Bernard Grech’s speech: A blueprint for an unlikely government

1. How can Bernard Grech promise so much when the country is passing through what PN billboards proclaim to be the “worst recession” and government finances are in such a dire state?

If elected Bernard Grech will inherit the finances left by a Labour administration. Grech’s promises would sound more realistic if he also acknowledges that the economy is doing well. But in his speech Grech questioned the sustainability of Labour’s financials by referring to “historical levels of unprecedented debt”.

He also criticised Labour for not even planning “to reduce or restrain” this debt. And while recognising that €1.5 billion had to be spent on the pandemic, he attributes another €1.3 billion of debt on “waste and bad governance”.

Grech’s assumption is that if he manages to cut the pork barrel there will be enough money to fund his promises. But while criticising government for basing its projections on a substantial increase in revenue from VAT over and above pre pandemic levels, the same Grech promises to slash VAT on restaurants to 7% and to exempt businesses earning a turnover of €60,000 from collecting and paying VAT.

Moreover his speech does not indicate a clear plan to reduce debt but includes un-costed promises, which would further deplete the public coffers, with their sustainability hinging on his promise to attract new economic sectors to fuel growth. On this aspect he vaguely hints at attracting internet giants like Google and Facebook in the same way as Malta attracted gaming companies during the Gonzi administration, without even saying what he would offer in return for attracting these predatory giants – with a dubious ethical track record on tax avoidance and data mining – to Malta.

And while Grech repeatedly referred to Malta’s greylisting, he expects this not to impact on his own ability to attract investment as if he possesses a magic wand to restore the country’s shattered reputation.

2. With his chance of winning being so slim, can he convince the electorate that he is actually in a position to implement his promises or is he promising the sun and moon while his sole aim remains that of reducing the gap to secure another chance in the election after the next?

Grech’s budget speech includes a number of imaginative proposals ranging from a €500 grant to young people spending a sojourn in another EU country to a free doctor of your choice for over-60s. He even promises a frontliners’ bonus and a “substantial increase” in teachers’ salaries. For sure it indicates a revival in the party’s role as a factory of new ideas. While this propositionary and generous approach dispels fears of an austerity-driven PN government reminiscent of Gonzi’s final years in government, it also hinges on the electorate’s belief that a PN government is actually electable and in a position to implement these promises.

For the greatest doubt Grech faces is the perception that the PN is promising the sun and moon simply because it knows that its best hope in the next election is to reduce the gap.

3. Why is he promising to implement his socially regressive tax cut for high-income earners in the first budget, while not taking the same commitment with regards to his living wage proposal?

As Lawrence Gonzi did before the 2008 election when he promised to widen the 25% tax bracket to those earning up to €60,000, Grech is now promising to widen it again to those earning up to €80,000, thus leaving €2,000 more in the pockets of a category which is not exactly in need of an income supplement.

As was he case in 2008, this proposal is aimed at a constituency which has traditionally supported the party but which may have become apathetic and possibly seduced by Labour’s aspirational discourse. It is also a category which benefitted the least from the budget, which was more targeted towards low-income earners.

But the socially regressive nature of this promise, which would see high-income earners pay less tax, flies in the face of Grech’s criticism of Abela for not being ‘socialist’ enough. In this sense the proposal highlights the PN’s ideological schizophrenia: that of trying to outflank Labour from the left while pandering to the vote of the more affluent segments of the population.

4. Truly this proposal must be seen as part of a package which also includes a vaguer proposal of a €1,000 living wage, it raises one important question: If the country’s finances are in such a bad state, how can a new PN government promise a tax cut for high-income earners in its first budget while forgetting more vulnerable categories?

This approach is reminiscent of Gonzi’s 2008 fiscal commitment, which was thwarted by the global financial crisis, and which was only implemented by the Muscat government in 2013. While Gonzi made the promise at the same time that he warned of “a storm brewing around us”, Grech is making this commitment while saying that the country’s finances are already in a bad state.

It should be noted that other measures like the living wage are subject to discussions with social partners and are not tied to a firm commitment of being introduced in the first budget. In this sense the proposal exposed the PN’s traditional bias for the upper-middle class on whose support it depends to sustain its majority in affluent districts.

The challenge for Abela is whether to rebut the PN’s proposal by affirming his party’s social democratic values, or whether to appropriate this measure for himself by promising something similar over a longer period of time.

5. Is the promise of delivering more goodies even the most compelling reason for voting PN this time round, or should Grech focus on a different style of governance?

The PN has been criticised for not addressing bread and butter issues by focusing on corruption.

In his speech Bernard Grech made a great effort to dispel this perception by proposing wide-ranging measures ranging from tax cuts for the high-income bracket to an increase in the minimum wage.

But is this a compelling reason to vote for the PN in a situation where most people are doing relatively well? Grech wants to convince us that a Nationalist government will do better then Labour in redistributing wealth fuelled by economic growth. For in the absence of any new tax revenue and with a commitment to reduce taxation, this means the overall vision is similar to Labour’s.

But it may well be the case that M.O.R. voters expect something different from the PN: the promise of a fairer society and greater transparency across the board, something which the PN can start delivering from the opposition if it emerges strengthened in the next election by reducing the gap.

Ultimately the most compelling reason to vote PN is not the promise of more goodies by a party which has a remote chance of winning power, but the Opposition’s ability to keep a likely Labour government on its heels for the next five years.

In this sense Grech should also focus on presenting new candidates who can regenerate the party and turn it into an electable force in the election after the next.

But to get there Grech first needs to decrease the gap and avoid a wipe-out. The question remains: can he achieve that by indulging in a spending contest with Labour or by presenting himself as the sober but trust worthy alternative? Or can he do both?