The hardworking middle class needs a morale booster

Caruana’s next budget must provide the ray of hope that allows Malta’s hard workers and self-employed the chance to dream and achieve

Clyde Caruana came out of hibernation this week to set the agenda for the upcoming budget during a meeting with the social partners.

In no uncertain terms he said high inflation is here to stay and he will aim for an expansive budget.

The latter commitment came with the caveat that he will strive to keep the deficit within the 5% target even if still above the EU threshold of 3%.

The truth is that the Finance Minister cannot do otherwise than open his hands irrespective of the EU’s deficit target.

Malta’s infrastructure is creaking in several areas - waste management in certain localities is a mess; several road projects are taking forever to complete with contractors complaining of payment delays; Gozo needs a new general hospital; the country needs a new mental hospital to replace the ancient Mount Carmel; a new collective agreement for nurses concluded this year has to be financed and educators are next in line rightfully waiting for their pay packet to increase generously; more investment is required in intelligent systems for public transport and enforcement; and the list can go on.

But among this expansive strategy - much of which is an investment in improved quality of life - Caruana has to find the cash to give the hardworking middle class lasting and significant reprieve.

The ‘sinjur żgħir’ mantra propagated by former prime minister Joseph Muscat has lost its lustre. Somehow, middle income earners no longer feel they are well off.

The measures from 2014 onwards that left more money in people’s pockets have now lost steam. To make matters worse, inflation has continued to eat into people’s pockets. A €200 spend at the supermarket today buys far less products than it did three years ago. Services have shot up and eating out has become somewhat of a luxury for many.

The middle class is losing its breath as its purchasing power is eroded and its lifestyle challenged.

The savings many made during the COVID interlude as a result of less spending have gradually been eaten away and the ability to save has eroded.

This leader believes the middle class, which does not depend on government handouts and is the pumping heart of the economy through its hard work and consumption, needs a breather. And this can no longer come in the form of a measly one-off yearly cheque.

Caruana must permanently cut income tax for the middle class by widening the tax brackets.

This leader stands by what it proposed last May: the non-taxable portion should increase, while the current top rate of 25% for those earning less than €60,000 should drop to 15% for a substantial portion of middle income earners. The government could also introduce a new 20% rate to differentiate the mass of people that currently pay at 25%.

The inevitable shortfall in income for government can be mitigated if the tax adjustments are introduced gradually and a concerted effort is done to curb tax evasion.

Caruana must also carry out periodic spending reviews of the different ministries to ensure that money which has been voted is used correctly and efficiently. If money allocated to individual ministries remains unused - or worse, is used irresponsibly - then Caruana should trim budgets.

Every person employed with the public sector must be useful, including those engaged by external agencies like Wasteserv and Transport Malta. Consultancies and persons of trust should be kept to the minimum. Corruption should be weeded out and fought tooth and nail.

The Finance Minister must exert more control on other ministries and to do so he must also adopt a stronger public persona.

The Caruana show cannot be confined to the three-month interlude straddling the budget period.

Unless Caruana wants to see the middle class engine spluttering with the veritable risk of seizing up, he has to provide a morale booster.

Caruana’s next budget must provide the ray of hope that allows Malta’s hard workers and self-employed the chance to dream and achieve.