The budget has now been presented in Parliament and the government's economic policy for the coming 12 months has been spelt out in detail. It is part of a five-year strategy that should take us up to 2010, by which time we should realise the government's vision of having an economy built on excellence and quality and where Malta's competitive advantage shall lie in the ability of its workforce to produce high value added goods and services.

What is also interesting in this year's budget speech is that the Prime Minister (doubling up as Minister of Finance) gave an inkling of what should be the items of economic policy that shall be addressed next year in preparation for the 2007 budget.

Some may feel that the budget speech was a non-event, presumably because there was nothing in it that excited them. Others may feel that it was an exercise in propaganda where the government sought to twist facts and figures to suit its needs while presenting no new ideas. Others still may feel that it was an important event, that it was not a propaganda exercise but highlighted what in their opinion are the wrong economic policies of the government.

This is not to mention those who feel that the real budget speech was not the one presented last Monday in Parliament but was the press release issued by the government announcing the increase in the price of petrol and the increase in the surcharge on the water and electricity bills.

Then there are those who feel that it was good in that it sought to address the key economic and social issues that this country is facing. I found The Times' editorial on Tuesday to be very apt in that it described the budget as having set the scene for the coming years, referring to issues such as the giving of more space to the private sector, the promotion of certain specialisations in the field of education, the giving of incentives in the area of environment protection and the submission of the finalised report on the pensions reform.

It is apt because this year's budget continued with the consolidation of the government's fiscal policy (with the target of having a fiscal deficit of not more than three per cent of the gross domestic product becoming more than just a possibility), it contains a number of new ideas, it confirms the policy of this government to minimise its role in the operation of the economy to take on a stronger regulatory role and it announced the start of a study that should lead eventually to tax reform in this country.

This budget is really setting the scene for future years during which we shall be converting to the euro and we will be going through the transformation that membership of the European Union entails.

There are two aspects in this year's budget which I feel require specific mention. The first deals with the accountability of the public sector. There is general consensus that the public sector should reduce its expenditure. It is critical that the government changes its role in the economy from that of an operator to that of a regulator. However, for the government to allow more space to the private sector, it should take up a smaller share of the gross domestic product. Privatisation and public-private partnerships contribute to this; but in order to complete the cycle the public sector also needs to spend less.

This has been achieved this year. The scene is now being set for the next stage, whereby public service departments and public sector entities will have their subvention from the public coffers tied to a set of deliverables. This would ensure that the public sector would not reduce the outcomes because its inputs have been reduced.

It would be forced in delivering more with less; something that private sector organisations know something about. I feel that this is likely to put to the test not so much the public service but more so what we generally refer to as the parastatal sector.

It would also help to address an issue which, in my opinion, is becoming a cause for concern. There are several who believe that the governance of the country is no longer in the hands of the elected government but in the hands of bureaucrats (which, by the way, are not necessarily public servants). The government needs to send a clear signal that it is its job to govern and it is the public sector's job to manage and administer. The initiative to make the public sector more accountable is a step in this direction, as is the initiative to simplify regulations and reduce their number.

The second aspect deals with the tax reform. The report on the pensions reform has been finalised as has been the report on tertiary education. This year's budget talks about a report on the need to make our tax regime more in line with today's realities. This would not mean that the government would collect less taxes. It means, rather, that the government would collect it from sources that are not necessarily the same as today's. It would be futile to try and guess what would be the outcome of this report, but any new tax regime would need to take more account of issues such as the environment, while making sure that wealth creation is encouraged rather than penalised.

One assessment of this year's budget has been that it was a neutral one in that it did not raise taxes. And this seemed to have made the day for some people. My own assessment of this year's budget is that through it the government is sending a clear message that its role as an entrepreneur is finished and that it is expecting the private sector to use its initiative to exploit the opportunities that the government is presenting it through privatisation, incentives, better regulation and a more efficient public sector.