The Malta Independent 17 February 2020, Monday

Budget 2020 - A Green New Deal for Malta?

Michael Briguglio Thursday, 5 September 2019, 11:33 Last update: about 7 months ago

According to Finance Minister Edward Scicluna, the upcoming budget on 14 October will aim to sustain inclusive growth. He is emphasising that Malta's 'economic prosperity allows the government to continue to commit to policies that ensure greater social justice'. 

Consequently, Government's pre-budget document is focusing on the strengthening of public institutions including the justice system, sustaining the health and education sectors, strengthening social inclusion and upgrading Malta's physical and digital infrastructures.


Other sectors are also mentioned in the document, but it is clear that Government aims to build on its current economic model, which despite, its merits, also includes questionable practices. For example, being dependent on the shady sale of passports raises various questions regarding sustainability. Revenue generated may be used to finance not-so-transparent initiatives, which I suspect will go on overdrive closer to the general election.

Besides, I needn't emphasize that Malta's economic model has visible and evidence-based impacts on the environment, quality of life.

In this regard, one should note that Malta's economic growth in terms of real GDP, is expected to increase by 6.2 per cent and 2019 and 5.7 per cent in 2020. Sectors such as construction and real estate are among those with highest growth rates, but at the same time high property costs are creating difficulties to many, notwithstanding the current rent reform process.

The recent statement by the Central Bank that borrowers are increasingly taking on larger loans compared to their income, resulting in higher loan repayments, and possibly indicating increasing pockets of vulnerability in case of a downturn, should not be taken lightly.

It is also pertinent to note that according to the Central Bank the monthly average repayment compared to the average wage is more contained and below the levels reported in 2006-2007, when house prices grew at double-digit rates. Still, I believe that such quantitative data should be matched up with qualitative research which provides evidence of people's everyday lives. Let us keep in mind that according to official data, over 80,000 persons are at risk of poverty in Malta.

Government's €250.8 million surplus in 2018 has been followed up with a deficit of €126 million as at the end of July 2019. Even though one should be cautious when analysing mid-year figures, one should analyse whether increased expenditure is discretionary or not and whether it is sustainable.

For example, are increases in Personal Emoluments and Operational and Maintenance Expenses being matched with improved services, or do they have to do more with electoral commitments to specific lobbies and constituents?

Whilst it is a fact that Malta's economy is doing well, an objective analysis of its sustainability must factor in that being a small-island state, the country may be significantly vulnerable to risks in relation to global economic situations.

Here, one must note that various economic analysts believe that the global economy is heading into recession. This may be due to various factors such as slowing economic growth in the USA, the latter's trade war with China, which in turn is facing debt challenges, Germany's recession risks, Brexit, as well as economic woes in various developing Economies. Financial markets are als posing their own challenges. I hope that the Malta Council for Economic and Social Development is giving due importance to such outlooks.

At this point in time, the Minister of Finance is probably trying to match Government's declared vision with a wide range of pressures, both internal and external, for pieces  of the budgetary cake. I too have my own preferences.

An area which I believe needs to be given more importance by Government is pensions sustainability. Here I am not only referring to the thousands of pensioners who find it difficult to cope with the cost of living, but also to the needs of future pensioners. Government's pension model is based on revenues from foreign workers: Whilst I see sense in this logic, I question whether it is prudent to use such windfalls to justify reform for decent pensions in the future.

I also believe that Government should seriously investigate Malta's mechanism which calculates yearly cost-of-living-adjustments. Is the basket of goods within it really representing today's consumption patterns? Can Government appoint a team of experts and civil society representatives to investigate this matter?

Another area which I believe deserves inclusion is precarious work: Government should follow up the proposal of UĦM - Voice of the Workers to have a nationwide online portal to combat this reality. Standardised work contract requirements as per current legislation would be available to authorities, employers and workers to ensure that legislation is being adhered to when workers are employed. 

As regards the environment, it has consistently remained a policy Cindirella under different governments. The implementation of transport policy is a case in point, where the car keeps being king at the expense of greener alternatives and multi-modal opportunities. Relying on public transport for personal appointments remains an exercise in guess work, and new infrastructure projects are not really giving importance to corridors, spaces and initiatives that are truly friendly for bicycle users and pedestrians. Besides, what if Government had to invest in a national project for truly accessible pavements?

Indeed, how about having a green new deal for Malta? One where Government aims to sustain the economy through initiatives that increase social inclusion and improve the environment. Green jobs can be created in sectors where Malta is currently a European laggard, such as waste management, renewable energy, alternative transport and accessible urban spaces.

Wouldn't it be great if our country looks beyond construction and other short-termist economic sugar rushes, and if initiatives, incentives and investment are in place to green Maltese society?

Just imagine a Green New Deal: One driven by political consensus, societal co-ownership, real evidence-based consultation and innovation in line with Malta's small-island status.

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