A budgetary agenda

Soon, thousands of us will listen to the Minister of Finance delivering his Budget speech for 2012. The perceived merits or weaknesses of the Budget will grab the media headlines for the rest of the year. We will then get on with the business of living in this island that is struggling to catch up with more prosperous EU nations in the quality of life league.

Budget speeches are usually well crafted tools of communication aimed at dazzling the public with sound bites- John Cassar White

Budget speeches are usually well crafted tools of communication aimed at dazzling the public with sound bites meant to inspire confidence in people who are struggling to get by in an increasingly difficult economic climate partly brought about by global events beyond our control. Spin doctors, masters of rhetoric and simply shrewd political experts will go through the script of the Budget speech with a magnifying glass that spots any minor irritants that could mar the upbeat mood that the minister will try to whip up.

But the acid test of any Budget speech is how effectively it addresses the real issues that will affect our prosperity in the years to come. Admittedly, the Budget is a one-year business plan but it is also just a link in a chain of political strategy spanning over at least a decade and that should underpin our long-term economic performance. If we are to heed the comments made by independent observers, like the European Commission, on how strong this chain of political planning is, we have good reasons to be worried.

Let me just quote from a recent European Commission report on Malta’s competitiveness: “The design and announcement of sophisticated strategies are not necessarily a guarantee that they will be fully implemented in the way they were intended to. The SmartCity project is a case in point”. I find the almost sarcastic tone of this comment very disturbing. Is the Commission hinting that the grandiose plans announced with tedious regularity in every Budget are no more than a list of good intentions that, however, are rarely realised?

Similarly, the Commission reiterated that “Malta should improve the overall qualifications of its workforce if further progress was to be achieved.” The justification for this sobering recommendation is the “loss in cost and price competitiveness” that Malta has experienced in the last decade when “nominal unit labour costs have increased by 29 per cent between 2000 and 2010, compared to an increase of just 14 per cent in the EU-27.”

So, apart from the often irrelevant details (like the likelihood of an increase in taxes on cigarettes) that some media like to speculate on before every Budget day, what should be the economic agenda that the next Budget and those after it, need to address? A careful and dispassionate observer of the local economic scene does not need to go further than read the Commission Working Paper on the assessment of the 2011 National Reform Programme and Stability Programme for Malta.

Despite the diplomatic language that characterises Brussels-speak, the list of priorities is as clear as crystal: “Important challenges such as reducing high early school leaving rates, ensuring a better link between the education system and the needs of the economy, as well as devising an active ageing strategy to foster labour market participation of the older workers remain to be properly addressed. The National Reform Programme also includes measures to reduce the incidence of undeclared work which may also help to ensure long-term sustainability of Malta’s public finances.”

I have no doubt that all these issues will be mentioned in the forthcoming Budget speech. But there is a difference between knowing what needs to be done and having the political will to do it, however politically unpopular this may be. The European Commission hit the nail on the head when it stated: “The (Maltese) government continues to pursue the reform agenda. However, the often prevailing impetus and ambitious plans are not always backed up by clear and reliable implementation strategies”. Put in another way, we often say the right things, but then fail to implement our plans.

I earnestly wish that the public debate on our economy moves beyond the short-term issues, like the importance of reducing the short-term deficit to below three per cent. It is the medium and long-term strategies that do not withstand proper scrutiny. I would, for instance, feel more upbeat if in the next Budget it is announced that we will implement immediately another European Commission recommendation to identify the causes of our early school-leaving “by analysing and measuring the causes by 2012”.

jcassarwhite@yahoo.com