[ANALYSIS] ‘Grow and spend’: How parties’ manifestos converge and diverge

The fiscal austerity that characterised the Gonzi years has been exorcised by a decade of increased public spending financed by higher economic growth: a ‘grow and spend’ model which left the country richer, but uglier and more unequal. Now both major parties have submitted voluminous manifestos which largely subscribe to this model. So where do the two parties diverge? asks James Debono

Labour leader Roberta Abela (first from right) with PN leader Bernard Grech at the Chamber of Commerce debate
Labour leader Roberta Abela (first from right) with PN leader Bernard Grech at the Chamber of Commerce debate

1.  Both parties want to increase public spending on goodies, ranging from free holidays to free laptops, while lowering taxation, with sustainability hinging on higher rates of growth, which depend on attracting more investment

The bottom-line is that both parties now subscribe to the same economic model that grows the size of the cake to ensure greater public spending, and further lower taxation, an approach which characterised the policies of the present government.

As the incumbent, Labour has presided over a spell of growth and survived COVID pains, so it starts at an advantage as it has already delivered on this front, albeit in without any significant investment in new industrial sectors and as a result of a property boom fuelled by an increase in population.

Both parties seem keen on anchoring this growth model in more sustainable ‘industrial’ investment, even if addiction to high growth rates makes the country vulnerable to demands of investors. The PN is committed to set an economic transformation fund to the tune of €1 billion which will be set up to encourage the creation of 10 new economic sectors, including the metaverse.

On the other hand Labour is emphasising “advanced manufacturing” in fields like robotics and medical equipment and is banking on investment related to offshore developments in the ‘blue economy’ within the framework of Malta’s Exclusive Economic Zone beyond its territorial waters.

2.  The PN is keener than Labour on using taxation as a carrot to change behaviour, while Labour’s tax cuts and financial benefits are easier to quantify and explain

While Labour is committed to unconditional tax cuts for both companies and individuals, the PN is making most of its fiscal incentives conditional on adherence to Environmental Social Governance criteria which are yet to be established in agreement with social partners.

This is an innovative and forward-looking idea but which PN spokespersons are finding hard to explain. And while the idea of using taxes to reward responsible social and environmental practices is an interesting one, promising to do so in a manifesto is proving tricky in the absence of a fixed shadow spokesperson on economic issues.

For while Labour’s economic vision is conveyed by Clyde Caruana, who comes across as solid and prepared, the PN has sidelined Mario De Marco without presenting an alternative which carries the same gravitas.

While the PN is promising to lower company tax to 15% on the first €500,000 when reinvested in ESG-compliant companies, Labour is promising to cut corporate tax cut to 25% on the first €250,000 in income for everyone. As regards personal income tax the Labour party seems more in synch with the aspirations of the lower middle class, which was largely overlooked in tax cuts inherited by Labour from Lawrence Gonzi’s government in 2013.

While Labour is committed to raise the tax ceiling on non-taxable income for parents from the current €10,500 to €12,200, the PN is committed to decrease the tax rate for those earning between €60,001 and €80,000 to 25%. But while committed to regressive tax cuts for higher-income earners, when it comes to tax rebates it is the PN’s approach which is more socially progressive by promising a 10% tax credit on all tax paid in the previous year for those earning less than €20,000 and 3-5% for those earning more.

And while Labour may be more populist in its tax policies, its manifesto does include an important long term fiscal commitment: enshrining in the constitution an obligation on governments to set aside money every year as a contingency fund. This suggests that Labour has learned from its COVID experience and wants Malta to be better prepared for similar emergencies in an increasingly unstable world.

Where both parties agree is in avoiding any reference to new taxes aimed at redistributing more wealth from sectors making major profits. In this sense neither the PN nor the PL is keen on using fiscal disincentives as a way of reducing widening social inequalities. Neither are any taxes being proposed to discourage car use or activities and products with a large carbon footprint.

3.  On civil liberties, Labour is more open to future debates on controversial issues like euthanasia, thus remaining the obvious choice for those who prioritise more social liberalisation

In a clear indication that Labour is keen on retaining its edge as the most socially liberal between the two big parties, the PL’s manifesto is committed to commence a national discussion on voluntary euthanasia. This comes across as a calculated decision in view of surveys showing greater support for euthanasia then for abortion.

This suggests that euthanasia is set to become the next frontier in Labour’s social revolution, taking precedence over the more urgent need to update draconian abortion laws which do not even make an exception for medical exceptions and which are out of line with legislation in most of the world. And while abortion is not addressed in its manifesto, Labour remains more open to discussion on this topic than the PN.

It is also promising greater access to sterilisation services. And while the PN’s commitment for free contraception, including the morning after pill, has gone some way in dispelling the association of the party with ultra-conservative views, it is Labour which is once again rocking the boat.

On cannabis the PN’s suggestion that it could amend the recently approved law may also alienate a volatile segment of voters who benefit from this law. But Labour’s manifesto does not suggest any will to further liberalise drug laws by applying the harm reduction model to recreational use of other drugs like psychedelics and cocaine.

Despite its selective approach, Labour still remains the pragmaitic choice for those who want more progressive social reforms.

4.  While generous with public funds, both parties are wary of increasing costs for businesses. Labour is now committed to raise the minimum wage without saying by how much, while PN will only offer fiscal incentives to encourage companies to pay a living wage

While Labour is now committed to raise the minimum wage over and above COLA increases, the PN is committed to reward companies paying a living wage – the amount of money required by a family to live a decent life-with fiscal incentives in line with ESG criteria. But the ‘living wage’ will only be determined following an agreement with the social partners.

And while Labour’s commitment is vague, as it does not state by how much the minimum wage should increase, it is more tangible than the PN’s promise which is entangled with a complicated mechanism still to be defined. Overall, both parties seem wary of a commitment which would increase expenses for businesses but which would make work pay for a neglected category of workers.

But the PN is also committed to pay a full “minimum wage” to all those who lose their jobs for the period of a year. The PN also aims to use ESG criteria to discourage precarious employment conditions. Both parties are now committed to outlaw zero-hour contracts.

5.  Both parties seem to recognise the environmental emergency but refrain from a commitment to change local plans, while Labour is dangerously keen on land reclamation

Although studies promised more than three years ago have yet to be published, Labour is making a clear commitment for land reclamation by saying that this is “necessary in a small country with a limited amount of available land.”

And while the manifesto refers to “projects” which are of benefit to the country like renewable energy, it fails to exclude real estate on reclaimed land. Such a vague and generic commitment made in the absence of published studies identifying the areas which can be reclaimed, may well give a future Labour government a blank cheque to extend the development zone to coastal areas.

Still, after a decade of building mad, Labour is showing greater sensitivity to land use problems. It is now committing itself to give greater protection to urban conservation areas by introducing transitional buffer zones to prevent village cores from being enveloped in five-storey development. It is also committed to enact a skyline policy to regulate high-rise developments.

But Labour falls short of any commitment to revise the local plans to stop the proliferation of apartments in every nook and cranny, which came as a direct result of both the 2006 local plans and a raft of policies concocted after 2013.

Moreover the focus on aesthetics suggests that Labour is more keen on putting lipstick on the pig’s face than on democratising the planning process.

And while the PN is committed to increase ODZ areas by 50,000sq.m a year, this is limited to public land which presently can only be developed if the government decides so. Neither is the PN committed to changing policies devised by Labour after 2013, including development guidelines which converted floor heights in local plans to metric heights.

On this issue ADPD remains the only party with a clear commitment to revise local plans and to reverse the infamous extension of boundaries carried out in 2006.

6. Foreign workers are here to stay and both parties are now committed to inclusion without promising them a path to citizenship and political rights

Gone is the PN’s obsession with the increase in foreign workers which characterised its MEP campaign in 2019 when it was led by Adrian Delia. Both parties recognise the contribution of foreign workers to the economy and are committed to their inclusion in the Maltese social fabric.

The PN’s manifesto goes as far as suggesting that immigration compensates for the decline of the workforce in an ageing population while seeking to combat exploitation of any worker irrespective of nationality.

On the other hand, Labour is keener on emphasising a distinction between legal foreign workers and immigrants worthy of protection, and those who do not qualify for any protection and should be sent back. But while paying lip-service to inclusion, both parties shy away from a reform of citizenship and residence laws to give more political and social rights to this segment of the population.

7. The PN is keener on addressing corruption but major reforms like that of party financing are left out by both parties

Despite the heavy price it paid in terms of reputational damage as a result of a free-fall in governance, Labour’s manifesto includes no commitment for legislative changes to criminalise mafia-like organisations and to make it easier for the State to confiscate their monies.

In contrast the PN is presenting a raft of proposals which would not only make it easier to prosecute people who abuse their position of public trust but also go a long way in curtailing the power of incumbency by introducing fixed term parliaments.

And while the PN’s manifesto does propose a law to regulate lobbying and favours, the creation of a register where meetings involving lobbyists and MPs are logged, this topic is completely overlooked by Labour.

In a sign that the PN has a more continental mind-set on political reform, it is now advocating a 5% threshold for parliamentary representation. Labour also suggests that it wants to discuss electoral reform to ensure greater proportionality but it fails to indicate how. This suggest little willingness on the part of Labour to show leadership on good governance and constitutional reform, leaving space for the PN to take ownership of an issue which it had overlooked when last in government.

But while the PN seems keener on addressing shortcomings in governance, both parties fail to make any reference to the need to revamp party financing laws (and introduce state financing) to ensure that parties and candidates are not subsidised by powerful lobbies.

This in itself raises the question: are the manifestos themselves conditioned by the power of lobbies to exclude measures which do not suit them?