When facing challenges, it is often very easy to fall in the trap of focusing on them and losing sight of the bigger picture. In reacting to rising inflation, some governments took knee-jerk reactions, adopting austerity measures to reduce fiscal pressures.
In so doing, they put at risk short-term economic prospects, endangering their future prosperity in the process. Against this background, when economies need to quickly digitalise and become climate neutral, this tunnel vision presents the most dangerous risk the world is facing.
Our view and stance is diametrically opposed.
This is why in Budget 2023 we have expressly embarked on a completely different path. Strengthening public investment, we have announced the most ambitious programme of capital expenditure ever. More than €920 million in projects to build the infrastructure of the future, push the digitalisation of public services, investing more in renewable energy and creating more open and green spaces.
And while investing so much in our country’s future, we will be continuing to address today’s realities.
In Budget 2023, we have given the largest support ever to combat the effects of inflation. By keeping energy and fuel prices stable, we have halved the potential inflation rate faced by firms and families.
In the absence of this support, the average family would have needed to spend an additional €2,000 to continue with its normal life. Many businesses would have had to raise their prices further, losing competitiveness and having to shed employment.
Malta is the one of the few countries, probably in the world, where the government is taking on its shoulders the entire cost of the rise in energy and fuel prices. And we did not stop just there. In Budget 2023 we did not just enhance greatly existing social security benefits, we also introduced new rights, benefits, and services.
Pensioners will be benefitting from the largest benefit increases ever granted. Besides an increase of €12.50 per week, many of them will be benefitting from an additional adjustment to reflect the fact that inflation this year has been higher than the norm.
Next year we will start the process to invest €700 million in green and open spaces while finalising projects to greatly improve the quality of our air and water- Robert Abela
As a result, a couple on the minimum pension will end up with an increase of up to €20.50 per week, an income boost of nine per cent in just one year. A widow on the lowest pension will see an increase of €18 per week, an income boost of 10 per cent compared to this year.
In addition, families with young children will benefit from higher children’s allowances. Those who send their children to extracurricular activities will see tax credits rise to €300. Those with children in the first year of secondary school will be given a laptop.
Schemes to aid students of families with financial difficulties will be enhanced while these families will be getting a direct boost in income. A couple where both earn the minimum wage and have two children will each see an increase of more than €15.50 per week, an income boost of eight per cent on this year.
Furthermore, as promised in our manifesto, all first-time buyers who resort to a home loan to purchase their property will benefit from a grant of €10,000 spread over 10 years to help them with their loan repayments. A scheme that will be applicable to all who purchased their property from January 2022.
This will be over and above other schemes such as the first-time buyer scheme, the deposit guarantee scheme (which we are enhancing) and the grants to those purchasing vacant or UCA properties.
At the same time, we recognise that some groups require more tailored solutions. In Budget 2023, we also continue to address such needs. For example, parents who act as carers to children with disabilities will benefit from new tax credits and social security contribution credits. The carers grant will rise ninefold.
We will start providing personal assistants to persons with disabilities. Parents who adopt their foster children will not lose immediately the foster care allowance they were previously entitled to.
This social expenditure will complement capital investment to build the conditions for a new prosperity. Next year we will start the process to invest €700 million in green and open spaces while finalising projects that will greatly improve the quality of our air and our water.
In this vein, the government will allocate the largest sum ever on education, health, and social policy to ensure that all in our society can move forward.
All of this is being done in a sustainable way, as our debt ratio will remain below 60 per cent, remaining among the lowest in Europe, while our deficit will decline. Buoyed by fiscal support, our economic growth is projected to remain robust and unemployment will remain at historical lows. This is the certainty and stability that this administration can deliver.
Robert Abela is Prime Minister of Malta.