Last Monday, Malta’s finance minister presented the 2025 Budget. Before the budget speech, Moviment Graffiti, barged into the stranger’s gallery in Parliament, carrying a banner with the trending topic against massive developments. The narrative is that such developments are reducing the quality of life of people due to the untoward generation of gargantuan amounts of debris and construction waste, as well as noise pollution and environmental degradation. I had the opportunity to meet with Andre from Graffiti last week during the TV programme, Popolin. However, I will expand in more detail on the discussion we held on Popolin in my upcoming article, as we treated the topic of affordable housing, which is also important for a better quality of life and to transit to a country of quality.
The 2025 Budget introduced new measures, aimed at helping Maltese families by injecting additional income in their pockets. The widening of the tax bands will provide additional disposable income to the Maltese. People will have more money to spend, thereby giving some breathing space to those families that were struggling to cope with the rate of inflation over the past two years. Many of these segments fall within the C1 bracket. Besides, other positive measures, such as the increase in the pensions, the increase in children allowance, the grant to those who never worked or worked briefly but do not qualify for a pension, as well as the measures aimed at increasing people’s income, will surely translate into additional economic growth, primarily pushing domestic demand.
Notwithstanding that the 2025 Budget will help families, and this is what really matters in the end, my understanding is that additional long-term measures will be presented in the 2050 Vision for Malta, with the penholder being the Minister for the Economy Silvio Schembri. What many are expecting is, though, additional measures to offer new instruments for affordable housing, new modes of transport, as well as a vision built on transiting to cleaner and more efficient practices. As I have already explained in my last week’s column, even efficiency has an expiry date, and is eventually eroded. The more we innovate, the bigger the demand, and a higher demand, erodes efficiency. This is what I called the Jevons effect in my preceding article. So, what I mean is that improvements in efficiency must be coupled with a change in behaviour, as well as an institutional change.
However, what we certainly need in the medium- to short-term, is a plan to allow more flexible working hours to private, but more so to public employees, as well as teleworking. Here, we need a holistic vision, which is intertwined with what the Climate Action Authority will be overseeing as per its TORs. Whereas we need new economic niches, including gaming, digital, e-wallet and what has been mentioned in the past week, the primary goal must be the green transition.
True, the digital transition is crucial for a better standard of living, and quality of life. However, we need to focus on the bigger picture. Let’s take the concept of green transition. What does this really mean in concrete terms. We, economists, are interested in the sectors that produce high GHG emissions, inter alia, CO2, NOx, Sox and CH4. Why? Such GHG measures are crucial to understand the economic environment, as well as to devise a plan to start reducing them. In simple terms, as economists, we estimate the emissions produced by each sector and assess both the transition risks and physical risks associated with those sectors.
However, the economic operators must calculate what they are producing in terms of Scope 1 (Direct Emissions) and Scope 2 (Indirect Emissions). The mostly used standard to calculate GHG emissions is the GHG accounting and reporting standard, developed by the PCAF. The understanding of the PCAF and its categories, are important to comprehend.
Earlier, I mentioned that we need teleworking, as well as flexible hours to primarily reduce road traffic, and indirectly lower GHG emissions. Such policy actions entail a dual positive effect on the economy, because the more emissions are produced through land transportation, the worse it gets to maintain and control the social costs including the financing of ETSs. Authorities must understand that the PCAF standard includes calculating emissions from employee commuting, meaning that the CO2 emissions from employees’ commutes are considered part of the organisation’s total emissions. Notwithstanding that the public sector might not be in scope of reporting, surely, it applies to the private sector.
Such granular information is important to start transiting. This is the reason why I am heavily promoting teleworking where possible. I do not have an interest in teleworking, because even though I have the option, most of the time I am at the office. However, we need a culture change. I recall travelling to the ECB and many of their employees were already teleworking in 2009. For Malta it sounded like a taboo. This is why we need a change in behaviour. We cannot keep on repeating what we were doing. The world changed. And we are part of it. This is not Malta of 2009, where public sector employees were squeezed, and controlled to the point of schizophrenia.
Besides its own employees, the government can explore the idea of giving tax incentives to the private sector to allow employees to telework, which would be attached to a KPI that reduces CO2 emissions. These are all ideas that are needed and which the government must explore. Also, we need to start including additional carparks outside of our towns, as well as water transportation and shuttle services to reach the centre of the cities.
Overall, the 2025 Budget tackled the S, that is the social part of ESG, which is a step ahead of the E when devising a strategy. I agree with the government’s approach. We cannot tackle the E of ESG on its own, else many will be left behind. The green transition demands a bit of painful decisions, and we need a just transition. However, prioritising the S of ESG was a strategic move by the Maltese government. What I now want to see is that in the Malta 2050 Vision, the E is prioritised through green infrastructure projects, working hand in hand with the financial industry and the private sector. There is so much potential of crowding in private investment in this area, that postponing further is not advisable.
Overall, I am satisfied with the measures taken in the 2025 Budget. And I now look forward to the publishing of the Economic Migration Policy and the regulation of additional sectors that are impinging on the quality of life due to the economic success.
Clyde, douze points!