25 November 2004

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Budget 2005 unleashed with draconian measures and pension reform proposals

It was bound to happen. With four years left before the next general election, the Prime Minister, also acting as Minister of Finance, announced new measures that will add new burdens on the consumer, while covering little ground in boosting consumer confidence.
After years of belt tightening for the middle class, the first year of Lawrence Gonzi’s premiership has been marked by measures to increase government revenue. Under the banner of Economy, Education and Environment, Budget 2005 was launched yesterday to a posse of angry journalists who were left without the traditional translated version of the budget speech.
Yesterday the Prime Minister promised to control public sector employment and to decrease administrative budgets.
Yet Budget 2005 includes a plethora of proposals, but it is unclear how many of these will be introduced.
Attention has been given in the Budget to underprivileged groups, but clearly neglects the vast middle class.
The major new burdens include a surcharge of 17 per cent on electricity and water consumption going back on the promise made recently not to tax water consumption. Mobile telephony has been hit with a duty of three per cent which, according to Parliamentary Secretary Tonio Fenech, is ‘a luxury’.
The news was greeted in Parliament with boos and cat calls from the Opposition, which remains bitter after having lost a government in 1998 over its increased water and electricity tariffs.
Budget 2005 includes new measures for women who have not worked for a period of five years and decide to return to the labour market.
At the same time the Prime Minister launched a White Paper on pension reform. The White Paper proposes a set of measures which include extending the pension age to 65 and a new system for calculating the two thirds pension, spread over 40 years instead of the best three consecutive years in the last decade of one’s employment.
The finer details still have to be analysed, yet the first reactions to the White Paper’s content led observers to tell The Malta Financial and Business Times that the mandatory second pillar pension scheme would lead to the less disposable income in the short term.

Copyright © Newsworks Ltd. Malta.
Editor: Saviour Balzan
The Malta Financial & Business Times, Newsworks Ltd, Vjal ir-Rihan, San Gwann
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