The choice facing the Prime Minister on the eve of the forthcoming budget is one between a prudent budget and an electoral one.
Party pressures will inevitably dictate loosening the tight reins on public finances. The Prime Minister should resist such pressures, which risk cancelling economic gains and yet again placing the ship of State in turbulent waters. The writing of the budget speech is no longer just a Maltese affair. As members in the European Union, all national budgets are analysed and interpreted according to their being in line with Maastricht criteria. Our commitment or otherwise to financial rigidity and discipline are judged by the contents of the budget speech. Thankfully, this only serves to discipline the government, leaving little room for manoeuvre on electoral gimmicks, which carry long-term consequences. All European governments are subject to a yearly test on their financial discipline.
The starting point must be that government controls further its expenditure. It must play its part in ensuring that revenues do exceed expenditure, which has not been the pattern of state finances for the last twenty years. This involves a tighter control on the workings of government departments by ensuring that all outgoings are justified according to norms of value for money.
It also calls for moving back the frontiers of the state by making the public sector even leaner than the thirty per cent of gainfully employed achieved over the last years. This has been achieved thanks to a successful liberalisation and privatisation policy.
Government must also cut into excessive consultancies and reports, many of which never end up seeing the light of day. As the model employer, government must lead finances by example by spending carefully and wisely.
The budget should also respect the COLA mechanism for calculating wage increases. This annual calculation cannot simply be thrown to the wind because of political expediency, which dictates that on the eve of elections tight discipline controls should be jettisoned. The strength of the budget lies in limiting the increase set by the cost of living mechanism but at the same time leaving more disposable income in people’s pockets. This is equitable since the hike in oil and cereal prices is biting into the family budget.
This can be achieved by a smart overhaul of the taxation system. Increasing the threshold and narrowing the tax bands will reduce taxes. Accordingly all will pay less tax and increased disposable income will help generate growth.
Government should carry on investing heavily in education. Our future depends on an educated workforce able to compete globally and not locally. Our size, for years a disadvantage, is the least of our concerns in the modern information society. Size really does not matter in this age of information technology. Add our knowledge of the English language and our membership of the European Union and one has a winning formula for attracting foreign investment to the country as witnessed by the SmartCity project.
The budget must commit itself to further green investment in the environment. Incentives and schemes must be concocted to incentivise citizens not only to be green but also to live a green life by opting for low emission cars and solar equipped houses. Our environmental deficit should also be addressed. With much having already been done the budget should focus on solving polluted waters, scars on the landscape, the sate of building construction sites, and illegal dumping. These all require strict enforcement measures. Road discipline has improved considerably since the wardens’ system was introduced. Similar vigilance needs to be done on the environmental plane.
This budget is an opportunity to keep the ship of State on an even keel which will allow us to further exploit all the opportunities that membership of the European Union have opened up to us. Keeping the economic fundamentals in place is the surest way to ensure that living standards are protected. The budget must look at the long term rather than the easy option of political expediency. Financial discipline is in the long-term interests of all citizens.