Thriving economic sectors like financial services, construction, and tourism will be expected to “compensate” for the extra funds the government will be dedicating to pensioners and the housing sector, the finance minister said on Tuesday.
Edward Scicluna was speaking during a presentation to Cabinet on the forthcoming 2020 Budget scheduled for October 14.
The Cabinet meeting was held at the Social Care Standards Authority in Santa Venera. The media was allowed to follow the first part of the meeting.
Prof. Scicluna was tight-lipped on the Budget measures but said the government’s main priority would be to “not overspend”. This approach would ensure another surplus in the government’s finances.
He said that the Budget measures would focus mainly on housing and pensioners.
The government will be “compensating” for the expected increase in expenditure through “cost recovery” measures in economic sectors doing very strongly, he said.
“This will not be done in one year but over a period of three to five years,” he said.
In the case of financial services, he said operators would be expected to give their share for the implementation of various recommendations made in recent weeks to strengthen institutions regulating this sector.
“The government is taking these recommendations very seriously,” he said.
The Finance Minister also referred to the tourism industry, hinting that the bed tax introduced a few years ago could be reviewed. He noted that when this tax was introduced there had been objections, but in the long term it did not have a negative impact on the sector.
Prof. Scicluna referred to the construction industry saying there were plans for “cost recovery measures” in relation to expenditure for the disposal of construction waste.
“Failure to implement such measures will mean that the government will not have the resources to support those in need,” the finance minister said.
In his presentation, Prof. Scicluna outlined various incentives and structural reforms enacted since 2013 when Labour was elected to government, saying that the overall effect was record economic growth and employment, and a significant drop in poverty, with those at risk now accounting to 19 per cent of the population.
Taking a dig at government’s critics, he described claims that credit rating agencies were being bribed to give a positive outlook on the island, as absurd. These agencies did not hesitate to downgrade their rating of an economic giant like the United States, he observed.
Asked by the media to give further details on these cost recovery measures the Prime Minister referred to past reforms in excise duty on certain products like cement, reinforced steel and the tourism bed tax.
These changes were meant to shift the emphasis of taxation from middle-class employees to other sectors, Joseph Muscat said at the end of the Cabinet meeting.
Dr Muscat also referred to the spike in the international price of oil following the bombing of oil production facilities in Saudi Arabia.
He said that thanks to the government's decision to convert the power stations to use gas, the government was not considering any increase to the price of electricity.
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