Labour aiming for three percent reduction of fiscal deficit by 2006

Labour’s plan for economic growth will start in 2004, its manifesto reads, but at no point is there an indication of when the five to six per cent growth can be expected.
Smart. The PN do not fulfil their promises, whilst Labour disclaims its pledges by saying it will be working for a growth in the economy, without committing to when we can expect this growth.
Its bold pledge for deficit reduction is more straightforward however. Labour believes that "under current economic circumstances" it will decrease the fiscal deficit by three per cent by 2006.
Public spending
What is evident in Labour’s manifesto is its bid to streamline public expenditure and the public sector. And this not only through ensuring ‘efficiency’, ‘productivity’ and cutting down wastage.
It is the core network of ‘friends-of-friends’ Labour is about to get, which is why it will be replacing the Malta Enterprise fledgling through the Malta Development Corporation as its FDI one-stop-shop.
It will be conducting an assessment of the public finances through a team of independent auditors, a promise Labour has harped on through the last year, to carry out a clinical analysis on the public finances.
Labour has also earmarked Lm22 million to be cut off the government spending list, which it claims is spent on harmonisation with EU legislation. Wastage in government and parastatal corporations, foundations and consultancies, will be eradicated through intensive and systematic planning.
Labour has also set a six per cent yearly increase in capital expenditure directed to the completion of educational, environmental and transport projects, as well as FDI initiatives and worker re-training schemes.
Taxation
On VAT, Labour once again reiterated its endorsement of the tax in view of the economic scenario, but pledged to review the tax.
VAT rates will be reviewed to remove negative impacts of the tax on the tourism sectors, essential products and services, education, culture and sports. NGOs will also be exempt from VAT, upon registration of their special status.
Income tax rates and consumption tax will not be increased, but work will be directed towards an alleviation of the tax burden over the next five years.
It will be inciting more domestic spending through special measures upon re-election, and address the unemployed, especially those below 30, through a series of training schemes for the developments of trades and skills.
Financial services
Two quirks are apparent in the financial services chapter. Labour pledge to conform with international regulations, ‘without foreign interference’. Concurrently, Labour’s manifesto speaks of fiscal harmonisation with the EU, and a mission to attract financial trading from Luxembourg, Ireland and Cyprus.
In banking, it will seek to investigate HSBC’s dominant position in the banking sector. Although it is apparent that Mid Med had already been dominant in banking since before the HSBC take-over. Concurrently, Labour talk about attracting established banks to transfer their business and financial activity over to Malta.
The focus is however attuned to turning Malta into a centre for financial services, operating a ‘Swiss’ model and to beef up what could have the promotional aspect of the Malta Financial Services Authority. This also includes the creation of a special unit to attract financial service providers and investment fund managers from abroad.
Labour also proposes to remove the 15% capital gains tax on collective investment schemes.
No detail is given on proposals seeking to reform the council for the Malta Stock Exchange, and to ensure high officials in regulatory institutions, ‘such as the Central Bank’, have no conflict of interests.
Privatisation
Labour’s tack on privatisation is the ensuring of planning and transparency, without any space being given for speculation on such projects. More space has to be given to public participation for their investment in these enterprises.
In response to the need of privatisation, Labour sees Government’s privatisation drive limited to 40 per cent of commercial entities which have a natural monopoly.
In other areas where no natural monopoly is apparent, a broader privatisation can be considered.