Making sure that the country's new wealth reaches everybody
On taking office in 2013 the incoming government found an economy in distress.
The country had been placed under an Excessive Deficit Procedure by the European Commission as various entrenched challenges affected the sustainability of its public finances and its potential growth. Macroeconomic imbalances pertaining in particular to the financial sector and public finances were identified among the main ills that affected the Maltese economy. In 2012 the annual deficit reached 3.5 per cent well above the EU benchmark of 3.0 per cent, while the national debt as ratio of GDP amounted to 69.9 per cent.
In 2012 the unemployment rate was 6.3 per cent while labour participation rate was at 65 per cent. Shortcomings in the labour market included the failure to maximise the island’s human capital, address skills gaps and establish improved links with education and training. In order to raise the female participation rate and facilitate the integration of women in the labour market, the Commission recommended that affordable child-minding facilities be made available.
The Commission also expressed concern at inadequate reforms in pensions and healthcare and regarded the energy sector as posing a significant challenge to the competitiveness of the Maltese economy.
Not one to shy away from a thorny situation, the Labour Government immediately launched an economic recovery plan and successive budgets were aimed at measures that would contribute towards economic regeneration.
The first budgets of the current administration promoted stability and confidence and launched measures aimed at a new economic environment conducive to investment and employment and to higher disposable income levels. Diligence and work were rewarded and encouraged; income tax rates were lowered; tax credits and benefits were introduced; free childcare facilities were launched; voluntary pension reforms were rolled out; and energy rates went down.
Reforms in the social welfare system provided a set of incentives including in-work benefits to reduce welfare dependency while promoting an enabling state. Assistance was also extended to first time buyers.
Between January 2015 and August 2016 the number claiming unemployment assistance and social assistance declined by over 3,300 claimants. Most of these are now in full employment contributing to their pensions through national insurance while others have taken advantage of the taper of benefits and moved into employment.
By and large these measures have been a success. As the country experienced significant economic growth under the current administration, national income rose by 15 per cent and employment levels increased by 13% while household disposable income went up by 28 per cent. Labour participation rates have
increased from 61.6 per cent in 2011 to a forecast of 68.2 per cent in 2017 while the unemployment rate has fallen from 6.4 per cent in 2011 to 4.9 per cent in 2016.
The 2017 Budget that was announced by Minister for Finance Prof. Edward Scicluna on 17 October 2016 sought to build on the results of previous years and further strengthen the Maltese economy by a wider range of incentives to encourage more workers to join the labour force. The Budget recognized the need to ensure that our young people will acquire the necessary skills set to meet the needs of the Maltese economy; improve access to finance for enterprise; and further strengthen and improve the infrastructure.
Besides seeking to exploit to the fullest possible extent the full potential of the Maltese economy, the 2017 Budget confirm the government commitment to prosperity with social justice. This is in fact the underlying rationale of the budget exercise for 2017 – the need to promote wider social justice among sections of the population that are unable on their own to participate in the ongoing development process. This includes pensioners, low income workers, disabled persons and recipients of social benefits.
Government is confident that on the back of a buoyant economy it can meet these developments without any undue strain on its overall financial position.
In addition to the weekly rise of €1.75 announced in the 2017 Budget to cover the increase in the cost-of-living for October 2015 to September 2016 to all employees, pensioners and those on social benefits, the main measures to address the situation of pensioners include tax exemptions on pensions up to €13,000 over a two-year period; a weekly increase of €4 to married pensioners on the national minimum pension; and an additional set-off of €200 to holders of a service pension which is expected to reach 5,000 beneficiaries.
The Budget 2017 makes provision for reform of the carers allowance which increases from €105 per week to €140 per week while the carers allowance increases from €76 per week to €90 per week. This would allow our citizens to continue to live in their own homes and in their communities. The Budget also seeks to increase the disability allowance while extending eligibility to amputees.
The Carer at Home project is also being extended.
The extended in work benefit paid to families with one earner is also being improved from €150 per child to €350. In the meantime eligibility to the extended in work benefit also means that more families will become eligible.
Addressing the working poor the government is also extending the Supplementary Allowance to low income families so that more families become eligible to the benefit.
The provisional estimates show that low income families eligible to both the extended in work benefit and the supplementary allowance will seek their incomes improved between €5 and €9 per week according to the number of children
With regards to the housing sector, the Budget 2017 provides for the doubling of the rent subsidy to vulnerable people with aim being that of doubling the number of beneficiaries to 2,800. Furthermore, rent adjustments for government-owned premises for 2010, 2013 and 2016 are being withdrawn and the amounts already paid by tenants are being refunded.
Other measures that feature in the Budget 2017 include a revision of the means test and the introduction of more realistic thresholds for the eligibility of persons for non-contributory benefits. The reform of the means test means that more senior citizens will now become eligible to free medicines under the pink card.
In addition there is the launching of a government savings bonds for pensioners at more attractive rates than those currently available on the market to enhance their income levels.
The Budget also makes provision for an allocation of €8 million for the launching of a new fund for the settlement of past grievances mainly relating to pensions rights and claims of former employees of a number of public sector organizations. The fund will be administered by a board that will carry out the necessary consultations and establish procedures on which requests by aggrieved pensioners will be considered.
Other measures that are planned to be undertaken in the context of the Government’s commitment to build a more inclusive society include the launching of a social fund to address the quality of life of students in difficulty by means of sports and cultural activities; the introduction of a respite service for carers who provide assistance at home to individual dependants; the continuation of the Soċjetà Ġusta project aimed at having 10 small homes in the community for persons with disabilities; the continuation of the project REACH in Naxxar to provide different professional services to a wide range of persons including persons with disabilities; and the establishment of the Ċentru Sigur għaż-Żgħażagħ Bniet.
In the housing field 2017 will be witnessing the construction of the first units in the social housing project estimated to cost some €50 million while the Housing Authority will be launching a six-year programme for the installation of lifts and for improvements in 211 houses in various residential estates throughout the country for some 4,400 persons, including 1,200 elderly citizens and 200 persons with disabilities.
The Government is confident that on the basis of this wide-ranging programme it will be able to fully honour its commitment to ensure that no Maltese citizen will suffer from any form of economic deprivation or social exclusion in the years ahead.
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