The carrot (and the stick) in the PN’s manifesto

The PN’s electoral programme is guided by the principle that the government’s main role in the economy should be that of rewarding socially and environmentally responsible behaviour.

A new yardstick known as Environment, Social and Corporate Governance (ESG) will be introduced and applied across the board.

In the words of former MP Claudio Grech, who penned the party’s manifesto following a year-long process of consultation with experts, the PN’s goal is that of creating “a fairer society which rewards good behaviour.”

In this way, the state will create a level playing field between businesses complying with onerous social and environmental targets when competing with those who don’t.

And while incentives to compliant businesses will act as the proverbial carrot, the denial of these benefits to non-compliant businesses will serve as the government’s stick providing the basis of a new social pact. 

Still the electoral programme is vague in establishing the criteria for ESG compliance as this task is delegated to the social partners represented in the Malta Council for Economic and Social Development.

The manifesto simply states that the ESG should have environmental criteria, including carbon neutrality and responsible land use; social criteria, which exclude precarious labour conditions; and governance criteria that include compliance to all fiscal obligations in an indication that tax evading business would be excluded from state incentives.

The manifesto also hints that accessibility and inclusion of the disabled will be one of the “main and compulsory” criteria in the ESG.

Businesses that respect these criteria would qualify for tax advantages like a proposed 15% tax rate on the first €500,000 of company profits which are reinvested in the company. Other benefits conditional on ESG compliance include the payment of 50% of wage costs for three years whenever a small family owned company employs an additional employee for a period of at least three years.

But while the PN is recognising that the country can no longer depend on competitiveness based on low wages and that the present minimum wage is inadequate, the electoral programme falls short on proposing a mandatory increase in the minimum wage or a mandatory living income as requested by anti-poverty activists.  

Instead, it suggests that in line with the ESG mechanism, fiscal incentives should be made conditional on employers paying a living income - the amount of money required by a family to live a decent life. But this amount will only be determined following an agreement with the social partners.

While prioritising the idea of a “living income”, the PN is also committed to pay a full “minimum wage” to all those who lose their jobs for the period of a year.

This measure which comes close to the introducing a national basic income, is described as a measure aimed at helping these people get the necessary training to find a decent job. 

The PN also aims to use ESG criteria to discourage precarious employment conditions.  Significantly this is coupled with a commitment to outlaw zero hour contracts.

The question is, will the incentives offered be enough to encourage businesses to change their behaviour and will the system be fool proof from abuse.  

Incentives for ESG compliant companies with an income of less than €5 million will not have to present annual audited statements and will be able to present company accounts.  ESG compliance will also be rewarded with tax exemptions on company mergers. Compliant companies will also be eligible to funding form an Economic Transformation fund. And while a PN government is committed to purchase 25% of its needs from micro businesses, only ESG certified companies will be eligible.

Moreover, even incentives to first time buyers including a subsidy on 50% of the interest due, will be conditional on buying an ESG compliant property.

On the civil liberties front, the manifesto appears to suggest a truce by leaving unchanged the laws introduced over the past nine years but stops short of proposing any changes in this sphere.

As acknowledged by Claudio Grech, the manifesto is based on a recognition that the PN is home to divergent ideologies with regards the role of the state in the economy and civil liberties but who concur on the need to defend the common good while giving everyone the opportunity to fulfil his or her potential.

The PN manifesto has more than 500 proposals. The following are some of the highlights:

• Income tax changes

The highest income tax rate for those earning between €60,001 and €80,000 will drop to 25%. However, tax credits will be given to earners in other income brackets: those earning €20,000 or less will receive a 10% tax credit; those earning between €20,000 and €40,000 will get a 5% credit and those earning between €40,000 and €60,000 will receive a credit of 3%.

• Reduced tax on companies

The tax rate for companies that conform to ESG criteria will drop to 15% on the first €500,000 in profits that are reinvested in the company.

• Living income

Introduce a living income that would ensure a family can live decently. The mechanism would have to be agreed with the social partners. The living income will be used as the basis for work-related policies.

• Minimum wage for unemployed

A person who ends up jobless will be paid an unemployment benefit equivalent to the minimum wage for the first 12 months to encourage them to get training and find a job that pays well.

• €1,000 baby grant

Parents will receive a one-off €1,000 grant for every baby born and this measure will apply retroactively for every child born from 1 January 2017.

• Higher Children’s Allowance

The basic Children’s Allowance rate will increase by €150. Families with income less than €12,000 will see the allowance increase by €250. The disability allowance for children will go up by €1,000 and the foster carer allowance will also increase by €1,500.

• Mass transport

Introduce a trackless tram that uses a reserved lane, passing through arterial and distributor roads. The system can be introduced in a few months and will contribute to cleaner air since more people will use their car to travel around.

• ODZ land

Every year, 50,000sq.m of public land will be added to ODZ areas.

• House deposit

Young couples unable to put up the 10% deposit to buy their home will be given a loan up to a maximum of €20,000 that can be paid back over 30 years.

• First-time buyers

All current incentives for first-time buyers will become permanent with the capping for the non-payment of stamp duty going up to €400,000.

• Elderly selling house

Elderly people who sell their house to go and live in a smaller property will not pay stamp duty on the first €300,000 of the value as long as they go and live in the new house within six months from the contract.

• Subsidy on loan interest

Young people under 35, who are buying their first house will receive a subsidy that covers up to 2% of the interest on loans up to €250,000. All other buyers will be able to deduct the value of the interest on their loan from their taxable income for the purchase of a property worth up to €350,000.

• VAT refund for climate-friendly home improvements

House owners will receive a VAT refund of up to €5,000 on any home improvements that address climate neutrality and cut energy consumption. The maximum reimbursement will increase to €8,000 for families that have a pensioner or a person with disability living with them.

• End the Steward hospitals deal

The privatisation agreement with Steward Healthcare will be stopped and the money saved will be invested, through Malita plc, in a series of long-term projects in the health sector.

• Free doctor service for elderly

All pensioners will benefit from a free doctor service and a number of hours of treatment at home.

• New mental health hospital

Mount Carmel will close down and a new mental health hospital to treat acute cases that will be built in the vicinity of Mater Dei Hospital.

• Ħal Far race track

The project will be implemented and government will give its support throughout the planning process and development stage

• 5% tax for athletes, coaches, artists

Athletes, coaches and artists will be taxed at 5% on the first €80,000 of income.

• €1 billion fund

An economic transformation fund to the tune of €1 billion will be set up to encourage the creation of 10 new economic sectors. 70% of the fund will be guaranteed by the State and will ask people to invest in it. The rest of the fund will come from domestic and EU institutions.

• Fixed election date

The date of the election will be fixed at law with the exception when government loses a vote of confidence.

• Young to get €500 travel voucher

Young people between 16 and 21 will receive a €500 voucher to travel abroad for sports and cultural activities.

• Student grants increase

Students’ maintenance grants will increase by 25%.