The budget that was presented last Monday in Parliament by the Prime Minister in his capacity as Minister of Finance had some key messages, which probably are an epitome of what a budget should represent. However, let me start with the reactions to the budget speech, as I strongly believe that these reactions in themselves reflect the substance of the budget as a fiscal policy document. Generally the reactions to the budget were very positive, something which indicates that the Prime Minister has managed to get behind him a groundswell of public support, for what is probably the most important policy statement of the year.
As an aside I cannot help commenting that those who spoke in favour or against the budget before they even knew what was in it are making themselves irrelevant to the democratic process in the country and in any serious debate on the economy. Some expected this budget to be an election budget. I had hoped it would be the "euro budget" and my hopes have realised themselves. It is a euro budget (and this is one of the key messages of this budget) because it seeks to continue to strengthen the fundamentals of our economy, while addressing the issue of the fiscal deficit and while seeking to address the social issues facing the public.
It is a euro budget because the economic data published together with the budget speech show that the economy is growing stronger as we enter the eurozone, but it also shows that this is part of a process that owes its origin to Malta's EU membership. The 2008 budget represents a realisation and a recognition of the positive impact of EU membership on our economy.
It builds on the strengths that our economy has acquired since then and on the strengths that we have acquired over time through appropriate policies and projects the country towards 2015.
This budget is the first budget since the Prime Minister unveiled his vision for the country for 2015. Some may have thought that unveiling a vision for 2015 is an act of arrogance as the time period involved goes beyond the life on any government. In my opinion this view in still anchored in traditional political thinking.
This country needs a long-term vision for it to thrive economically and socially and the yearly budgets (including this one) are but links in the chain that help us top realise this vision. In fact, this is a second key message of this budget. It is not a budget which is short-term in perspective, but a budget with a long-term view.
Two comments which were made in reaction to the budget and which attracted my attention (no offence meant to the comments made) were those of the director general of GRTU, Vince Farrugia, and of the Secretary General of the UHM, Gejtu Vella.
The former described it as a good budget that however does not go far enough, while the latter spoke of a prudent budget. In a way the perceptions of these two gentlemen are similar and they tie to a third key message of the budget.
One may say that the budget was not bold enough and one may look at fiscal prudence negatively rather than positively. However, what these gentlemen are saying is that the budget views sustainability as a very important principle.
It is useless spending today whatever extra money has gone into the government coffers. We need to keep some it for he future, and we need to invest some of it to be to sustain the economy in the future. Whatever measures were announced in the budget need to be sustained in the future. Giveaways cannot be sustained in the future and this is why we have no giveaways in this budget.
The budget, as a fiscal policy tool, is probably the only economic tool left in the hands of the government. Monetary policy has been the competence of the Central Bank of Malta for the last years, while competition rules do not allow government much space to intervene directly in the operation of the economy. Given the critical importance of the budget to the economy, this document has a lot more to do about the leadership of the country than it used to in the past.
Thus the question that needs to be asked is whether the 2008 budget provides enough indications of sound leadership that enables us to look at the future of the economy with confidence. In my opinion the key messages that emerge from the budget are such that the answer to the question is an unqualified yes.