The Times of Malta
In this last part of the analysis I test the budget against mainstream social criteria. Does the Budget for 2002 help to render Maltese society more socially just, more caring, more confident about the future for themselves and their children`
There are some minorities for whom special measures announced in the budget will bring welcome relief to their hardships. Foster parents receiving Lm12 a week for each child they foster is fully deserved.` `Full social assistance for mental health rehabilitation patients whilst they work is laudable. Increase in ceiling of capital assets before being disqualified from Non-Contributory Age pension is most welcome by its beneficiaries. Deduction from taxable income of alimony paid under marriage separation is a belated addressing of a very unfair situation. The increase in tax ceilings for couples who make a joint declaration only marks how unjust it is that ceilings of single or separate declaration married tax-payers have remained without similar adjustment.
But these measure effect a very small section of society. The mainstream of society, those who were hard hit by the last three budgets, those whose were promised most by the administration in their 1998 manifesto have again been given the short end of the stick.
Take a married couple where both parents work and have to sustain children attending private schools. They probably jointly master a gross of Lm10,000 and make separate declaration for income tax purposes. The Lm3 per week joint cost of living award will probably be taxed away at 25% (depending on how the joint income is split between the spouses) and the 10% N.I deduction will leave them with a net Lm1.95. If one of the spouses smokes one packet of cigarettes a day they are left with Lm1.25 per week. With inflation touching an actual rate of 4% they needed Lm7.70 to stand still. Their real standard of living will again reduce by more than Lm6 a week after they were hit again last year when the tax bands where lowered and fringe benefits were taxed.
The couple had heard the Minister of Finance saying that the worst was over and that the Tax Compliance Unit was getting well into gear thus reaching those who have been having it good at the expense of the majority of employees who pay tax right down to the last cent, fringe benefits included.` Hopes were high that as tax revenues were augmented by enforcement on evaders, the honest tax-paying middle class would be showered with relief.
Hopes were dashed!` The additional tax revenue, assuming it materialises,` is` needed to continue funding expenditure which the Minister just cannot keep in check.
This time it was even worse as the IMF obliged the Minister to pass through the Consolidated Fund payments to the tune of Lm20 million which in previous years were hidden in the Treasury Clearance Fund. Past payments which were understating the deficit remain buried in the Treasury Clearance Fund for future generations to make up for this administration`s past excesses.
Excluding this extraordinary inclusion, recurrent expenditure is planned to increase by only 3%.` Basically a freeze or outright reduction of recurring expenditure in real terms.` Judging by the Minister`s professed inability to control the expenditure addiction of his peers and with government going increasingly in election mode I give little credibility to the chances of expenditure being kept within targets. Where is the much needed additional spend on education, health, environment and law enforcement coming from`
Our mainstream family should rush to the electoral manifesto of the PN to remember what they were promised in order to attract their vote. They will remember they were promised a tax rebate on private schooling fees. This was given in 2001 but soon eroded by increase in school and transport fees. They were promised tax rebates on health insurance premia (promise no. 165) and on house loan repayments (promise no. 197). Paying some Lm1800 p.a. on such committed expenditure would give the mainstream couple a tax saving in the region of Lm 450 p.a. This is what they voted for.` Instead they are seeing again their real wages being eroded for the third consecutive year.
And to add insult to injury our mainstream couple are being told that this was a good budget and that the worst has passed. They shudder to think what it would be like when the Lm400 million hidden debt in the Treasury Clearance Fund and the dead bank loans of public enterprises which are still being serviced by the Government will have to be addressed. And when all public assets are sold and there is nothing left to generate the one-off revenues to keep the structural deficit from continuing to blow the national debt out of control.
And the mainstream couple can`t understand why the Minister continues to blame the 22 month Labour stint in government for all these economic ills when he has already had opportunity to present 8 budgets, 4 before and 4 after Labour`s tenure.` `What on earth can a short term government that orders a recruitment freeze do in 22 months that cannot be corrected in four budgets`
The Minister claims to be very optimistic about Malta`s future. Hope springs eternal. But with the economy effectively in reverse gear, the deficit obstinately unaddressed even though clearly expenditure has been under-estimated, assets being disposed of wholesale, tax reservoirs being sucked in and frittered away,` it sounds like the optimism of fools rather than the self-confidence` of experts.
Our mainstream couple take courage only from the fact that at best they have to endure only one more budget of senseless talk, figure manipulation, divisionary language and subtle but consistent assault on the standard of living of the middle class.
In this last part of the analysis I test the budget against mainstream social criteria. Does the Budget for 2002 help to render Maltese society more socially just, more caring, more confident about the future for themselves and their children`
There are some minorities for whom special measures announced in the budget will bring welcome relief to their hardships. Foster parents receiving Lm12 a week for each child they foster is fully deserved.` `Full social assistance for mental health rehabilitation patients whilst they work is laudable. Increase in ceiling of capital assets before being disqualified from Non-Contributory Age pension is most welcome by its beneficiaries. Deduction from taxable income of alimony paid under marriage separation is a belated addressing of a very unfair situation. The increase in tax ceilings for couples who make a joint declaration only marks how unjust it is that ceilings of single or separate declaration married tax-payers have remained without similar adjustment.
But these measure effect a very small section of society. The mainstream of society, those who were hard hit by the last three budgets, those whose were promised most by the administration in their 1998 manifesto have again been given the short end of the stick.
Take a married couple where both parents work and have to sustain children attending private schools. They probably jointly master a gross of Lm10,000 and make separate declaration for income tax purposes. The Lm3 per week joint cost of living award will probably be taxed away at 25% (depending on how the joint income is split between the spouses) and the 10% N.I deduction will leave them with a net Lm1.95. If one of the spouses smokes one packet of cigarettes a day they are left with Lm1.25 per week. With inflation touching an actual rate of 4% they needed Lm7.70 to stand still. Their real standard of living will again reduce by more than Lm6 a week after they were hit again last year when the tax bands where lowered and fringe benefits were taxed.
The couple had heard the Minister of Finance saying that the worst was over and that the Tax Compliance Unit was getting well into gear thus reaching those who have been having it good at the expense of the majority of employees who pay tax right down to the last cent, fringe benefits included.` Hopes were high that as tax revenues were augmented by enforcement on evaders, the honest tax-paying middle class would be showered with relief.
Hopes were dashed!` The additional tax revenue, assuming it materialises,` is` needed to continue funding expenditure which the Minister just cannot keep in check.
This time it was even worse as the IMF obliged the Minister to pass through the Consolidated Fund payments to the tune of Lm20 million which in previous years were hidden in the Treasury Clearance Fund. Past payments which were understating the deficit remain buried in the Treasury Clearance Fund for future generations to make up for this administration`s past excesses.
Excluding this extraordinary inclusion, recurrent expenditure is planned to increase by only 3%.` Basically a freeze or outright reduction of recurring expenditure in real terms.` Judging by the Minister`s professed inability to control the expenditure addiction of his peers and with government going increasingly in election mode I give little credibility to the chances of expenditure being kept within targets. Where is the much needed additional spend on education, health, environment and law enforcement coming from`
Our mainstream family should rush to the electoral manifesto of the PN to remember what they were promised in order to attract their vote. They will remember they were promised a tax rebate on private schooling fees. This was given in 2001 but soon eroded by increase in school and transport fees. They were promised tax rebates on health insurance premia (promise no. 165) and on house loan repayments (promise no. 197). Paying some Lm1800 p.a. on such committed expenditure would give the mainstream couple a tax saving in the region of Lm 450 p.a. This is what they voted for.` Instead they are seeing again their real wages being eroded for the third consecutive year.
And to add insult to injury our mainstream couple are being told that this was a good budget and that the worst has passed. They shudder to think what it would be like when the Lm400 million hidden debt in the Treasury Clearance Fund and the dead bank loans of public enterprises which are still being serviced by the Government will have to be addressed. And when all public assets are sold and there is nothing left to generate the one-off revenues to keep the structural deficit from continuing to blow the national debt out of control.
And the mainstream couple can`t understand why the Minister continues to blame the 22 month Labour stint in government for all these economic ills when he has already had opportunity to present 8 budgets, 4 before and 4 after Labour`s tenure.` `What on earth can a short term government that orders a recruitment freeze do in 22 months that cannot be corrected in four budgets`
The Minister claims to be very optimistic about Malta`s future. Hope springs eternal. But with the economy effectively in reverse gear, the deficit obstinately unaddressed even though clearly expenditure has been under-estimated, assets being disposed of wholesale, tax reservoirs being sucked in and frittered away,` it sounds like the optimism of fools rather than the self-confidence` of experts.
Our mainstream couple take courage only from the fact that at best they have to endure only one more budget of senseless talk, figure manipulation, divisionary language and subtle but consistent assault on the standard of living of the middle class.
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