The government said it was happy with the feedback it had received, mainly because the majority of members on the Malta Council for Economic and Social Development (MCESD) have given their cautious approval to the government’s plans.

With the exception of the Malta Labour Party and the General Workers’ Union, constituted bodies said the budget was the best possible in the

circumstances.

Of course, and as expected, there are parts which they criticised and areas where they felt their suggestions should have been adopted, but on the whole they were satisfied with what the government is doing and how it is tackling the situation.

They all agreed that the government’s target to reduce the deficit according to a plan established last year had been reached and that the country could look forward to a further reduction in the deficit next year – to below the three per cent of GDP mark – in line with Maastricht Treaty

criteria.

During 2005, the deficit is estimated to be reduced by some Lm20 million to Lm76 million, and it will be pushed down by another Lm20 million next year. In 2006, the government aims to bring the deficit down to 2.8 per cent. Further deficit cuts are planned: by 2007, the government wants the deficit to be 1.4 per cent of GDP.

Although this is extremely positive news for the economy, the public tends to respond to the budget in more personal terms... in particular, how the budget measures will affect their lifestyle.

In this respect, there were no major announcements made in the budget, apart for the Lm2.25 weekly increase and the reduction of the Capital Gains Tax from 35 per cent to 12 per cent.

The weekly rise incorporates an “extra” 50 cents to compensate for the increase in the electricity and water surcharge which was announced a week before the budget. Many believe – and they are right – that an extra Lm26 a year will certainly not be enough to cover the rise in the electricity and water bills.

But here the government sought a balance between the requests made by the unions and those made by employers. In the end, however, the government ended up displeasing both. The unions, and their members, believe the 50c

compensation is not enough. Employers, however, believe that the “extra” 50c will only add to their increasing cost base. They are now saying that the 50c should be deducted from the cost of living increase that will be given next year.

This takes us to the electricity and water surcharge increases announced a week before the budget, together with adjustments to the price of fuel products. The government thought it fit to exclude the surcharge issue from the budget itself, a decision that has been derided by critics as having been a political move meant to first deal a blow and then sugar the pill.

The government defended itself by saying that the oil crisis issue had to be tackled as quickly as possible. Again, the oil crisis is something the government has no control over and, were it not for the fact that the price of oil increased so much over the past months, there would not have been any need to introduce changes to electricity and water bills.

The oil situation is not expected to change anytime soon – natural disasters such as Hurricane Katrina have not helped – and this surcharge is expected to increase to 84 per cent within two years. Hopefully, over time it will get better and then the surcharge will be lowered.