The PD criticises Meloni’s move on road tax, but the culture of cover-ups is not characteristic of Schlein & Co

The ‘abolition of road tax on first cars’ approved by the Meloni government has sparked fundamental criticism which, regardless of its merits, concerns the method by which the country’s economic policy is formulated. The measure, costing around 2.3 billion euros, is valid for just one year: it is scheduled only for 2027 and is funded by savings from the National Recovery and Resilience Plan (PNRR). It is a temporary bonus rather than a structural reform, leaving a hole – or at any rate a burden – on the next budget: next year, the government that emerges victorious from the elections will be forced to find €2.3 billion to avoid a tax rise. The Meloni government says the measure will become ‘structural’ in just a few months’ time, with the Budget Bill. We shall see. But at the moment this is not the case, and therefore the criticism is valid. Although it does need to be put into context.

Carrying forward the cost of time-limited measures to the following financial year is nothing new. Indeed, it has long been standard practice in the management of public finances. From 2011 to 2021 – a fact many have forgotten – Italy’s budget was burdened by the so-called ‘safeguard clauses’: a mechanism designed to make the accounts appear in order with the EU, which provided for automatic increases in VAT and excise duties on fuel in the years to come, in the absence of alternative funding.

So every year, with every budget, governments were forced to find tens of billions to ‘cancel out’ tax rises, postponing the ‘safeguard clauses’ until the following year. In 2020, this “I’ll pay later” scheme reached a record figure of 28 billion euros, twelve times the value of the suspension of Meloni’s road tax and much higher as a proportion of GDP (0.1 percentage points now and 1.7 then). At a certain point, the safeguard clauses – which automatically resulted in a higher deficit – ceased to be regarded as credible by the European Commission and were scrapped.

However, there are other measures that have met the same fate, such as the Sugar Tax and the Plastic Tax, introduced in 2020 by the Conte II government and repeatedly postponed. For six years, they have continued to exist only in name, as an accounting fiction representing future revenue, to be written off each year (around 400 million euros). In this sense, the temporary abolition of the road tax is a bad habit rather than a bad development. But there is, in the controversy over the road tax, a deeper issue concerning the credibility of the opposition. 

The PD, the M5S and the rest of the broad coalition – including Matteo Renzi – are onto something when they describe the temporary abolition of road tax as an electioneering ploy. And they are certainly right to highlight the lack of funding to make the tax cut permanent. But the criticism falls flat if it is intended to portray this government as unreliable when it comes to managing public finances.

Firstly, because the Minister for the Economy, Giancarlo Giorgetti, found himself having to deal with a situation that was certainly more complicated than the renewal of the road tax exemption. At the end of 2022, the Meloni government inherited a public budget with a deficit that was the highest in the European Union (8.1 per cent of GDP) and energy subsidies worth tens of billions due to expire (consider, for instance, the excise duty cut, which cost almost one billion a month), not to mention the Superbonus time bomb. Four years on, the centre-right government presents itself to the markets and the electorate with a deficit reduced by five percentage points (3.1 per cent) and on the verge of exiting the infringement procedure. It is no coincidence that, so far, the main criticism levelled by the opposition (and even within the ruling coalition) at the economic policy of Meloni and Giorgetti has been an excess of ‘austerity’. To now suddenly claim that the government is being reckless with public finances over a measure covered for just one year, amounting to 0.1 per cent of GDP, is somewhat contradictory.

This is particularly because, at present, the government appears more credible on this issue than those standing to replace it. The centre-left’s programme is still in the works; there are many shared proposals and many details yet to be clarified, but if there is one thing that is certainly lacking, it is budgetary provision. In their most recent public statements, Giuseppe Conte and Elly Schlein have put forward many proposals, but have never explained how they intend to fund them. The PD, M5S, AVS and IV agree on how to spend a great deal of money, but only because they do not say where to find it. The list of expenditure is long. “If we win, we’ll raise healthcare spending to 7 per cent of GDP,” Elly Schlein said at the Festa dell’Unità. That means, compared with the current 6.4 per cent, an extra 15 billion euros or so. With what resources? No one is saying. Schlein has tabled a bill proposing to increase healthcare spending to 7.5 per cent of GDP (+26 billion), but no financial provision is specified. A few months ago, the PD secretary had suggested to the government that it spend 3 billion on hiring doctors and nurses by scrapping the ‘boiler bonus’. But Giorgetti had already scrapped that bonus – which was introduced when the PD was in government – two years ago.

In March, the PD, M5S and AVS tabled a bill on reducing working hours whilst maintaining the same pay which, according to their calculations, would cost 0.6 billion: it was rejected by the State General Accounting Office (RGS), which, instead, estimated the cost at 24.8 billion. A week earlier, the RGS had rejected the proposal put forward by the three parties of the Campo Largo coalition on ‘equal leave’ because ‘vague measures’ had been cited to cover the cost of 3 billion.

Last year, Schlein, Conte, Bonelli-Fratoianni and Renzi proposed a ‘counter-budget’ comprising 16 joint amendments, which would have cost around 25 billion and had funding for just 2. If all the measures proposed by the opposition are added together, the gap between election promises and financial backing easily exceeds 50 billion euros. More broadly, the coalition’s stance on the country’s fiscal position remains unclear: Meloni and Giorgetti assert that budgetary prudence is a value in itself, even setting aside European rules; within the broad coalition, the prevailing view is that of those who describe the Stability Pact as a cage from which to break free and look back nostalgically on the days of the Superbonus.

The criticism of the Meloni government regarding the temporary reduction in road tax is valid, but precisely for this reason – if taken seriously – it reveals a far greater lack of credibility across the political spectrum.