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8 NEWS ANALYSIS maltatoday | WEDNESDAY • 16 MARCH 2022 'Grow and spend': How parties' manifestos 1. Both parties want to increase public spending on goodies, ranging from free holidays to free laptops, while lowering taxation, with sus- tainability hinging on higher rates of growth, which depend on attracting more investment The bottom-line is that both parties now subscribe to the same economic model that grows the size of the cake to ensure greater public spending, and further low- er taxation, an approach which characterised the policies of the present government. As the incumbent, Labour has presided over a spell of growth and survived COVID pains, so it starts at an advantage as it has already delivered on this front, albeit in without any significant investment in new industrial sec- tors and as a result of a property boom fuelled by an increase in population. Both parties seem keen on an- choring this growth model in more sustainable 'industrial' in- vestment, even if addiction to high growth rates makes the country vulnerable to demands of investors. The PN is committed to set an economic transforma- tion fund to the tune of €1 billion which will be set up to encourage the creation of 10 new economic sectors, including the metaverse. On the other hand Labour is emphasising "advanced manu- facturing" in fields like robotics and medical equipment and is banking on investment related to offshore developments in the 'blue economy' within the frame- work of Malta's Exclusive Eco- nomic Zone beyond its territorial waters. 2. The PN is keener than Labour on using taxation as a carrot to change behaviour, while Labour's tax cuts and financial benefits are easier to quantify and explain While Labour is committed to unconditional tax cuts for both companies and individuals, the PN is making most of its fiscal incentives conditional on adher- ence to Environmental Social Governance criteria which are yet to be established in agree- ment with social partners. This is an innovative and for- ward-looking idea but which PN spokespersons are finding hard to explain. And while the idea of using taxes to reward respon- sible social and environmental practices is an interesting one, promising to do so in a manifesto is proving tricky in the absence of a fixed shadow spokesperson on economic issues. For while Labour's economic vi- sion is conveyed by Clyde Caru- ana, who comes across as solid and prepared, the PN has side- lined Mario De Marco without presenting an alternative which carries the same gravitas. While the PN is promising to lower company tax to 15% on the first €500,000 when reinvested in ESG-compliant companies, Labour is promising to cut cor- porate tax cut to 25% on the first €250,000 in income for everyone. As regards personal income tax the Labour party seems more in synch with the aspirations of the lower middle class, which was largely overlooked in tax cuts in- herited by Labour from Lawrence Gonzi's government in 2013. While Labour is committed to raise the tax ceiling on non-tax- able income for parents from the current €10,500 to €12,200, the PN is committed to decrease the tax rate for those earning between €60,001 and €80,000 to 25%. But while committed to regressive tax cuts for higher-income earners, when it comes to tax rebates it is the PN's approach which is more socially progressive by promising a 10% tax credit on all tax paid in the previous year for those earn- ing less than €20,000 and 3-5% for those earning more. And while Labour may be more populist in its tax poli- cies, its manifesto does include an important long term fiscal commitment: enshrining in the constitution an obligation on governments to set aside money every year as a contingency fund. This suggests that Labour has learned from its COVID experi- ence and wants Malta to be better prepared for similar emergencies in an increasingly unstable world. Where both parties agree is in avoiding any reference to new taxes aimed at redistributing more wealth from sectors mak- ing major profits. In this sense neither the PN nor the PL is keen on using fiscal disincentives as a way of reducing widening social inequalities. Neither are any tax- es being proposed to discourage car use or activities and products with a large carbon footprint. 3. On civil liberties, Labour is more open to future debates on controversial issues like euthanasia, thus remaining the obvious choice for those who prioritise more social liberali- sation In a clear indication that Labour is keen on retaining its edge as the most socially liberal between the two big parties, the PL's manifes- to is committed to commence a national discussion on voluntary euthanasia. This comes across as a calculated decision in view of surveys showing greater support for euthanasia then for abortion. This suggests that euthanasia is set to become the next fron- tier in Labour's social revolution, taking precedence over the more urgent need to update draconian abortion laws which do not even make an exception for medical exceptions and which are out of line with legislation in most of the world. And while abortion is not addressed in its manifesto, Labour remains more open to discussion on this topic than the PN. It is also promising greater ac- cess to sterilisation services. And while the PN's commitment for free contraception, including the morning after pill, has gone some way in dispelling the association of the party with ultra-conserv- ative views, it is Labour which is once again rocking the boat. On cannabis the PN's sugges- tion that it could amend the re- cently approved law may also alienate a volatile segment of vot- ers who benefit from this law. But Labour's manifesto does not sug- gest any will to further liberalise drug laws by applying the harm reduction model to recreational use of other drugs like psyche- delics and cocaine. Despite its selective approach, Labour still remains the prag- maitic choice for those who want more progressive social reforms. 4. While generous with public funds, both parties are wary of increasing costs for business- es. Labour is now committed to raise the minimum wage without saying by how much, while PN will only offer fiscal incentives to encourage com- panies to pay a living wage While Labour is now commit- ted to raise the minimum wage over and above COLA increases, the PN is committed to reward companies paying a living wage – the amount of money required by a family to live a decent life-with fiscal incentives in line with ESG criteria. But the 'living wage' will only be determined following an agreement with the social part- ners. And while Labour's commit- ment is vague, as it does not state by how much the minimum wage should increase, it is more tangi- ble than the PN's promise which is entangled with a complicated mechanism still to be defined. Overall, both parties seem wary of a commitment which would in- crease expenses for businesses but The fiscal austerity that characterised the Gonzi years has been exorcised by a decade of increased public spending financed by higher economic growth: a 'grow and spend' model which left the country richer, but uglier and more unequal. Now both major parties have submitted voluminous manifestos which largely subscribe to this model. So where do the two parties diverge? asks James Debono