Issue link: https://maltatoday.uberflip.com/i/1420685
9 ANALYSIS maltatoday | WEDNESDAY • 20 OCTOBER 2021 KURT SANSONE BERNARD Grech's election proposals could cost anything between €160 million and €180 million, an exercise undertaken by MaltaToday shows. The approximate figures only account for six significant proposals announced by Grech during his reaction to the budget on Monday. The proposals considered for this exercise are: the extension of the 25% income tax bracket to those earning €80,0000; the trav- el voucher for young people between 16 and 21; the bonus for front liners; the refund for overcharged utility bills; the VAT cut to 7% on hotels and restaurants; and the 'substan- tial' increase in teachers' salaries. The Nationalist Party's proposal to extend the VAT-exempt threshold to €60,000 from €30,000 and the increase of 25% in stipends for students in certain courses have not been included in the ex- ercise because of the difficulty to estab- lish existing parameters. If these two measures are taken into account it is very plausible that the PN's electoral manifesto bill will surpass the €200 million mark, excluding any capital projects. The extent of the PN's expense jars with its criticism of the government for run- ning up a large deficit. Depending on the percentage increase in salaries for teachers, the costings for these six proposals range between €162,065,000 and €182,365,000. COSTINGS 1. Extension of 25% tax bracket: €10 million A PN government will, in its first budget, extend the 25% income tax bracket to benefit those who earn up to €80,000. As things stand today, the 25% bracket ap- plies to those earning up to €60,000. This measure will benefit high earners and could possibly encourage profession- als who under-declare their earnings to be more honest about their income. Grech did not quantify the loss of in- come government would incur as a result of this measure. Sources privy to the tax system told MaltaToday that as things stand today, the PN proposal would cost public cof- fers €10 million in lost revenue. 2. Teachers salary increase: €30 million to €51 million Bernard Grech has pledged that educa- tors will receive "a substantial" increase in their salaries under a PN government but has so far failed to explain what this means. He did not flesh out the proposal further during the budget speech and the cost of this pledge remains unknown. According to Budget 2022, the expense on wages and salaries in the education sector will be €203 million. If Grech's pledge represents a 15% increase in this bill, the additional cost will amount to €30,450,000. If Grech's promise repre- sents a 25% increase in salaries, the addi- tional cost to public coffers will tot up to €50,750,000. 3. VAT cut to 7% on tourism: €45 mil- lion Another pledge made by Grech is to cut the VAT rate on restaurants and hotel services to 7% from 18%. The Opposition leader did not quantify the cost of this measure but a 2009 study by the finance ministry at the time had put the cost of such a measure at €30 million. However, sources within the sector told MaltaTo- day that the amount would today be clos- er to €45 million given the higher levels of consumption. 4. ARMS refund: €50 million The PN is pledging to refund over- charged utility bills, which according to estimates derived from the findings of a National Audit Office report could amount to around €50 million. Grech reiterated this pledge during his budget reaction. Government has acknowledged that the billing system for water and elec- tricity need to change but will not refund any overcharging. 5. Bonus for front liners: €14 million Bernard Grech has promised COVID-19 front liners a one-off bonus as apprecia- tion for their work during the pandemic. Grech identified certain sectors who will receive the token bonus and quantified this at €14 million. 6. Travel voucher for youngsters: €13 million A new PN government will give young people between the ages of 16 and 21 a €500 voucher to travel abroad for edu- cational, cultural and sports purposes. Grech did not quantify the cost of this measure. MaltaToday looked at the NSO popula- tion statistics, which show that there are 25,230 young people between the ages of 16 and 21. With each given a voucher of €500, the PN measure will cost taxpayers €12,615,000. PN's election pledges tot up to €180 million splurge… and counting tax, flies in the face of Grech's criti- cism of Abela for not being 'socialist' enough. In this sense the proposal highlights the PN's ideological schizo- phrenia: that of trying to outflank La- bour 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 in- cludes 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 vulner- able categories? This approach is reminiscent of Gonzi's 2008 fiscal commitment, which was thwarted by the global fi- nancial crisis, and which was only im- plemented by the Muscat government in 2013. While Gonzi made the prom- ise 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 meas- ures 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-in- come 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 eco- nomic growth. For in the absence of any new tax revenue and with a com- mitment 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 dif- ferent from the PN: the promise of a fairer society and greater transparen- cy 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 rea- son 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 alterna- tive? Or can he do both?