The budget presented by the Government of Malta on 28 November 2012, just a few months before the general elections, included a number of positive measures. Overall the social partners’ response was very positive, especially about the adjustment in tax bands which would lead to a cut in income tax for many middle income earners. However, the General Workers’ Union was critical of the proposals, other unions voiced reservations, and the budget was defeated in parliament.
Final budget features
The Maltese Government presented its budget for 2013 on 28 November 2012. This was the final budget of this legislature because the Government’s five-year term of office is due to come to an end. The main features of the budget were a cut in tax rates for wage earners whose income was below €60,000, and a cost of living allowance (COLA) rise of €4.08 per week for all workers and pensioners. The rise was to account for inflation, measured by the rise in the Retail Price Index up to September 2012.
Employers’ reaction
Overall the reactions of the social partners were positive. The Director-General of the Malta Chamber of Commerce, Enterprise and Industry, Kevin Borg, called the budget realistic in the sense that it focused on fiscal consolidation and job creation. While welcoming the reduction in income tax, as this measure could enhance Malta’s competitiveness, he criticised wage increases which were pegged to the inflation rate rather than to productivity. He said this was contrary to what the Chamber had been consistently advocating.
The Director General of the Malta Employers’ Association (MEA), Joe Farrugia, said the sustainability of the revision in income tax bands was dependent on the ability of the government to adhere to its fiscal targets. He said it also depended on the economy showing positive growth, and the efficiency of expenditure in the coming years.
The President of the Chamber for Small and Medium-Sized Enterprises (GRTU), Paul Abela, was also very positive in his comments about the budget. He believed it strengthened private and public investments.
Union reaction
The General Workers’ Union (GWU) was disappointed as several of its initiatives were not included in the budget. Among GWU’s proposals were:
- the adjustment of COLA to be made every six months instead of every year;
- an increase in the statutory minimum wage;
- ensuring that pensions would not be less than 60% of the median wage;
- the reduction in utility (water and electricity) tariffs.
The union was particularly unhappy that instead of a reduction in water and electricity tariffs, the budget announced an increase in the price of fuel.
Josef Vella, Secretary General of the United Workers’ Union (UĦM), expressed his approval of the allocation of €70,000 for a committee to monitor the active labour market policy. This was one of his union’s proposals to the Government. But he was disappointed that the other UĦM proposal, to set up a public partnership scheme to provide childcare services, was not included..
FORUM, a loose confederation of 11 unions, expressed its satisfaction at the adjustment of tax bands, the special consideration given to the national airline Air Malta, and other measures for the improvement of social services. It expressed its disapproval of the increase in the price of fuel, and felt the Government should have introduced measures to tackle tax evasion.
Commentary
Being the last budget of this legislature before the general elections – due to be held on 9 March 2013 – the positive measures were anticipated and expected. The government is, however, insisting that the budget’s positive measures are the culmination of its sound economic policy rather than a promotional exercise to win votes.
The opposition promised that, if elected to government, it would implement the positive measures announced in the budget.
It has to be pointed out that the government was aware of the distinct possibility that this budget would not be approved by the Parliament of Malta. One of its own backbenchers had already said he would vote against the budget, depriving the ruling party of its one seat majority.
In the end, the budget was not approved by Parliament. It was agreed, however, that the measures to do with COLA should come into force.
Saviour Rizzo, Centre for Labour Studies