Take from Peter to pay Paul

I am not an economist and I have never studied economics but I have lived a good part of my life trying to run media businesses.

I have the feeling that most economists or finance ministers have never really run a business. It helps if someone has some limited experience in adding the numbers and seeing from where money comes from - in the real world.  

This week Finance Minister Clyde Caruana said the tax bands would be adjusted to allow for more money to land in the hands of every worker, whether they are high or low-income earners.  This would result in a €100 million less in income tax for the government.

Caruana knows that the €100 million shortfall has to come from somewhere. He also knows that there are indications that the economy does not have the same tempo as previous years, no matter what is said. Tax revenue will not go up at the same rate.

So, the minister knows that the drop in funds will have to come from somewhere. Apart from the decrease in tax revenue, the minister wants to address the issue of uncollected taxes and social security contributions.  

And in the last three months, the relevant departments have been putting more pressure on defaulters to pay up or face the wrath of penalties for late payments. The government needs to bring in the cash and many defaulters have suddenly been faced with a very impatient government wanting to collect its dues. This makes people edgy and unhappy.

The thinking behind the €100 million tax cuts is a direct reaction to the June electoral outcome which saw Labour plummet to a smaller majority of 8,000 votes. The tax cuts  are meant to appease the middle class. They will not.

But to resort to a blanket tax reduction for everyone is not a sensible financial reform. We need to uplift the lower middle class that is suffering real time. It would also fall in the supposed political manifesto of a social democratic party which Caruana is part of.

I asked Clyde Caruana about the idea of means testing when government dishes out subsidies or gives out grants; he was not excited about means testing and I have to admit I did not understand his thinking process.

A student who drives into university with a brand-new BMW worth €60,000 paid gratis by mummy and daddy and another student who takes public transport to get to University are treated as similar economic profiles and receive similar grants.

I cannot see the sense in this. Caruana does, however.

There is truth in that fewer taxes encourage people to spend more, but what the government is forgetting is that a healthy tax collection will also go to improve many social, health and educational projects. And when it comes to low income earners, fewer taxes does not necessarily mean more spending. It may simply mean a few less restless nights and some break-even situations.

Let me take one simple consideration that impacts thousands of people in Malta. I have to declare an interest here but I know I am not alone. It is about the access of individuals who are Type 1 or Type 2 diabetes to sensors (to gauge the level of glucose in the blood). Unlike most European countries, the provision of insulin pumps for people who need constant intake of insulin is not possible in Malta. Insulin pumps change the life of people with diabetes in a radical way and yet we are still miles away from having a decision.

The same could be said of those numerous instances where certain medication is not available on the POYC. And there are thousands of people in the lower income bracket who have to fork out money from their limited finances to get a supply of medication not on the free register.

The introduction of pumps would mean forking out millions every year. But it would change the quality of life of thousands of Maltese and Gozitans.

The need for government intervention is not only needed for health matters.

When it comes to our quality of life, the need for government intervention should be a priority. We also talk of having a pleasant environment, but this does not happen simply with colourful pronouncements.

Every sector needs more grants and money to implement policies that will benefit the community.  It could be organic farming, herding Maltese goats, water sports or making electric cars more accessible to more people, aiding boat owners to construct holding tanks and numerous initiatives that will make everything so much better for everyone and everything.

As things stand, budgets have a holistic approach but their underlying intention is to embolden people to be more appreciative of government policy.

The idea of taking from Peter to pass on to Paul is not the way forward. We need to look at the bigger picture. Not one that is motivated by electoral considerations only.