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8 OPINION W e have just assisted in the publication of next year's budget which – as always – drew mixed reactions from various sectors. In his pre-budget comments perit David Xuereb, president of the Chamber of Commerce, said that this exercise could not be a one-year budget but had to present longer-term solutions and measures. "We want government to be courageous and to think of the medium and long term, lest we end up looking back in regret at this budget as a missed op- portunity to plan ahead," he said. "e 2021 budget needs to be a particularly formative budget, which will determine the country's future during and after this pandemic". He also told BusinessToday that the manufacturing indus- try, which is already having to deal with vastly reduced orders due to the COVID-19 pandemic, could suffer irrep- arable damage and losses if many more workers end up in preventive quarantine. Malta's largest union, the General Workers Union, said it was pleased with Budget 2021 and has praised the govern- ment for combining "economic caution and fiscal discipline". e GWU thinks that the country must be ready for the economic growth that is ex- pected in the coming years, not just when the world finds a COVID-19 vaccine but also as a result of the economic stim- ulus the government has intro- duced over these past months. e Malta Hotels and Res- taurants Association said it values the government's strong focus on social initiatives in this budget as this will inspire a feel-good factor across all so- ciety, in difficult times for all. Bernard Grech, leader of the opposition, said he was disap- pointed to hear nothing about electricity and water tariffs or about how to help "the 83,000 people at big risk of poverty". "We heard nothing about a holistic plan to help local busi- nesses and we heard nothing about Gozo," he said. Finally, he lamented the fact that this budget planned for today but forgot about tomorrow. One may comment that the 2021 budget has been vastly impacted by the sudden wave of the pandemic which has decimated one of the pillars of the economy: the hospital- ity sector. Last year the island benefitted from a record num- ber of visitors (including about one million day-visitors on cruise liners). is industry helped im- mensely to generate mass do- mestic demand but due to the lockdown has resulted in a drop of 12% in exports. is is a massive drain on the GDP growth which previously created a feelgood factor and resulted in full employment not least due to a runaway building sector that saw mega developments surge all over the island. e unprecedented wave of economic destruction that the pandemic has converted a 0.5% of GDP surplus in 2019 to a whopping 9.8% deficit (al- most €1,200 million). is monumental deficit has never hit the island so harsh- ly not even in the peak of the 2007/8 world economic crises and it peaks at a time when the number of COVID-19 cases have been climbing at an un- precedented rate. e cost of monitoring the virus is added to the stress in- flicted on workers in the pri- vate sector who have been in constant fear of being made redundant. e stark fact that almost 100,000 workers rely on the government-extended furlough scheme is no joke and must have stressed the finance minister to propose a stable budget which as its main pre- rogative was the improvement in welfare benefits with special emphasis to help workers in the low-income scale and pen- sioners. e fact is that government has not touched the working conditions of its own employ- ees (almost 44,000) at a time when it has seen its own tax revenue dwindle during the onset of the pandemic. e drop in tax revenue has also been a Damocles sword over its head that must have shaken the resolve of any fi- nance minister seeing that our deficit has exploded and may take a number of years to re- gain the surplus to be able to repay the deficit (9.8% of GDP – approx. €1,200 million) this year pushing upwards national debt of 58% of GDP. One cannot but praise the stamina of the finance min- ister not to resort to impose extra taxes or new austerity measures but instead paving the way for more wage sup- plements – now extended to March 2021 (costing €40 mil- lion monthly). One may be ex- cused in describing this is as a generous (aka election) budget that wants to boost domestic consumption and maintain employment at a sustainable rate of 4.1%. e uniqueness of this budget is exemplified by the granting of a €5 increase week- ly for about 93,000 pensioners, and other measures such as improved child allowances and a welcome grant of a one-time cash gift of €350 to elderly reaching the age of 75years. Small traders with total reve- nue of under €30,000 will now become vat exempt. e ex- tension of a relief of stamp du- ties on property purchases in- troduced for first time buyers and a novel idea to reduce do- nation tax within family mem- bers of up to €250,000 exempt with a 3.5% tax rate thereafter. A welcome announcement is the building of 1,200 new social housing units over a number of years. A remarkable €450 million will be invested over a seven-year span to build an extended Life Sciences cen- tre, improvement of industrial estates, a new Kordin business centre and a venture capital fund for start-ups (previously a Cinderella concept). is is a redistributive budget with the repeat of an issue of another tranche of free vouch- ers to spurn a higher domestic consumption – now extended to be cashed at shops and not exclusively on hotels and res- taurants. e budget, as previously an- nounced, included provisions for more free medicines espe- cially for cancer treatment and a new St Michael Centre for palliative care in tandem with Hospice Movement. It also in- cluded a social scheme to add more beds for the elderly, in- cluding with joint investment from private sector. is will help in special cases of demen- tia sufferers, adding tele-care improvements and other spe- cialist medical services. It goes without saying that the island has no mineral assets and therefore it has to contin- ue to improve the educational levels of its workforce. e main trust of budget propos- als is to strengthen vocational learning and the containment of the high numbers of early school leavers. Free internet is to be offered to students who choose to continue studying beyond secondary level. In conclusion, the budget is a pivotal one coming at a time when the country finds itself at a crossroad. It needs to assure investors that the government is serious in creating a level playing field and reducing un- certainty. Only thus can new initiatives be taken by the private sector to rebuild a new horizon with an accent on digital and the green sector that will usher in a new dawn. George Mangion George Mangion is a senior partner of an audit and consultancy firm, and has over 25 years experience in accounting, taxation, financial and consultancy services. His efforts have seen PKF being instrumental in establishing many companies in Malta and ensured PKF become one of the foremost professional financial service providers on the Island Budget 2021 - Wheeling the ship of state 22.10.2020

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