‘Economy faring better than it did last year’ – Scicluna

Country’s economy was faring better than it did in 2012 and the Budget measures will strengthen the country, finance minister Edward Scicluna says.

As the finance minister brought down the curtain on the 2014 Budget, Edward Scicluna said that the main thrust of the opposition's criticism of his second budget was that it was dishonest and concealed cuts and tax increases.

"If you believe this you would imagine people were desperately tearing their hair out following the budget. However, this certainly does not reflect the people's sentiments."

Scicluna said the budget was not only welcomed by civil society but a MaltaToday survey showed that the majority of people had judged the budget positively and only 3.5% said they were negatively affected.

He accused shadow minister Tonio Fenech of purposely providing wrong information on the excise duty on fuels to "deceive" people who cannot make a distinction between different accounting methods, "as he had done in the March budget to shirk off responsibility for Malta's entry in the Excessive Defict Procedure."

"You cannot shed doubts and use scaremongering tactics. These are failed tactics," Scicluna told a smiling Fenech sat just across the Chamber.

Turning to the economy, Scicluna said that the opposition wrongly thought that the sector can only grow through incentives and subsidies.

Noting that the economy was faring better than it did in 2012, Scicluna said that the election of a new government in March brought stability and the economy responded positively.

The minister added that the opposition was clearly unfamiliar with the modern thinking on job creation and economic growth because instead of focusing on new sectors, the opposition was insisting that only subsidies and incentives would encourage and attract local and foreign investment.

Explaining that the budget addressed this by introducing measures which dealt with early school leavers, illiteracy, excessive bureaucracy and the inefficient justice system, Scicluna said that the budget measures would increase the country's competitiveness.

"What really matters for investors is the availability of trained and able employees and how easy it is to operate in Malta. They also look at how efficient the justice system is and whether their rights are upheld."

 On the opposition's insistence that government cut its expenditure in a number of sectors, Scicluna explained that the PN was comparing the 2014 Budget allocations with those from the 2012 Budget presented by Fenech.

"In fact, the budget allocations for local councils, Malta Enterprise and the National Commission for Persons with Disability were not cut in this budget as the opposition is claiming, but they were reduced in the 2013 Budget presented by the PN government."

He explained that the budget allocation for the National Commission for Persons with Disability had been cut by the previous PN government from €844,000 to €750,000 in the 2013 Budget. However, the Labour government was now increasing it to €800,000, Scicluna said.

Similarly, the budget allocation for primary health care had increased to €23.1 million from €22.5 million, the minister said. He also pointed out that the budget allocated for IT services in education had also increased by almost €400,000 despited the opposition's claims that it had been decreased.

Scicluna stressed that the budget should not be judged on whether more money had been allocated to each and every sector, but rather on the effectiveness and efficiency.

"Spending more is not necessarily right. We need to get the most out of what we spend."

Refuting the opposition's claim that taxation increased by €72 million, Scicluna explained that "the real increase in taxation amounted to €21.4 million."

He said a distinction should be made between new taxes, changes to tax rates and increased revenue from taxes. Scicluna said that while the 2014 Budget did not introduce any new taxes, the increases were down to an increase in consumption and the increase in excise duties on fuel, cigarettes and alcohol.

On the European Commission's report on Malta, Scicluna underlined the commission's clear conclusions that the government had "taken effective action and does not need to take any further action to address its deficit."

In his concluding remarks, Scicluna said that in the past, "the country was living beyond its means," and the country's reputation had suffered blow after blow under previous PN administrations.

"This budget was based on a number of priorities, which firstly respects the principle that the country should not spend according to its means."

The budget's other key priorities were those of reducing energy costs, fostering economic growth and improving the country's quality of life by making work pay. Scicluna also highlighted the government's measures to address bureaucracy, attract new economic sectors and strengthen health, education and the environment.  

Despite having five MPs absent, including Prime Minister Joseph Muscat, the government had a four seat majority as Parliament took the final votes on the 2014 Budget. 

@jon80. Dear Sir, allow me to point out that there is an abyss of difference betweening "spending" and "investing". Spending is for fools! Investing and obtaining the best value for your funds is the wise man's choice. I have always disavowed the PN's believe that "money is no problem"; and very unfortunately I have been proven ultra correct. Fund overfueling to kick start the economy is correct, BUT like with a mechanical engine you cannot keep it on choke for a long time. Unless, that is, you do not know what you are doing, and that was symptomatic of most of GonziPN's financial workings. As regards businesses suffering "cashflow" problems, I would agree that some, especially in the overdeveloped retail sector are in this position. However, most are in this position because they brought it on themselves. Others who took great care of their customers (like a certain German grocery chain) not only are cash flush but growing by the months. So attribute faults to the correct doorstep please.
"This budget was based on a number of priorities, which firstly respects the principle that the country should not spend according to its means." What control does anyone have over prices in a free market economy where prices of all markets are subject to market fluctuations and economic factors? How does Hon. Scicluna mean that we should not spend? Should we not live?
Spending is a function of disposable income. What is the disposable income available per capita?
If the economy stabilised in the last years of the PN government, the lower levels of society never felt its benefits. It was the upper layer of the nationalist-government-business, that provided the filtration so that all benefits were stuck with them. All this government has to do is remove that filter and the generation of economy lifts itself from the present lethargy.
With respect towards the funds allocated, I could not really understand how they are going to trickle down to meet everyone's needs. It is known that the majority of business persons have cashflow problems, and, it is known that the banks ask for collateral security and upfront commitment; as does Malta Enterprise at lower levels of prudence, but lower levels of financing. Therefore in my mind's eye, I still fail to understand how the economy will grow given that the majority of businesses in Malta (and in the EU for that matter) are startup SMEs with little startup funding.