate of this administration’s attempts to create a niche for Blockchain technology in our economy.

Realistically, one can conclude that the spectacular performance of our economy has diminished by far the endemic fear of unemployment but this does not mean that the issues ahead of us are any easier. On the contrary, this small island is facing some very challenging issues that it has never tackled before.

The Budget speech failed to give an inkling about whether the government has any policy regarding population growth as a result of foreigners finding employment and settling among us. Malta lacks the experience on how to tackle the new social issues that are facing us.

This is the real challenge ahead and the Budget was weak here.

But then these issues go beyond the end of the term of office of the current administration – after which the Labour Party is expected to take the decision of appointing a new leader...

Now it’s about Hong Kong

As if the never-ending trade disputes between China and the US were not enough, China has now threatened unspecified ‘strong counter measures’ if the US Congress enacts legislation supporting Hong Kong protesters.

China’s foreign ministry issued the warning last Wednesday after the US House of Representatives passed a package of measures backing the pro-democracy movement that has rocked Hong Kong for more than four months.

A spokesman for the Hong Kong government ‘expressed regret’ over this decision that came hours before the territory’s Chief Executive, Carrie Lam, was prevented from delivering her annual policy address by Opposition hecklers in the legislative chamber.

But it seems that for the US and China, fighting while talking is becoming normal as Donald Trump and Xi Jinping both are signalling they will not let ongoing tensions get in the way of a trade deal. Both leaders need to get some sort of result to keep the economies of their countries on track... and prove this costly trade war was worth it.

At the same time, neither side can afford to look weak at home to the extent that the Hong Kong branch of the Chinese Ministry of Foreign Affairs issued a separate statement warning the US against ‘playing the Hong Kong card’ while adding: ‘They are lifting the stone only to drop it on their own feet’.