Public money clangers

Three things are certain on the public money front: the budget deficit will be higher than the Finance Minister forecast in the Budget for 2008; it will not be as high as some predict on the basis of the fiscal chasm that opened up to July; the Budget for 2009 will not slash income tax in line with the PM's electoral promise.

The government has not admitted to the first certainty in full. Finance Minister Tonio Fenech said the deficit would be somewhat higher, but insists one should wait for the returns to the end of the year - only they will establish the real outturn. Obviously. And, yes, the last months of the year will see the revenue yield increasing. But what will happen on the expenditure side? It cannot be argued that the government got that side wrong because of one-offs, like the euro changeover or the general elections. All those one-offs were known to the finance team when they drew up and presented the 2008 Budget.

The minister will now tighten the screws on all forms of spending up to the end of the year. Still, how will the shipyard workforce scaling down be financed? And what further effect will Enemalta and the Water Services Corporation requirements have on the end-year totals? The Finance Minister will not offer replies to such semi-rhetorical questions. He will patiently continue to advise us to wait till the picture becomes clearer. With September beginning, the Budget preparations will soon be ending. The minister will already be receiving revised forecasts of revenue and expenditure to the end of the year. He knows the approximate size of the structural deficit.

Mr Fenech will have some explaining to do to Prime Minister Lawrence Gonzi, but he will not be rapped on the knuckles for this year's outturn - they will jointly try to explain it away with one-offs (not an acceptable explanation) and the higher-than-expected initial rise in oil derivatives (reasonable). Their heart will skip a beat, though, when it comes to budgeting for 2009 and fulfilling the electoral promise to leave €47 million in the taxpayers' pocket. That was a rash promise, even should Messrs Gonzi and Fenech be right in predicting that the way they proposed to raise the tax thresholds would cost no more than that, that the cuts would stimulate economic growth and so yield a higher claw-back than takes place when tax benefits are given (meaning that part of the benefit is taken back as the higher net income itself suffers tax).

Rash because it was predictable even as the promise was made that the government would have higher priorities to allocate any forecast spare cash. But then, politics, the art of the possible, turns into the game of reaching for the unlikely or impossible during the electoral campaign (see Barack Obama and John McCain both making promises to the US electorate which don't square up when costed).

PM Gonzi, while worried that he will be charged that such a broken promise will make a huge clang on the credibility floor, might take solace that this is happening early in the political cycle. True - but there is still the commitment to balance the budget by 2010. Aside from the electorate, with its eyes on the European Parliament elections next year, there will be the EU to contend with in the following year. Whatever anyone might say, public money does matter, and can never be in inexhaustible supply.