Pensions fall under the principle of social inclusion which aims at distributing wealth among all strata of society, and the island must definitely face the problem to increase funds which will be available for future generations, Finance Minister Edward Scicluna said this morning.
The Third Pillar Pension concept is to come in and a task force is to meet this week to plan the way forward, he announced.
Giving a presentation to the Malta Council for Economic and Social Development (MCESD) this morning – the first in a series of talks before the Budget is presented, Prof. Scicluna said there are a lot of fiscal rules and rules on expenditure which Malta must follow and which are new.
Among these is the need for an independent fiscal council, that must give independent budget forecasts and opinions.
Prof. Scicluna believes this is the best time for the island to carry out a spending review since a new government will have a different outlook to review expenditure, identifying ways how this can be done. He also highlighted that supplementary estimates which have so far been done, are a way for the government to lose control. Many EU countries have removed this process and only draw up contingency plans for each project. Malta must plan for this mechanism to be changed.
Prof. Scicluna explained that the economy’s basic need is to increase the productivity capacity by strengthening the work force, increasing the number of women in employment and by means of education.
The proportion of GDP dedicated to capital, and which makes up investment, has dropped over recent years and it has not recovered from the lowest low in 2009.
Low capital, coupled with low participation in the work force, results in lack of growth. This must be given attention while production costs must be kept low in order to increase competitiveness.
Prof. Scicluna said we must work especially to encourage young people joining the work force.
Reacting to criticism that the pre-budget document gives little attention to employment, Prof. Scicluna pointed out the focus is on economic growth from which employment results. If employment increases but productivity drops, then competitiveness would be badly affected.
In line with economic trends and the need to cut debts, which had resulted in an economic crisis – a repeat of which the global economy is working to prevent, the government is strongly focusing on cutting expenditure. Meetings irrespective of budget talks, are being held with every ministry in a bid to cut waste and increase efficiency. The ‘Planning Total’ approach is being taken and rather than a bottom up approach, which spikes costs, the government intends to implement a top down approach by which expenditure is cut.