‘A quality country’ is the theme adopted for Budget 2025 and a good number of measures announced by the finance minister last night are aimed at improving citizens’ lives. Of course, there are other things, beyond money, that ensure a higher standard of living. But we did not hear much about that.
Apart from the annual cost-of-living adjustment, the biggest story of Budget 2025 are the tax cuts benefitting practically everybody, costing the exchequer €140 million.
The average family should see its financial situation improve by circa €1,800 a year, considering the tax cuts and higher children’s allowances. As a result of the new tax bands, 18,000 present taxpayers will no longer be paying anything.
Pensions are also being raised and action is being taken to address the private pensions issue. Employees in the private sector are free to make their own choice but the government has opted to lead by example by introducing a private pension scheme for all civil servants.
Hopefully, private employers will see the logic of this move and consider it also as an investment in its workers, just like training.
The bottom line is the money families will have as a result of the budget measures will serve to further fuel the economy, with the positive ripple effects this should have on the country. The government is estimating that something to the tune of €550 million is being injected in people’s pockets.
Such a generous budget is, of course, mainly possible because of Malta’s strong economy. This is no mean feat given the fact that Malta’s economy is so prone to external factors, which are beyond its control.
GDP growth says a lot about how the economy is performing but one must look at the bigger picture
GDP growth in real terms is projected to hit 4.9 per cent this year, well above the EU average. Inflation is expected to drop to two per cent, provided the international situation does not worsen.
Economic growth, more efficient tax collection efforts and better control of government expenditure, even if capital spending remains unchanged, enables the government to come up with such a budget.
But there is a downside too. GDP growth says a lot about how the economy is performing but one must look at the bigger picture to contain the remarkable disgruntlement on the ground.
We did not hear budgetary incentives to ensure a healthy environment, to rein in an unbridled construction frenzy or take bold decisions to address in an effective manner congested roads.
Initiatives to improve an education system that is increasingly failing to guarantee the talent and skills in this country are thin on the ground or altogether overlooked in Budget 2025. We did not hear about any budgetary incentives to reduce the bloated public sector and, in so doing, redistribute workers to deal with the overpopulation issue. Instead, we heard about “plans” and yet more “reports” and “masterplans”, rhetoric which is often best forgotten.
In Sunday’s editorial, we said we hoped the budget would commit to protecting the little environment we have left and impose a high cost on those bent on exploiting it for money.
We said the government can – and should – use fiscal policy to place the necessary brakes on harmful economic activities. Tax policy is not just about generating revenue; it can be used as a tool to encourage or discourage particular behaviour. Unfortunately, we saw no such measures introduced. Which means the government effectively keeps throwing money at growing problems.
Spending power does make for happy families but quality living entails more than money in one’s pocket. It is commendable spending money to meet present-day needs but not if we keep pretending tomorrow never comes.