Middle class Malta will be watching

When Clyde Caruana stands up to read the budget speech tomorrow many will be waiting for that part where he explains how income tax bands will be amended.

Taxpayers will want to know how much money will be left in their pockets next year when the changes come into force.

And with the Prime Minister having described the promised tax cut as “historic”, expectations among middle income earners are high.

We are not privy to the changes the Finance Minister will announce but a tax cut of significant proportion cannot come too soon.

Certain sections of the middle class that experienced temporary wage cuts or were dependent on the wage supplement during the COVID years, witnessed an erosion of savings in a bid to maintain the same standard of living. In the aftermath of the pandemic, persistently high inflation ate away at disposable income. This robbed middle income earners of the peace of mind they were expecting after exiting the pandemic.

Undoubtedly, the very generous subsidies on fuel, energy, grains and cereals, helped cushion the blow. Indeed, Maltese consumers continued to pay stable prices for petrol, diesel and electricity bills.

But there was a creeping feeling that the post-2013 feel good factor had long vanished among the middle class. Erosion of incomes was not the only contributing factor for this phenomenon. Multiple corruption cases, which exposed the disconnect between those close to the ruling clique and the rest, have left a sour taste that culminated when the full extent of the Vitals hospitals fraud became apparent earlier this year.

Corruption is a strange phenomenon – it does not help parties in Opposition to gain much ground and will affect government negatively when everything else starts going bad. At a time when middle income earners have been feeling the strain on their pockets and seeing their lifestyles being challenged, the Vitals case left a disproportionate impact on a weary electorate. The government has failed to acknowledge this and it does so at its peril.

An income tax cut will not solve all the ills associated with an electorate that is exasperated with Robert Abela’s government but it will go a substantial way in alleviating the financial pressures the middle class has been enduring. It will be a reprieve.

Another aspect the budget should address is better support for families with children. This should translate into meaningful assistance for today’s parents and guardians and serve as an encouragement for prospective parents to start their family. Child rearing should not automatically translate into a financial burden and yet, for many, it is.

Nonetheless, from an economic aspect, each measure Caruana will be announcing on Monday should serve a purpose. Steering the economy into new waters will not happen overnight but the building blocks have to be laid down in the budget.

This leader hopes that a plan starts being laid out to slowly ease the country off its dependency on fuel and energy subsidies. The country has so far been able to afford these subsidies and undoubtedly, they have helped to support families and businesses by providing stability at a relatively low price. But the indiscriminate nature with no timeframe for their end creates wasteful attitudes and promotes dependency that can stifle the yearning to seek sustainable solutions.

Concurrently, we hope the budget also lays down concrete financial commitments for floating offshore wind and solar energy projects, and battery farms, which are needed to diversify the island’s energy mix. On alternative energy, the Energy Ministry must move beyond the study phase towards project development. Domestic alternative energy sources could be one way of keeping electricity prices down.

Similarly, the health sector urgently requires significant investment in infrastructure but any budget commitments must be based on project plans that have starting and end target dates. The Health Ministry cannot continue to shuffle its way through. Plans that have been announced must be accompanied with identifiable milestones, otherwise they will only be smoke and mirrors.

Energy and health are two areas of national concern as are education, good governance and the rule of law. Middle class Malta will be assessing this government’s performance in these areas and making its deliberations in silence.

Caruana’s speech tomorrow is unlikely to represent some Damascene moment but it could lay out the direction government intends to take in the coming years. We only hope that promises made will be kept and projects identified will be delivered.