Why we found no surplus in Budget 2018’s financial estimates – yet

MaltaToday ran the front-page headline that read: ‘Surplus… Only when the passport cash comes in’

It’s not here yet, but we’ll get that surplus soon enough once the IIP money comes in… Edward Scicluna before yesterday’s Budget 2018 speech. Photo: James Bianchi
It’s not here yet, but we’ll get that surplus soon enough once the IIP money comes in… Edward Scicluna before yesterday’s Budget 2018 speech. Photo: James Bianchi

If you’re a fan of Budget mathematics and enjoy combing through the finer points of the annual government budget, you’re in for a small surprise. There is no surplus in the consolidated fund.

Even up to yesterday, the government was welcoming its brave citizens to the new ‘surplus generation’.

But what happened in 2016, when the government hit an €8.9 million surplus in its consolidated fund, has not materialised again in 2017, nor will it happen in 2018.

In fact, although up to August 2017 there was a surplus of €31 million, by the end of the year that will turn into a deficit of €29 million, and in 2018 it will ease slightly to €21.4 million. So, where’s the catch?

In terms of European Union accounting – called the ESA – the deficits and surpluses Brussels cares for are those accounting for “general government” or “extended government”.

That means including all other authorities and agencies, and social security funds outside the government’s departmental structure. So in 2016, the €8m surplus actually climbed up to over €100 million when all the government’s agencies were accounted for. That boost came from the Individual Investment Programme’s sale of passports.

A tweet from April 2017

But again, 2016’s consolidated fund’s surplus already had skimmed 30% of the IIP revenue as per the programme’s rules. The general government surplus included 100% of the IIP revenue.

So in 2017, and also in 2018 – even when taking in 30% of the IIP’s takings – Malta’s consolidated fund is actually showing a deficit. The surplus will only come in when the passport cash comes through.

MaltaToday asked a government official to explain the regression, and this what they had to say:

“The deficit or surplus we speak of regularly is not that on the consolidated fund but that in respect of the extended government, which in the case of 2018 is planned to end with a €54 million surplus.

“This is the recognised balance and not that of the consolidated fund. The consolidated fund is the cash account for general government.”

Of course, that pretty much answers what the ‘surplus generation’ is all about.

More in Budget 2018