The ASCS calendar would not be complete without an investigation into the annual national budget. For the seventh successive year, the organisation provides a summary of the most influential policies put forward, both from the student’s perspective, and the economy as a whole.
First and foremost, it is imperative that one understands the context that such policies are being presented. The new decade has proffered two massive tremors in such a short time. The pandemic and the war have left devastating effects on major industries and supply chains. Needless to say, Malta’s alternative fate would have been disastrous had the government not intervened to counter these adverse conditions. And, unlike highly indebted countries such as Italy, there was sufficient prudence practised with respect to the national finances during the booming years to make the interventions feasible. The proof is in the pudding.
Within a few short years, a debt-to-GDP ratio of 40% in 2019 has been projected to be reaching the 60% mark by the end of this year. 60% is a special figure, as one may recall that the fiscal rules of the EU’s Stability and Growth Pact (SGP) prescribe a ceiling of this percentage.
As to whether all the expenditure that took place was justifiable or necessary is a different story. In response to the unprecedented crises that befell Europe, the European Commission felt it necessary to extend countries’ ability to temporarily withdraw from the strict prescriptions of the SGP, in the short run. Be that as it may, sufficient scrutiny needs to be paid so as not to slip into a fiscally unsustainable situation.
Without further ado, these are the main highlights of this year’s annual budget:
Taming the Lion – Measures related to Inflation
Recognising the potential threat that untreated run-away inflation would have, measures have been taken both to suppress this freshly awakened lion, and simultaneously aid the most vulnerable in society. The Cost Of Living Adjustment (COLA) was revised to €9.90 per week. This had already been anticipated weeks ago, with the Finance Minister has already admitted it would be between €9 and €10 from much before. This comes to some €500 annually which should be merited in the current economic environment. The government’s intervention in the halting of food and energy inflation will amount to €600 million.
ASCS is happy to hear that pensioners will be receiving an annual increase of €650, inclusive of the COLA, given that this group is amongst the most vulnerable to falling into the poverty trap. Students should note that their stipends will be rising proportionally to the COLA.
The organisation thinks that this year’s inflation adjustment is a fair balance between the interests of employers and employees. Without adequate intervention in the energy sector, Dr Caruana has suggested that the adjustment would have been a ludicrous €25, an amount which would surely create further imbalances, possibly leading to a vicious wage-price spiral.
The Socialist Heart – Measures targeting specific groups
Individuals that had lost their spouses while still at working age would not have benefitted from short-term benefits such as unemployment benefits because they would be earning the widower/widow’s pension. This will no longer be the case, a measure which ASCS reflects is just.
The organisation is also pleased to find that mental health is being given a certain level of significance in the budget. As is common knowledge, persons become eligible for a good pension upon settlement of forty-one years of national insurance, assuming one is born from 1969 onwards. Alas, work may not always be an option for everyone, especially those of us who face mental health challenges. As of the coming year, two years of NI credit would be provided to youths who would be unable to work for a period of time between 18 and 30 years of age if they receive regular psychiatric care from a state or former-state consultant.
One would still be eligible for a periodic allowance from the state if they have not satisfied the usual conditions for a pension. The bonus for those who paid less than five years’ worth experienced an increase in their bonus to €450, and to €550 if the years of contributions lie between five and ten years.
The children’s allowance went up by €90 for every child. This is set to rise by an aggregate of €450 by the end of the current electoral legislature, should government maintain this promise. One should expect, therefore, that the same increment will be experienced in each successive budget. Additional good news for adoptive parents who previously fostered; the foster’s allowance would not be immediately halted at the point of adoption anymore. Instead, it will gradually decrease over four years.
A Roof over One’s Head – Measures related to real-estate
First-time buyers will be delighted to hear that, for a property bought after 1st January 2022, the government will allocate €10,000 grant over a span of 10 years, given that the property value does not exceed half a million euros. The Deposit Payment Scheme, which allows the loaning out with no interest of the 10% deposit required when purchasing property, for those who are able to obtain a bank loan but unable to save up the deposit, will now be capped at a property value of €225,000 instead of €175,000.
The property market has been ruthless, especially hostile towards third-country nationals. ASCS is concerned that, should population growth rates return to pre-Covid times, which often involves the importation of foreign workers to make up for local labour supply-side shortages, an incremental disparity in quality of life would emerge between the upper and the lower strata of society. Hence, the organisation urges more planning in housing aspects, whilst not forgetting obligations towards sustainability.
A Moment of Silence – Infrastructure
An increasingly worrying set of statistics deal with the state of road infrastructure on the islands. The Budget regards it as “a crucial factor in strengthening economic competitiveness” and lists the numerous projects serving to keep up with worsening traffic, often a cause for tardiness, stress, and anxiety. Certainly, some areas have observed faster traffic flows. But equally true is the tragic passing of yet another victim on Maltese roads. A total of twenty-two mortalities occurred in 2022 from road accidents. Economically motivated policies and projects cannot come at the price of the safety of our citizens.
Public transport has now become free as had been announced in the previous year’s budget, but ASCS has noticed scarcity in the promotion of alternative road vessels, such as bicycles and scooters. In addition to decreasing the traffic pressure, policies which increase the safety of their use would also help from an environmental aspect. A drive around the islands is enough proof that there is a lack of bike lanes. Indeed, Malta has a relatively flat landscape, making this option attractive and feasible.
A chance at sensible and conscious development – Gozo
Many hope that Gozo would maintain its less noisy character. At the same time, development is inevitable. Perhaps, one should therefore aim to strike a balance between the two. To this end, the budget has allocated €60 million under the Sustainable Urban Development scheme. It is imperative that these sums are used appropriately to avoid the emergence of a second Malta.
The main positive point that emerges from this budget is that the cooperation the country has pledged in sympathising with Ukraine through its sanctions against the Russian Federation has been complemented with adequate intervention in the economy. A variety of policies conscious of a wide range of social issues are characteristic of the government’s message.
Where it is lacking involves the seemingly immortal infrastructural and logistical issues that the country has always suffered from. The current economic slowdown should be used to reflect on the sustainability of the model of growth it currently adopts.
Written by: ASCS
The views expressed in this article are those of the author and are not reflective of ‘A Bird’s Eye View’ as a whole.
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