The Malta Independent 16 April 2024, Tuesday
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Budget 2020, opportunities and risks

Michael Briguglio Thursday, 17 October 2019, 09:33 Last update: about 5 years ago

A sociological analysis of the budget can investigate both macro- and micro- aspects. The big picture, social trends, people’s perceptions and everyday lives are all important considerations in this regard. Such an analysis can also investigate emphases and gaps in the budgetary discourse as well as policy implications.

If one views the budget from a macro-perspective, various indicators point towards economic stability. These include the budgetary surplus which has now been in place for some years, the falling public debt which is expected to go down to 40 per cent of Gross Domestic Product in 2020, a relatively low unemployment rate of 3.5 per cent, as well as significant economic growth. On the other hand, even though Malta’s inflation rate as a whole is not alarmingly high, rising prices in commodities such as food stuffs and housing are bringing about social hardships for categories such as pensioners and low to middle income earners.

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Government’s Keynesian logic of investing public funds into large infrastructural projects is accompanied by the sale of passports, permissive policies in construction and the importation of workers including many who are employed at relatively lower wages. At the same time, Government’s economic model is also enabling working class and middle-class people to invest in property development which can then be rented. Of course, this has significant environmental impacts and is splitting up the population into those who are reaping benefits from real estate and those who don’t. Whether Malta is equipped to manage risks associated with the construction bubble is quite concerning.

The reputation of sectors such as finance and gaming are also of concern. Recent decisions by companies such as HSBC deserve thorough analysis beyond the usual cat-and-mouse partisan language games. Malta requires a safe space for impartial analysts to investigate matters such as the country’s downward positioning in the competitiveness index. At the same time, attempts to attract new forms of economic investment are welcome, provided that evidence-based opportunity and risk analysis takes place.

We must also keep in mind that Malta is a small-island state. Our size can make us vulnerable to external shocks such as economic slowdown elsewhere. At the same time however, the country can maintain relative economic stability, as it did during the times of the post-2008 financial crisis, unlike our Southern European neighbours.

In the meantime, when analysing Government’s surplus, we should investigate whether revenue streams are making the country too dependent on certain sectors. A case in point is the sale of passports. 70% of revenue generated from this is not reported within the consolidated fund. I believe that this revenue requires more transparency and public scrutiny, especially if it will end up being used as electoral bait in the run-up to the next general election.

The other 30% appear under ‘Fees of Office’ in the vote for the Office of the Prime Minister in the Consolidated Fund. Here it is interesting to note that the approved estimated revenue for 2019 read 36 Million Euro, whilst actual revenue for 2018 amounted to 44 million Euro. By the end of 2019 we will know what actual revenue for this year amounted to. But we know that approved estimate for 2020 reads a significant 50 million Euro. Government is also estimating 13 million Euro revenue from the Residency and Visa programme – almost double the respective 2019 and 2018 figures. As things stand, the country’s surplus would still be in place if we deduct such figures, but the question to ask is whether we are becoming over-dependent on such revenues and therefore possibly increasing future financial risks. 

Talking of risks, Government is clearly aware of people’s sensitization on environmental issues. Hence, it may be realising that even though Labour’s huge electoral majority is also based on laissez-faire environmental policies in areas such as development and construction, a sizeable amount of people is angered by environmental hardships in their everyday lives. At the same time, Malta has sustainability challenges and EU commitments which need to be tackled.

In this regard, budgetary commitments on afforestation, cleansing, the banning of single use plastic, recycling, re-use facilities, renewable energy and electric cars are welcome. I augur that these commitments have an evidence-based policy infrastructure so that they can be implemented properly.

Government’s commitment to have a national strategy to make Malta climate neutral by 2050 is also welcome. Minister Scicluna also declared that the National Energy and Climate Plan 2021-30 will be presented to the European Commission in December. The obvious question comes to my mind on this. Who was consulted for this plan? What type of evidence did Government consider? And what forms of impact assessment were carried out?

In the meantime, calls have come from both civil society and the opposition to have a parliamentary committee to tackle the climate emergency. I reiterate what I suggested in The Malta Independent October 3rd, namely for the need for informed constructive discussion free from sloganeering and partisan trenches.

As regards the implementation of waste policies, Government could also start considering schemes which enable cheaper pricing for goods sold from dispensers or in reusable containers.

Despite the positive environmental direction of various Budgetary commitments, the fact that Government keeps downplaying the role of environmental enforcement is most disappointing. My qualified guess to explain this is that members of parliament are afraid of losing votes from particular constituencies (including lobbies) which profit from environmental exploitation.

The budget also fails to protect ODZ zones which are currently under siege courtesy of flexible planning policy. Even though this falls under the remit of planning rather than fiscal policy, a strong declaration to protect such zones would have been most welcome, particularly when we are experiencing a creeping change of Malta’s landscape.

Budget 2020 is also bittersweet when it comes to polices related to transport pollution. On the one hand, the incentivisation of construction operators to dispose of their old machinery and change them with newer machinery that pollutes less according to established standards, is a step forward, though we need to ask whether it should be the taxpayer who funds this. On the other hand, I note that Malta has missed another opportunity to deal with heavy polluters such buses used for school/tourism/private use, delivery vans and other old junks which seem immune to VRT tests. Malta has one of the oldest car fleets in the EU, and it shows.

Some other policies related to transport are welcome in relation to the need for a modal shift towards sustainability. These include increased sea connectivity from various localities and increased access to free public transport. At the same time the possibility of a metro system is once again largely absent from Government’s talk. As regards the fourth ferry between Malta and Gozo, the ship needs to be fully accessible, and its success so far shows that Government should really think twice before rushing ahead with the car-tunnel proposal.

In the meantime, Government remains very elusive on the controversial land reclamation question. Hence the need for public scrutiny.

The social dimension of the budget has various positive commitments, including increased assistance, incentives and facilities for persons with disability, pensioners, parents, workers, persons with specific illnesses. Whether these will adequately impact the money left in such people’s pockets has to be seen through social-scientific evidence. Indeed, Malta needs a mainstreaming of social impact assessments.

To me, it is quite clear that the COLA adjustment of €3.49 is not realistic, particularly when one considers the inflation of basic needs such as foodstuffs and the high costs of housing.

Hence, I ask, why are political elites simply ignoring proposals made from civil society exponents such as UĦM – Voice of the Workers for a comprehensive investigation of 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? Pensioners, low-to-middle income earners and specific social groups may be less visible in the Malta’s media-sphere and political lobbying, but this does not mean that their concerns are less socially significant.

Also, is Government willing to investigate the possibility of a more realistic minimum wage and the introduction of a living wage, something that Joseph Muscat himself spoke about when he was leader of the opposition? Incidentally, what happened to Government’s investigation of utility bills overcharging through a faulty methodology?

When it comes to precarious employment, I would like to see how Government’s plans will be implemented. Unfortunately, political elites in Malta are politely ignoring concrete proposals, yet again from the UĦM, to combat precariousness. I particularly like their proposal for a nationwide online portal which registers all employment contracts to ensure that legislation is being adhered to when workers are employed. The Union’s proposal for unionisation of low-salaried workers is also worth proper consideration.

The social dimension of Budget 2020 also leaves out pension sustainability. In a previous article in the Malta Independent (5 September) I wrote that apart from the thousands of pensioners who find it difficult to cope with the cost of living, Malta needs to give more thought to the needs of future pensioners. Government's respective pension model is based on revenues from the current increase in foreign workers, but is this sustainable?

In areas such as health and education, I note positive commitments on mental health, the national library and a Maltese spellchecker. But the elephant in the room is that work conditions of various professionals in the respective fields need to improve.

Finally, I cannot but note what I call the big/small paradox of political elites in Malta, a commonality I observe across different administrations and levels of governance including the national, local and European: In the smallest EU member state, political elites keep being addicted to big millionaire development. Hundreds of millions of Euro are allocated for huge projects, including controversial ones. But why do the same political elites consistently ignore the everyday realities of residents and pedestrians? Why are pavements side-lined by politicians who want to show off big stuff? Maybe this is because kids, persons with disability, parents with pushchairs and elderly people are excluded from the opportunities for political lobbying.
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