A social budget nonetheless | Michael Falzon

Until the world was hit by the coronavirus, most advanced economies, including Malta, were registering a relatively good GDP even if at the time, Malta’s 5% and 6% economic growth, was much better than others in the eurozone.

The ratio of public debt to productivity was also steadily going down, which in turn meant the country had more resources to plough back into strategic infrastructural projects, such as cheaper and cleaner energy, transport, education, health, and an array of other social programmes.

Social mobility was almost reaching all strata of society with full employment, and progressive housing schemes that made prospective home ownership, a reality. The supplementary income to low-income workers further led to thousands making significant improvement in their quality of life.

COVID-19 changed everything, as it not only wreaked havoc to all economies and systems, but changed the world forever. Practically overnight, supply chains were interrupted, causing serious delays and loss of productivity; international travel ground to a halt, social distancing was mandated, and all social events ceased. Schools were also closed and working arrangements changed drastically. Many around the world, but fortunately not in Malta, lost their jobs. This meant that Government had to change its governing formula, from one practically based on investment and development, to one based on supporting industry and safeguarding employment.

The wage supplement was introduced, aiding thousands of workers to secure the livelihood of their families. Persons in vulnerable situations such as the disabled and older persons, were protected by strict protocols. Industry was supported like never before. In addition, nothing was spared to shore up our health system and meet the unprecedented health challenge. COVID-18 indeed tested our resilience and agility to respond effectively but it did not find us wanting.

Our strategy was clear all along, that no matter what the crisis is, workers and those in vulnerable situations, shall always top our agenda. Therefore, while our governing formula changed to reflect the changing international scenario, we were always consistent in making sure that those in the lower strata of society would not fall behind. To make sure that these individuals are protected, we embedded this strategic direction in the EU recovery and resilience plan for Malta.

Proactive policies during the pandemic saw our economy pick up fast with a working population eager to return to work and follow where they had left off some two years earlier. Post-COVID we shifted to other policies for renewed economic growth, and investment in renewables to match the EU’s 2030 targets to reduce greenhouse gas emissions. We invested in human resources, encouraging more young people to take up higher diplomas and staying longer in the educational system. In-work benefits were increased to encourage people to return and remain in jobs; with EU funds from the European Green Deal, Malta is slowly but surely transitioning to a green economy – environmentally, socially and economically sustainable.

Unfortunately, the normality we had so longed for was short-lived. War in Ukraine shocked the whole continent – Government had to shift attention and resources to mitigate skyrocketing energy costs, grain exports from Ukraine were halted, food shortages and prices on the global markets spiked – inflation quickly followed suit, this soon becoming the major cause of economic instability, worldwide.

Once again, timely government reaction came with €400 million in energy cost subsidies for 2022, a consciously-made choice consistent with previous policies to minimise negative effects on the purchasing power of working people. The alternative was for low-income households to bear energy costs as high as 140% of current costs – never an option for this government.

Today there are new challenges that need to be acknowledged and addressed. Inflation tops the list at the moment, but it is not the only one. The urgent need to move faster in the transition to a sustainable economy, is a very close second. We need to adapt to a different governing recipe from the one we have had so far. Nevertheless, we shall remain consistent with our socialist convictions, that persons in vulnerable situations shall not carry the burden, neither of the current inflationary situation, nor the transition to a green economy. The emerging new scenario calls for support to groups in vulnerable situations, assistance to industry to shift as fast as is possible to digitalisation and mechanisation, as well as investment in renewables while accelerate foreign and local investment in green technologies.

Beyond all this, the priority for Government shall remain the safeguarding of the labour market and prudence in the administration of public finances and fiscal policy. We are convinced that protecting working people and creating the jobs of the future, will be key not only to economic success, but also to social well-being. In fact, despite the millions that shall go into the subsidies of utilities and commodities, the investment in capital projects shall be more or less at the same levels as in past years.

Michael Falzon is minister for social policy

To those who doubted that the current international turbulence shall in anyway deter us from standing firmly on the side of those mostly in need, may this track record guide their reflections.