Editorial | A fresh boost for middle income earners

Finance Minister Edward Scicluna appeared confident when addressing Cabinet this week that the country will end this year with another impressive growth rate.

More importantly, he insisted that growth was not the monopoly of any particular sector.

The headline figures for the economy have are good. Unemployment is almost non-existent, inflation is stable, economic growth well above the Eurozone average, and public finances registering a surplus.

But beyond the macro figures, it is time for the government to take stock of the economic miracle that has happened over the past six years and assess how this can continue for the benefit of everyone.

There are signs of stress in some sectors. Gaming companies are feeling the pinch of runaway rents and the construction industry has felt the shocks of a summer of discontent.

The issues may be interlinked and a decision on the new rent regulation regime is needed to cut out uncertainty in the market.

Schemes helping first time and second time buyers acquire their property should be extended, and possibly made more generous to reflect the higher prices in the housing sector.

On the manufacturing side, there needs to be more vigour to ensure that medicinal cannabis producers enticed by Malta’s legislation do actually come here and start operating.

In aviation, a promised masterplan detailing the use of land in and around the airport must see the light of day so that progress in this area is coordinated.

There are multiple niche sectors in aviation that Malta can exploit but this will require planning and the development of key infrastructure such as a taxiway all along the runway perimeter.

But beyond the job creating initiatives, the government has to give the middle class a fresh boost.

While domestic demand has remained robust, there are signs that the measures taken at the start of the first legislature to boost incomes have run their course.

The reduction in the top income tax rate for those earning below €60,000 in the first years of the Labour government and the 25% reduction in utility bills in 2014, along with other targeted measures, had boosted incomes and encouraged spending.

They were measures that injected optimism that was necessary to re-jig the economy from its doldrums.

The income tax rebate that was introduced after the last election may have helped those on low incomes but it has done little to benefit middle income earners to the extent of previous measures.

A rebate ranging between €40 and €68 for someone in work is a gift, not a boost, and far away from the promised range of between €200 and €340.

Although inflation has remained stable, key components of the basket have exhibited upward movements that have eaten away at purchasing power, which the tax rebate has done little to address.

The Finance Minister must consider widening the rebate but he must also start delivering on the pledge to lower the tax on part-time work to 10% and reduce the tax on overtime. This will help boost incomes without creating pressure on the country’s competitiveness.

But other targeted measures such as increasing the Children’s Allowance for middle income earners would also contribute to greater purchasing power.

At the same time, the government must ensure that any unnecessary spending from the public purse should be curbed to ensure that investment is re-directed to productive and more needy causes.

The middle class deserves a fresh boost to act as a catalyst for continued growth