Budgetary expectations

I would like to start off where the former Minister of Finance, John Dalli, left off in his article entitled So That Nobody Is Left Behind in last Sunday's The Sunday Times. Mr Dalli wrote that "the budget is the embodiment of a government's economic and social policies. It is a declaration on how the various government programmes, initiatives and measures are coordinated to improve every citizen's quality of life".

He is correct in his assessment and he should be pleased with himself that over the years we have come to appreciate the real meaning of the budget. He, in fact, has contributed significantly to this result.

Those of us who care to remember have been through the experience where budgetary expectations used to ruin our pre-Christmas shopping, as it was all an anxious wait for what is going to hit us next.

There was absolutely no consultation with the social partners and the core of the budget was the cost of living increase and the prices of commodities that used to be imported through the government's bulk buying system. They were camouflaged as boiled sweets (cejca), with the result that the real objective of the budget was lost. Thankfully, those days were consigned to the rubbish heap twenty years ago.

There were a number of transformations that the country's budgeting process has gone through since then. We have formal consultations with the social partners. At times it was done collectively and at times it was done on an individual basis. The consultation process has now been extended to society in general with the publication of the pre-budget document. The annual cost of living adjustment is now established according to a pre-determined formula that is acceptable to all social partners and is made known even before the budget is presented.

The government is no longer involved in the trading of commodities and the prices of services provided by state-controlled organisations are changed throughout the year in line with the requirements of the time.

All these changes did not come overnight - they necessitated a culture change. However, the end result has been that the budget was no longer a pre-Christmas nightmare and the Finance Minister stopped being considered as a Father Christmas dressed in a grey suit. The budget started to be considered for what it is - the government's primary interest of fiscal policy.

Any A-level economics student would tell you that, theoretically, the budget is nothing more than an estimate of government spending and revenue for the coming year.

As a country we have tended to focus a great deal on this aspect given the level of public sector deficit that we have had.

However, in practice, the budget speech still has represented the most important occasion during the year when the Minster of Finance reviews the progress of the economy against the world economic background, describes the economic policies of the government, sets out any new initiatives that the government expects to take to stimulate economic growth and spells out any new tax-related measures that require Parliament's approval.

Given the government's success in reining in the public sector deficit to sustainable levels and given that we already know what the cost of living adjustment is going to be, we can really spend time discussing the budget in the light of how the initiatives and measures announced by the Minister of Finance are going to impact on the economy, in terms of growth, employment, distribution of income, balance of payments, the competitiveness of firms, consumer spending, investment, etc.

This takes me back to what John Dalli wrote last Sunday and one notes how budgetary expectations have changed dramatically when compared to two decades ago.

In terms of my own expectations, apart from measures to stimulate activity in Malta's main economic sectors, namely manufacturing, tourism, and services, I would expect measures aimed at rendering the public sector more efficient, with a view to supporting better the productive sectors.

In terms of distribution of income, I would also expect measures aimed at strengthening the fight against tax evasion and measures aimed at supporting the purchasing power of the middle income earners.

We will be in the know by this time next week.