A populist budget

Calling the budget for 2024 a ‘socialist’ one, as the Minister of Finance actually did, shows beyond doubt that the current Labour administration does not seem to have an inkling on what socialism implies.

Contrary to what Minister Clyde Caruana seems to think, socialism does not simply mean helping the struggling sector of the population, those who cannot make ends meet or are on the verge of a personal pecuniary deficit. Just introducing needed social measures is hardly socialism in practice.

This was more of a ‘populist’ budget, in the sense that it tries to champion the common person, combining both left-wing and right-wing elements to achieve this. As the Prime Minister was reported saying this is ‘a budget drawn up by the people for the people’. The big majority of the men (and women) in the street do not understand the basic notions of economics and are concerned with the here and now (which means cheques in the post) and not with long term prospects, let alone visions. Hence next year’s ‘populist’ budget!

The more important aspect of the budget is that it confirms the actual economic direction of the country with no attempt whatsoever to tweak it, let alone reform it, by seeking a new economic model.

In his speech, Caruana pointed out that the debt-to-GDP ratio (the national debt as a percentage of the GDP) will remain under the EU’s 60% cap; but this ratio is bound to rise from an expected 52.8% at the end of 2023 to some 56.9% by 2026. At the same time, the national debt is expected to rise to some €13 billion by that year. Therefore, the projected increase in our debt will be at a faster rate than the projected increase in the GDP ratio.

What this means in practical terms, is that Malta’s economy will keep moving ahead in the same way it has progressed during the last few years: on the back of foreigners working in Malta. Mathematically, this means that the number of foreigners working in Malta is bound to increase. But, of course, in his speech, the minister did not explain or refer to this inevitable prospect!

The budget speech suggests that the current administration just wants to keep the population at large ‘happy’, rather than seriously think of the country’s future by announcing measures aimed at being policy tools. In this sense, it looks at the present and ignores completely the future. No wonder that some have dubbed this budget as visionless. It does seem that the government’s popularity in the polls was considered more important than the country’s long term prospects.

The government subsidy to keep prices of fuel and electricity will not be touched. This is costing the state over €350 million annually. Subsidising everybody’s fuel and electricity, irrespective of income, is hardly a socialist measure! Is this to remain a permanent feature of government expenditure? What many think is a necessary curtailment of this expenditure is obviously being postponed for after the general election in some three years’ time! What happens then when the new administration, irrespective of its political hue, will start looking at its tenure in power with this pre-determined heavy burden on its finances?

Many already announced projects have been ignored and left out with no money being provided for them.

In fact, most constituted bodies reacted negatively to the budget. The government’s plans for education, health and the environment seem simply to mean ‘as we were’. There are no plans for Artificial Intelligence (AI) to feature in our educational system, which is bereft of any new ideas. The projected new Gozo hospital and the new mental health hospital have disappeared into thin air. The problem with waste collection was ignored. So was the problem with the ever-increasing traffic facing the ever-increasing road works!

The government ignored its own promises to adjust salaries in the public sector leading to the Forum Unions Maltin to claim that it had betrayed the workers in this sector.

There seems to be no money for anything except to give away in social services and benefits.

Meanwhile, many state-owned bodies keep their spending at the level they decide, budget or no budget. The Finance Minister confirmed that the Film Commission this year has spent more than €10 million over its projected budget. Many of these state-owned commissions, agencies, companies – or whatever – do not seem to work within the constraints of a predetermined budget and the Ministry of Finance seems to have lost its clout to control them.

Sant’s wise words

In his column in The Malta Independent last Monday – published before the budget was announced – Alfred Sant made some interesting points. He asked about whether we could possibly keep track of how social policy programmes launched by the government were being really effective since a big chunk of budgetary expenditures gets allocated to such programmes.

Sant was even more scathing about the fact that the administration ‘has increasingly gotten cluttered with agencies, companies, corporations, authorities and one does not know what else, all financed by the state budget. They give the appearance of being independent bodies but they are not. Their functions extend from the economy to social, cultural, regulatory, infrastructural and other sectors’.

He then continued: ‘Is a strategic and compact overview being maintained over these institutions, not least by way of their expenditures and obligations they assume? The budget statements and the documents attached to it do not provide sufficient information by which to acquire a global and detailed picture of how monies allocated to them are being spent and the results they have achieved.

‘One would hope though that this kind of overview is regularly conducted every year. For there always comes the moment when a government, any government, must decide that it needs to change the thrust of how ‘its’ financial resources are being spent. For this to be done meaningfully, it needs to have a clear picture of how, why and where funds are being spent and of where they are achieving results, where not.’

I must confess that before I read this piece, I have never found myself being totally in agreement with Alfred Sant!