When political parties try to sell a world of make-believe, they risk losing credibility with a large section of the electorate that understands the economic challenges the country faces now and in the future. 

As the election campaign gathers pace, it is becoming increasingly evident that the marketing strategy of the main political parties is based on glossing over the economic challenges that will confront the country in the next five years. But there is no space to dodge fiscal realities.

The potpourri of tax concessions promised by the Labour and Nationalist parties keeps getting more colourful.

The PL, for instance, is promising taxpayers that they will see the non-taxable portion of their income increase by €1,700. The PN promises to reduce VAT for catering establishments.

The PL is envisaging the excavation of several tunnels in urban zones to make way for greener areas on top. It has yet to unveil its electoral programme, which could well promise other major infrastructural projects.

The PN wants to introduce a tram system that would put substantial pressure on public finances even if requiring lower capital expenditure than the PL-backed metro. The PN also intends to invest in a new 400-bed general hospital in Gozo.

Of course, all these investment pledges and tax-cutting would make people’s lives better. However, the country’s economic challenges cannot be resolved by increasing public expenditure and reducing taxation at the same time.

Like most other democratic countries, Malta needs to decide whether it wants to adopt a lower tax and lower public investment strategy or more investment in the social, human and physical infrastructure that would need to be financed partly by economic growth and partly by increased taxation.

In a post-COVID world, many economists agree that the role of government in the economy needs to be beefed up to ensure that countries improve their health and social services, renew the physical infrastructure and invest in the green economy.

All this investment comes at a considerable cost. It is naive to argue that such investment can be financed through economic growth alone.

Trade-offs between fiscal and economic growth priorities need to ensure that investment is financed sustainably partly through taxation and partly through growth.

Both the PL and the PN will claim that their electoral promises have been costed and that they have a sound strategy to balance the public books.

However, they need to be honest with the people and give details about how the substantial investment needed in the health, education, environmental and social sectors will be financed.

This year, the EU will be revising its Stability and Growth Pact criteria to ensure that the promised stimulus for sustainable economic growth will give the desired results.

Fiscal rules tied to national budgetary processes may be made more flexible.

Still, it would be naive to expect the European Commission to approve budgets built on the assumption of tax cuts and increased public expenditure.

Political parties must not neglect the opportunity to take the public into their confidence by describing the main challenges facing the country in the coming decade and beyond.

Electoral campaigns should be more than a marketing exercise to peddle freebies in the form of tax concessions.

So far, what the political parties are trying to sell verges on fantasy.

They need to shift gear and provide more substance to their political narratives. What they stand to gain by doing so is more trust from the electorate.

Ultimately, there is no place to hide from fiscal realities.

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