Voices least raised, least heard

These have been a good few days for Prime Minister Lawrence Gonzi. His political adversary, Opposition leader Alfred Sant, made a remarkable gaffe while addressing thousands of Labour supporters at Birzebbuga, shown live on television. That was followed up by his second best week on the euro. The best week will be that which includes the coming New Year, when the euro will become Malta's currency. Meanwhile, last week, the head of the European Central Bank had words of high praise for Malta's economic, financial and logistical preparations to qualify to adopt the single currency, and for the tricky changeover.

The two positives were countered by the Opposition leader to some extent in a discussion on TV last Monday. He sounded very lame when he tried to explain away the Birzebbuga gaffe as a joke, though otherwise matched and maybe out-pipped the Prime Minister. But Dr Gonzi retained a good credit balance to be happy with. Not least because opinion polls confirmed Labour fears that Dr Sant had cost Labour some five points' slippage by slurring his opponent at the September mass meeting.

The balance went to some Nationalist heads, with whispers getting louder that the PM should call a snap election. Encouraged though Dr Gonzi may be by the apparent closing of the popularity gap, he is unlikely to be so bold. The election campaign, even a short one, would throw up many manoeuvres from both sides. Though the Nationalists might milk Dr Sant's gaffe for all its worth, he will go on with his own milking of the failure of the Prime Minister to reshuffle his team and wield the axe where necessary, the various bureaucratic shortcomings used to suggest a weak administration where misdemeanours were rampant, and the cost of living.

The latter issue may well become the major talking point of the general election campaign. Already it has become a major political football which will be fiercely kicked around in the Budget debate.

In this regard the Opposition leader is playing a dangerous game. Whether because he got wind that the government will pronounce a cost-of-living increase higher than that yielded by the Retail Price Index, or because he wants to whip up expectation Dr Sant is calling on the PM to announce a Lm1.50 weekly cost-of-living increase.

Such a move would break with the statutory arrangement in place for a number of years. Under it the increase is based on the movement in prices as recorded by the RPI in the 12 months up to September. Governments, including this one, have been known to move slightly off that basis, by giving the statutory increase plus bringing forward a notional increase, which would be deducted from the following year's statutory movement.

Even such a variation had its economic negatives. If it becomes a habit, the statutory-increase mechanism would turn into a joke. Budgets are no laughing matter. In Malta the Budget is not even much of an economic tool. Given the openness of the economy, the Budget cannot used to much effect to influence economic activity through deficit or tighter financing. On top of that one has to add Malta's obligations flowing from the Maastricht Treaty, and the fact that the structural deficit is still substantial in absolute terms, though it has been declining.

The Budget, beyond its basic function, is best used as a social tool. The basic function consists of setting out what the government proposes to spend in the year ahead and how it proposes to finance such spending, through recurrent expenditure, one-off receipts such as from privatisation, foreign (which now reads EU) grants and - if need be - further borrowing. The government can influence the economy through the capital budget.

Beyond that, it can only announce limited measures, such as the way Malta Enterprise allocates resources made available to it to promote investment, and say how much these will cost.

From the basic standpoint, I feel the Budget is best seen as a social tool because it can be used to adjust the benefits to the most needy. To discuss our Budget in overall terms, such as to give a special flat cost-of-living increase irrespective of need, is to befuddle its purpose.

Having carried out the basic function to see how much spare resources he has at his disposal, the Finance Minister should focus on social justice. He should see to what extent he could bring about further just redistribution by identifying and helping those who live at the outer margins of our society.

That is how modern Malta should be discussing the Budget, and not just in terms of political tactics and easily identifiable attempts at cunning manoeuvring.

Yet that is exactly how the Budget is not being discussed. At the centre of whatever passes for economic and financial discussion between the political parties lie the middle-income groups, and not those living at the outer margins of our society. Few seem to see this as a negative sign in our development.

Yet, that is what it is. The Prime Minister, being also the Finance Minister, has an opportunity tomorrow week to demonstrate that he is aware of the way social justice has been pushed to the back of the public stage, and remedy the situation.

It is necessary to talk in economic terms, to point out that more women need to be enticed into the gainfully active occupations defined by economists; to discuss how to promote direct investment to create jobs; how to make the tax system less of a disincentive to extra effort. Without generating the means, there would be nothing to try to satisfy the ends. But, unless it is made much clearer that a major end is a definite and visible enhancement of social justice through clearly discernible measures, generating means is not enough.

Means - additional revenue - that go in tax relief without relieving the poor and the weak, who do not pay taxes and who do not have enough income for their basic needs, are means unjustly spent.

The government is still calling upon people to send in suggestions for consideration before the Budget for 2008 is concluded. It is unlikely that many of those who live at the margin of society, or disabled individuals who have little income and few opportunities, have been to the fore of the writing or ringing in. Theirs is the voice least raised, least heard.

Theirs are the needs the Finance Minister should prioritise.

There are other priorities to follow in terms of generating the means. Amid the euphoria of the praise showered by the president of the European Central Bank, the constant message of our Central Bank governor was recorded, but not emphasised. Michael Bonello outlined a principal task Malta faces - to bridge the remaining income gap with the more advanced members of the euro area. He was technical: "Looking beyond the introduction of the euro... the task is to maximise the benefits of participation in (the) monetary union by making further progress on the path to reform."

He was prescriptive: "The success of this endeavour will depend on how effectively the public and private sectors work together, both in assimilating the lessons learned during the first years of EU membership and in implementing appropriate policies."

And he was also brutally clear: "...Since in a resource-poor and open economy like Malta's growth must be predominantly export-led, the focus of policy must be on increasing the country's international competitiveness." There you have it. The euphoria of gaining a euro star pushed the governor's warning to the bottom of the various media reports. Nobody highlighted its importance. Yet it is of maximum and enduring relevance which should not be ignored through navel-gazing.

Adopting the euro is a good step forward, with costs attached. For the advantages to outweigh the costs, the country has to perform better, by expanding its export base, which can only be done if we become more internationally competitive.

Looking back, regurgitating and dissecting the Opposition leader's suggestion that Malta should devalue by some 10 per cent before joining the euro, and asking the president of the European Central Bank what he made of that little bit of history, is all well and good in the fun and games of local politics. It does not carry the economic argument forward by a centimetre.

That was the argument emphasised by Mr Bonello.

Politicians will look back to try to spot every bit of dirt and speck of dust on their opponents' coats. They compete by highlighting mistakes rather than saying how exactly they propose to take country forward, how much that would cost, where the resources would come from. Economic and financial managers learn from past mistakes so they may look forward, concentrate and plan.

That is where the action has to lie. It is in regard of that the political leaders have to show their mettle, to help the electorate judge who is the most deserving of leading the country in the next highly challenging five years.