Credibility and sustainability

Much has been written and commented about this year's budget ever since Prime Minister Lawrence Gonzi presented it to the nation.

The Prime Minister and his team, ably assisted by Parliamentary Secretary Tonio Fenech, gave an account of the performance for the year, which saw, among other things: economic growth at 3.6 per cent; inflation is down by 0.81 per cent; the deficit reduced to 2.11 per cent of GDP; the largest number of persons in gainful employment since 1964 - 3.9 per cent of the labour force; down 0.6 per cent from 2006; an increase in tourists with a net increase in gross income of 7.1 per cent; a 4.1 per cent growth in the manufacturing sector and record foreign investment.

Dr Gonzi presented a holistic budget, which included a number of initiatives and served as a stimulant for further economic growth and social well-being.

Most if not all sectors of society have been addressed. There are initiatives and incentives benefiting the manufacturing sector, Gozo, education and training, culture and sports, tourism, the elderly, persons with special needs, the environment, animal welfare and I would say the stress was undoubtedly on the family.

It is a very well-structured and balanced budget which respects not only the economic progress registered over these past three years, when the country's finances have been overhauled and which today meet the EU parameters on all counts, but, more so, does not unnecessarily weigh down on the economy and on future sustainable growth.

Social equity was the focus and a fairer distribution of the wealth generated by us, as a nation, was high on the agenda. However, the budget is so broad in its reach that it goes much further than being just an equitable distribution of wealth. It provides the economic wheel with the tools to grind sharper, thus creating wealth through the stimulation of demand.

As the late Sir Keith Joseph, the father of Thatcherite economic thought and one of Tony Blair's mentors in economic policy orientation, claimed, monetarism is not enough. Detaxing and restoration of bold incentives and encouragement to business and industry are necessary too. Until the state contracts and, indeed, up till enterprise is encouraged both by this contraction and together with some assurance that it will stay contracted and by less destructive taxation and intervention, there will not be either the confidence or the climate for entrepreneurship and risk-taking that will, in itself, secure prosperity, high employment and economic wealth. This year's budget goes in this direction and, given the tax cuts and the bold initiatives and encouragement to the wealth creators, it should provide a real tonic for the next real challenge: the adoption of the euro next year.

The main message coming out of this budget is the restoration of confidence to the wealth creators but, at the same time, ensuring social justice in its widest possible definition and encompassing all sectors of society. This is not a budget belonging to one party but a bi-partisan budget that shall positively affect the lives of us as a nation.

It is an undisputed fact that everybody, to various degrees, is better off with this budget.

What seemed like a totally unrealistic goal in 1998, at the end of the 22-month Labour stint in government, when the deficit was taxing our economic growth, is today attainable and the 2010 dateline for a surplus balance is on the cards. However, we need continuity and consistency in policies as we are still not out of the woods.

In conclusion, I must say that it must have been very tempting for the Prime Minister to go overboard and present us with an electoral platform budget, but he did not, thus confirming that Malta and its government is truly credible and opt for sustainable measures driven by a vision.