Issue link: https://maltatoday.uberflip.com/i/885114
17 maltatoday TUESDAY, 10 OCTOBER 2017 Editorial Edward Scicluna's strategy pays off MaltaToday, MediaToday Co. Ltd, Vjal ir-Rihan, San Gwann SGN 9016 MANAGING EDITOR: SAVIOUR BALZAN EXECUTIVE EDITOR: MATTHEW VELLA ASSISTANT EDITOR: PAUL COCKS Tel: (356) 21 382741-3, 21 382745-6 • Fax: (356) 21 385075 Website: www.maltatoday.com.mt E-mail: newsroom@mediatoday.com.mt NOT many finance ministers across Europe have the luxury of presenting budgets that turn up a fiscal surplus while being generous at the same time. But Edward Scicluna is ex- actly in that position after four years of carefully planned eco- nomic management that has turned the country around. After years of running an- nual deficits that had to be sustained through public debt, Scicluna's run as finance min- ister ditched the runaway ex- penditures. He kept an annual €25 mil- lion cap on new measures, each time targeting specific groups. He also used the mon- ey to introduce measures that stimulated economic growth and encouraged employment. Scicluna cut direct taxes and balanced out the higher ex- penditure by cranking up ex- cise taxes on a wide range of products. The strategy worked. Malta has experienced phenomenal economic growth fuelled by domestic demand and foreign investment. This resulted in virtually full employment that has necessitated the importa- tion of labour. Growth also contributed to higher than expected rev- enues, which saw the country register a general government surplus in 2016 for the first time in decades. The feat will be repeated this year even though the finance minister did not plan for it. But now, Scicluna is actually forecasting a surplus for 2018, an achievement that was last seen in 1981. And this will come on the back of a budget that will not increase taxes but rather in- troduce a host of measures that will benefit various cate- gories. The minister has actu- ally increased the expenditure cap to €35 million, reflecting Labour's much vaunted 'best of our times'. However, the finance minis- ter has failed to explain why his financial estimates have recorded a regression in the consolidated fund. While the general government accounts, which also include the income from the Individual Investor Programme, show a surplus of €54 million in 2018, the con- solidated fund (ordinary rev- enue and expenditure) shows a deficit of €21.4 million. The consolidated fund deficit is a regression on the €8 million surplus of 2016. There is a social slant to the budget in that it tries to miti- gate the impact of a revving economy on the more vulner- able families. Pensioners will get an across the board increase of €2 per week and low wage earners will see the in-work benefit in- crease, among other measures. Whether these will be enough still has to be seen but the emphasis has to do with the criticism the government has been receiving that wealth has not reached everyone. The provisions to introduce some form of control on rents may not fully satisfy the demands of anti-poverty campaigners and the government will have to monitor the situation care- fully to ensure the measures will deliver the intended im- pact. The introduction of a day's leave in the absence of an agreement with employers on the best way forward on the compensation of public holidays falling on a week- end, shows the government's resolve to fulfil its electoral pledge. While employers are unlikely to applaud this move, the government has treaded carefully not to adopt a big- bang approach. In many ways it reflects the prudent approach Scicluna has adopted over the past four years. While Budget 2018 has an overall positive outlook and may represent an early Christ- mas, it does not splash out un- necessarily. It is evident that Scicluna wants to stay the course and maintain a gen- eral surplus over the medium term. It would have been better had the surplus also been main- tained in government's ordi- nary income and expenditure.