Last October, Opposition Leader Bernard Grech gave his first major speech, namely his formal reaction to the Budget. This speech was meant to lay out his party’s vision for a better country while pointing out the fallacies of the Labour administration’s fiscal plans.
Most commentators, however, concurred that Dr Grech did not excel. The delivery was flat, with Dr Grech reading out his speech as if he were quite unsure of what it contained. Moreover, the far-and-between economic parts of his speech gave the impression that his grasp of financial matters was at best, shaky. Like Dr Busuttil and Dr Delia before him, the new Opposition leader did not appear that sound when it came to economic thinking, a serious failing that is costing the Nationalist Party the vote of a large swathe of the business community and the Middle Class that supported it in its glory days.
One highlight of Dr Grech’s reaction was his attack on the Financial Estimates presented by the Minister for Finance. He argued that it was unrealistic to project that government revenue could in 2021 reach the levels it reached in 2019. He stated that the pandemic’s impact on the economy was such that it did not make sense to project the take from VAT and income tax in 2021 to be anything but far below than in 2019. Dr Grech pointed out that this was proof this was the budget of an incompetent government that had failed and buckled. The public needed hope and new direction, which he argued, only the Nationalist Party could offer.
This line of reasoning became a repeated line of Opposition spokespersons. As recently as last month, Opposition spokesperson Dr Mario de Marco was reported to have said that lower-than-projected revenue figures would confirm the estimates the Opposition had made in its pre-budget document in September. He stated that this showed the solidity of its efforts in financial and economic matters.
Well as they say, the proof of the pudding is in the eating. Government finance statistics published at the end of May make for dire reading for the Opposition. Table 1 in this news release compares revenues and expenditure between January and May for 2019, 2020 and 2021. Part of it is reproduced below. The data speaks for itself. Once again, the financial competence of the Opposition is torn to shreds. Not only did the take from income tax and VAT reach 2019 levels, but it increased substantially on the pre-pandemic take. Between the two revenue sources, Government got €1,023 million in the first five months of 2021, or nearly €37 million more than in 2019.
To further discredit the Opposition’s recriminations of Government having abandoned families and not provided direction, one must look no further than revenue from Social Security. In 2021 revenue from this payroll tax was €36 million higher than in 2019, which marks an increase of nearly 10%. This is a clear indication that wages and salaries earned in the first months of 2021 were far higher than those earned in 2019.
Government finance figures confirm that the situation of families and businesses is well on the way of rebounding from the pandemic’s impact. Not only are they being able to repay the taxes some had deferred last year, but they are even paying more taxes than before. Indeed, the level of national output in the first quarter of 2021 was equal to that in 2019, meaning that the economy has stabilised and is now rearing to expand once again. Instead of being in a situation like Spain and Italy where hundreds of thousands are crying out for jobs, here in Malta we once again have employers whose main talking point is that they cannot find enough workers.
The rapidity of the recovery is proof of how wise it was for Government not to repeat the austerity policy mistake of previous administrations. In the first months of 2021, Government spent a billion and a half more than the previous administration had spent in the same months of 2009, when it faced a much smaller economic crisis than the pandemic. That is why, while Malta endured for years the consequences of the 2008 financial crisis, we are already recovering from the much larger blow of the pandemic.
The only expenditure that this administration is reducing is that on interest on public debt. While €92 million was spent in the first five months of 2013, nearly €20 million less was paid in 2021. This is because strong confidence in fiscal leadership, attested by better credit ratings, has led to the Maltese Government being able to borrow at lower rates.
This leaves the Opposition in need for a complete redrawing of its economic and financial political strategy. Unless it ditches its current advisors, move away from its constant negativism, and come up with spokespersons that can garner more credibility, it is hard to see how it will be able to reduce the public’s overwhelming trust that the country’s economic future is best guaranteed by a Labour Government.