The government’s recently announced €70 million cash grant of €100 and €200 cheques to students, workers and pensioners came under heavy criticism from the independent media. Finance Minister Clyde Caruana justified the handout by saying that the government’s projected deficit for 2021 will be lower than expected. Let us fact-check this statement.
In the 2021 budget, the government projected a deficit of €756 million. Ten months later, Caruana admitted that his ministry’s projections were way off. The deficit was revised upwards to €1.5 billion, double that initially projected. Caruana is now informing us that he has yet another deficit projection. It seems that the deficit will be in the region of €1.1 billion, halfway between the original and revised deficit projections.
According to the minister of finance, this ‘saving’ funded the cash handout. Caruana’s logic makes no accounting sense. The government is not saving. It is still operating at a loss and a significant one. Any company or household operating at a loss looks at reducing, not increasing, its costs.
Some might argue that there is a social justification for a cash grant. People are feeling the pinch of the increase in the cost of living. I fully understand the pain of those facing the pressure of rising prices.
It is a concern for lower-income earners and several businesses, particularly small- and medium-sized businesses. And, yes, I do subscribe to the view that the hike in prices merits intervention by the government.
However, the government’s cash handout is too little too late. The government could have done much more had it not been wasteful with public finances over the past nine years. Hundreds of millions of euros are being squandered in the Vitals, Electrogas and related deals. The auditor-general has issued a string of reports condemning the government’s lack of regard for value for money in the award of public contracts, particularly direct orders awarded to companies close to the party in government.
Not to mention the ballooning public service, extravagant salaries being paid to hundreds of persons of trust or close to the trust of certain ministers. The question has to be asked. How much more would have been available to help those in need had the government been more careful with the taxpayers’ money?
Even if the recently announced €70 million cash grant was justifiable from an accounting or social point of view, it is still morally questionable for any government to conduct a vote-buying exercise on the eve of a general election. I should assume that the government carried out a cost-benefit analysis comparing this initiative to giving more assistance to lower-income families or an incentive package to companies that are worst hit by the price increase.
It is morally questionable for any government to conduct a vote-buying exercise on the eve of a general election- Mario de Marco
Can Caruana publish this cost-benefit analysis or say what other options were considered and evaluated? Or was this route taken simply because it was the one that gave the best party-political return? If the latter is the case, we have a vote-buying exercise. Pure and simple.
But, then, this government was never one to worry about morals. It operated and continues to work with a total disregard for the basic principles of good governance. This is why Malta is blacklisted. Blacklisting, despite what the government is trying to portray publicly, carries significant ramifications. One such ramification is the lack of credibility around the negotiations table.
When our ministers sit around the negotiations table, they do so with a black mark hanging on their heads.
This point is very relevant in today’s scenario when Malta is trying to negotiate an extension to the introduction of the minimum corporate tax. The introduction of this tax could potentially impact upwards of 200 companies registered in Malta. The change in corporate tax rates could lead to these companies relocating away from Malta. These companies paid over €114 million in tax revenue to the government in 2019, which revenue we risk losing with the introduction of the minimum corporate tax regime. Such is the gravity of the situation.
The argument that we are not a tax haven was lost when it became public knowledge that Malta was the only EU country with a serving minister mentioned in the Panama Papers. To make things even worse, it then turned out that the offshore accounts of Konrad Mizzi were allegedly going to be used to launder illicit gains from public contracts.
Sadly, and unfairly, we are now considered by many as a rogue state. I say unfairly because I wholeheartedly believe that the absolute majority of practitioners in the financial services sector operate in full respect of the law. The actions of a few, aided by the Labour government, led to the ruining of our reputation.
The Labour government’s response to this sad and tragic situation, which it brought upon itself and our country, is to hand out cash and buy votes.
The Labour Party in government proved incapable of providing an economic vision in 2013 and 2018, preferring instead to base its campaigns on handouts in the forms of rebates and public sector jobs. That same tactic is being deployed again as the prospect of the election draws near. If Labour wins, Malta loses.
Mario de Marco, PN spokesperson on finance