As the Minister of Finance prepares the Budget speech this weekend and, together with his Cabinet colleagues, puts the final touches on the Budget measures, he needs to take account of one crucial factor. What is going to be the impact of this Budget on future generations? Someone might claim that the Budget is a one-year exercise and as such the impact on future generations may be irrelevant. The reality is that Budget measures, once implemented, have an impact that is beyond a one-year horizon.
When one speaks of sustainable economic development, one usually is referring to that development that meets our own needs without jeopardising the ability of future generations to meet their needs. This implies that we are recognising the rights of future generations. Although some believe that future generations cannot have anything until the future becomes the present, many economists are increasingly recognising the rights of future generations.
The responsibility towards future generations requires us to take a long-term view of the economyd
Whether future generations possess rights or not, it is certainly accepted that those alive today should at the very least take into account the interests that future generations will have and the way that our present actions will affect those interests. It is probably correct to argue that no generation should inherit less economic wealth than the one that preceded it.
To achieve this we need to do more with less by making better use of resources, increase investment, promote stability and competition, develop skills and reward work. The responsibility towards future generations requires us to take a long-term view of the economy, rather than adopting short-term solutions.
This is where we need to understand that the Budget cannot be viewed within a one-year horizon. Therefore, the way public expenditure structured is just as important as the amount of public expenditure itself, albeit that the level of public expenditure impacts on the level of government debt, which in turn does impact on future generations.
Someone might ask why I have touched upon this issue. All we need to do is analyse the situation in Italy. The Italian Prime Minister, Matteo Renzi, is a great reformer.
He is keen on modernising the country and to get the Italian economy to achieve its full potential.
However, he is being hampered by decisions taken in the past and which did not take into account the needs of future generations.
He has to grapple with a level of public debt that is clearly absorbing resources that could be put to better use. He has to remove privileges enjoyed by certain sectors of the population and which are costing the taxpayer loads of money. These privileges are the result of political compromises of the past. He has to reduce the level of taxation on labour which is serving as an enormous disincentive to investment and job creation.
I believe that there is one area which deserves top priority in terms of our responsibility and commitment to future generations. It is employment and education. Everybody has the right to a good standard of living, with better job opportunities. Job creation is a necessity if our country is to prosper. Businesses operating in Malta must, therefore, offer goods and services locally and abroad at the right quality and the right prices.
For this, we need a workforce that is equipped with suitable skills.
We need a skilled and adaptable labour force and a flexible labour market which rewards work and treat employees fairly. We must have a culture of work for those who can, security for those who cannot. Helping people into the labour market and improving skills levels is the best way to reduce poverty, social exclusion and state dependence.
This week’s contribution is not to be seen as an alarm bell.
However, I trust that, when debating the Budget, we look less at short-term issues and focus more on long-term ones.
Will this year’s Budget reflect the country’s commitment to future generations, even if it may mean a bit less money in our pockets?