Fiscal budgets normally have two sections: one detailing the benefits introduced to hit a particular economic target, the other explaining how the costs of the benefits will be financed. As an old song says “you can’t have one without the other”.

The mini-budget was presented in the impressive setting of Fort St Elmo, the Great Siege military bulwark.

The government should be praised for launching a €900 million worth of fiscal incentives to help the Maltese economy recover from the aftereffects of the lockdown that saw thousands of businesses close their doors and income from tourism dry up.

The incentives are primarily aimed at reducing business costs and stimulating public consumption. Some incentives are meant to encourage the upgrading of the business infrastructure of enterprises through investment in modern equipment and technology. 

Understandably, the tourism sector is bound to benefit most from these incentives. Despite the prime minister’s reiterated prediction that foreign tourists will once again be flying into the island in encouraging numbers before the end of the year, realistically local hotels and restaurants need to exploit the domestic tourism market until general confidence in flying is regained.

Whether this aspect of consumer confidence will recover sufficiently by the end of September remains to be seen. If not, the October annual budget will have to introduce more rescue tactics to revive tourism in the winter months.

One class of people that seem to have been forgotten in this mini-budget is those who have already lost their jobs in the last few months, especially those on low wages. Some will undoubtedly be re-employed as business hopefully picks up. For the others, more support will be needed to spare them from poverty. The underwriting of junk bonds with taxpayers’ money may be a step too far as it encourages moral hazard. Admittedly this measure may save many thousands of retail investors from losing their capital, but it also fosters the disregard of risk assessment when making investment decisions.

Another area that the recovery mini-budget failed to address is the need for schools to adapt to implement the medical recommendations of social distancing when they reopen in September. It has been established that online tuition has not benefitted all children equally.

We would have liked to see budgetary measures to help boost the green economy and start exploiting the green jobs market, which remains almost non-existent in Malta. It would also have been good to see measures taken to reduce traffic, rather than incentivise people to go back to their old habits post-COVID. The second section of the mini-budget about the management of costs has still to be written. The prime minister reiterated that come October there will be no new taxes to cover the €900 million incentives bill. The economy minister repeated the hackneyed mantra that the financing of these costs will not be through increased taxation but though baking “a bigger economic cake”. The finance minister did not make any comments on the prospect of increasing tax.

There is nothing wrong in adopting a fiscal strategy of spending now and paying later at a time of crisis. But it is dangerous to make believe that the debt burden will disappear once the economic wheels start turning again.

This is a “money no problem” mindset. It is something Labour had challenged effectively when in opposition. But in the rush to turn the economic lead of the pandemic into the gold of revived prosperity, care must be taken not to risk the long-term well-being of this generation and the next.