Not much to clap or jeer

While the Budget for 2010 presented by the Finance Minister last Monday was not quite a damp squib, neither was it exactly a heavens-piercing rocket. As speeches go it sprawled all over the place.

However, elegance is not mandatory in Budget speeches. What counts is the likely effects of the proposed government income and expenditure on economic and social developments.

The speech was replete with good intentions. I liked the fact the minister brought in fiscal morality and reiterated a grim determination to increase emphasis on stamping out tax evasion. That is essential in terms of the need for higher revenue and also of morality. It is immoral that so many people delight in defrauding the government of its proper tax take, thereby also defrauding honest taxpayers who pay their dues.

If combining the taxing departments under one authority contributes to that, it will quiet some of my misgivings over creating a behemoth.

I also liked the focus on the need to increase the creativity of our people. If we applied the same level of creativity exercised in evading taxes to more honest and productive pursuits, we should progress much more than we have done so far through the years.

I was also pleased that the government accepted most of the suggestions of the National Commission for People with a Disability to make it easier for the disabled to have gainful employment. I was less pleased with the scant reference to the disabled in the education section, five words in all. But then, the speech was a staccato exercise. The Education Minister will have more to say when it is her turn to speak more generally on the education sector in the Budget votes debate.

I was less than impressed with the main measure the Finance Minister put forward in the social field. His side saw the proposal to give a one-time subsidy to 97 per cent of households to mitigate the negative impact of the coming rise in water and electricity tariffs as the Budget's high point.

The minister did not indicate how much the rise would be, focusing instead on the €10 million cost of the subsidy. The Prime Minister, in his post-Budget press conference, did not give the figure either, but said little was left to the imagination.

Of course not - tariffs have to rise by over 28 per cent to bring them back to the level they were at from October 2008 to March 2009. They will probably be raised by more than that to allow Enemalta to recoup some of the losses made this year.

The minister lost an opportunity to inform people about how Enemalta is sourcing its fuel supplies, and to hold out hope that it will not be left in a monopolistic situation for much longer. Instead, he contradicted government policy, going back to subsidies which the Cabinet, with the Infrastructure Minister leading the chorus, was hitherto determined to bring to an end.

To make matters worse, the minister announced a subsidy which is socially regressive. It varies with household size and ignores income. At the political level, it will explode in the government's face when people receive their first actual-consumption bill next year.

On the economic front the government focused on micro enterprises. And why not - except that these enterprises will not invest and employ more simply because the government helps them out a little.

It is mainly the forecast of increased demand for their output that will make them - as with larger enterprises - invest more and take on additional labour. There is another snag: micro enterprises mainly produce for the local market. They should be helped as well, certainly. But Malta's priority requirement is to see more high-value-added, export-oriented investment.

The Finance Minister sought to encourage that as well, but more through explaining what a revamped Malta Enterprise organisation will be targeting and encouraging than anything else. What he said was useful, yet far from nearly enough.

As always, the devil lay in the detail. A cursory glance at the abstracts of income very quickly reveals that, under a number of votes, the estimated revenue is hugely optimistic.

A similar look at the expenditure side shows that the government will have underspent quite significantly under several capital heads this year. Saying that EU funds, not drawn down (by many millions), will be available for future spending is not an explanation for the shortfalls, but mere glibness.

There is mystery, too, in the Budget. The Piano project is going to be executed without clear public finance.

The fiscal trick there is that government will use public assets (rather than revenue) to generate income to finance expenditure without affecting the exploding structural deficit. Picking on Mr Public to pay Renzo is not terribly clever.

Budget night was characterised by the body language. The government side stopped cheering half-way through. Opposition jeers petered out about the same time. In truth, there was not much to clap or jeer about.