Spotlight firmly focussed on the Finance Minister

The Minister of Finance gets star billing all the year round in any government. In the last quarter he gets the leading role. It is during those three months, usually in late October or early November, that he presents the Budget – the estimates of income and expenditure for the coming year.

Although one of our prime ministers once said he wanted Budget Day to be just an ordinary day, it is never the case, particularly nowadays.

The Budget is always looked upon as the main tool for the government to influence the economy, with its taxing and spending policies having a potentially strong effect on the prospects for economic growth. In a monetary union such as we populate nowadays, such influence assumes greater importance.

That is particularly so this year, at a time when governments all over the world have to juggle with and balance the needs of lubricating the economy while cutting back overblown budget deficits.

We have not done as badly as other countries in the EU in this regard. We too were hit by the recession but relatively mildly so. The government had to take remedial measures, yet of a micro nature – concentrating on a few manufacturing companies in potential distress.

Our Central Bank automatically followed the historically low interest rate policy of the European Central Bank, as we are bound to do through our membership of the eurozone. But it did not have to pump money into the economy by buying government bonds. Such limited stimulatory financing as was made was put in by the government directly.

Nevertheless we too have a deficit problem. It is certainly not as big as that of eurozone countries like Greece and Ireland. Nevertheless it is there, and has to be tackled. It is coming down this year, helped by reasonable nominal growth (it’s that which counts for deficit and borrowing ratios), yet not so much as the crude figures indicate. Part of the buoyant taxation revenue is due to a one-off effect, induced by further tax amnesties.

That effect will not be there, certainly not so pronounced, in 2011, unless the Finance Minister has some new trick up his sleeve. That said, the minister will still be aiming to reduce the deficit (relative to GDP) by some one percentage point, so that we might come to the magical three per cent or less in 2012.

That would not only bring us within the so-called Maastricht criteria. It would allow the minister to start relaxing the income tax regime, as he and the Prime Minister had promised to do in the pre-election madhouse, in time for the next general election.

This reasoning explains why the minister assumes the – not a – leading role around this time of year. The popularity of the government, not to mention to a considerable extent the health of the economy, depends on him. He is the man in the driving seat. Brake suddenly or overspeed, and the national bus is in trouble.

Rather oddly, the drive forward is much bumpier than would have been imagined this time round. For one thing the minister was very injudicious in his reference to his home-help’s non-paying of social security contributions. His intention was good – to illustrate the need for all those obliged to do so to comply, since they could end up losers if they did not.

But he came across as a celebrity customer of services which required VAT compliance even at his household’s end but failed in that regard. Politics being what it is, the minister’s domestic observation is stealing media space from other important matters which he has to deal with, and which explain his leading role in the government billing.

Once again he is facing calls not to burden economic agents with hefty government-induced costs. In that regard the focus is once again on the water and electricity tariffs.

The minister expects them to remain stable at their current very high levels, but not to come down, seeing that the price of crude oil and its relevant derivatives is unlikely to fall.

I find it telling that the government has not as yet managed to persuade the people that tariffs reflect market forces, other things being equal. Its failure lies in the fact that they are not equal. Inefficiencies continue to prevail in water and electricity production and distribution, and these add to costs.

The Finance Minister is also the man to see that the Malta Social and Economic Development Council functions well, more so at this time of year when he should be well advanced in his traditional consultations with the social partners about his Budget plans. Remarkably, the social partners, often inelegantly at odds with each other, are of one voice in saying that this time round consultation is there in name only.

On my part I found off-key a non-Budget statement made by the minister on Tuesday. He spoke on the need to align education hours and after-school activities with the needs of working mothers to encourage more women to seek gainful employment. Again, his intention was good, but he would have done well to be more elaborate about the details.

Ours is a democratic republic founded on work, so says Article 1 of the Constitution. But work relates to the right to work, which follows in Article 7.

We have to be efficient in our working arrangements, yet not even remotely in the sense that we adapt family needs and children’s hours of studying, practising and relaxing to job needs. It should be the other way round, and that not only at a time when the family unit, however it is made up, is under so much focus.

The Finance Minister might do worse than revise his script and his delivery. The glare of the spotlight uplifts – it also mercilessly reveals.