Editorial | The Finance Minister’s choices

The budget presented by the Finance Minister on Monday goes a long way to alleviate inflationary pressures on low income earners but does little for the hard working middle class.

The growing dependence on subsidies to keep energy and fuel prices stable is a chokehold on Clyde Caruana’s fiscal manoeuvrability as much as it is a Godsend for keeping inflation in check.

The inability to provide significant tax relief to middle income earners will leave them struggling to maintain their standard of living next year.

Caruana did not even amend the tax bands to ensure the COLA increase is not taxed, something all unions and employer groups recommended before the budget. It is unclear whether this recommendation was ignored as a result of fiscal prudence or simply because the minister wanted to be sure he has fiscal leeway in 2024 for any extraordinary expense that may erupt.

The resultant situation is one where the spend on infrastructure remains inadequate. The budget does little to address the pressure on energy distribution, waste management, traffic congestion on the road network, the sewage network and hospitals’ capacity as a result of the population growth of recent years.

In the Chamber of Commerce’s words, the “budget was another missed opportunity at introducing concrete measures to disincentivise private car use in congested areas and during rush hours”. There is absolutely no mention of a metro, and no incentives to get people to give up their driving licences.
From a business perspective, the budget mentions a number of schemes to incentivise companies to make digital and sustainable investments.

On a positive note,  the government is restating its commitment to regulate temping agencies, set up a venture capital fund for start-ups, introduce incentives for family businesses, and unveil schemes related to ESG for SMEs.

The commitment to set up a specialised commercial court is also commendable and hopefully goes a long way to address delays in the justice system.

From a business perspective there are other ideas mentioned in the budget but which require much more detail.

Budget 2024 maintains a steady course but lacks imagination and excitement. The Chamber of Commerce diplomatically suggested as much in its post-budget reaction when it expressed eagerness “to see more tangible proposals that will provide the required impetus for a leap in quality, higher productivity, sustainable growth and improved competitiveness of our economy”.

In the midst of global uncertainty caused by war in Ukraine and the Israel, Caruana chose extreme caution. It may prove to be the best choice not to rock the boat, but it is certainly not the transformative moment the economy needs for medium to longer term prosperity.