Budget Day today. Not a special day, yet no ordinary day, either, as former Prime Minister Fenech Adami said Budget Days would become. It is not a special date because nothing earth-shaking will have happened by the time the Finance Minister sits down to much-back-slapping this evening. But what he proposes will be important for every element of civil society, every corner of the economy.

Finance ministers have taken to trying to prick the expectations raised by the imminence of the presentation of the Budget. They brief the social partners about the main thrust of the budget measures. Even to the extent of indicating what taxes might be raised, such as the excise tax on cement.

One thing the Finance Minister will not be doing, it seems, will be to fulfil the 2008 general election promise to slash the to 35 per cent rate. In that regard he will continue to show up the Prime Minister as a political opportunist. Lawrence Gonzi came up with the proposal on the eve of the election, arguing that it would actually boost the economy.

Yet the Finance Minister reiterates it would be irresponsible to cut taxes now, thereby driving the nail deeper into the honesty of the Gonzi promise. Politics will be played. But politics should not play about with fairness. In this regard it is timely to note that the tax-exempt allowances have been static for three years, with the government ignoring the rise in incomes due to the statutory cost-of-living increase, which in turn reflects the previous year’s inflation.

By not adjusting exempt elements for inflation, the government deliberately erodes the real value of the portion of income exempt from tax. It seems set to do so again for the fourth year running in 2012, eating further into non-taxable income. In the process the Finance Minister will collect an indecent proportion of the €4.99 weekly wage increases to be given from January 1 because of the high inflation rate in the 12 months to September.

That has socio-economic implications – more unfairness, less purchasing power, a marginal help to contain the Budget deficit. Still, it will not be the main economic factor to look for in the 2012 Budget proposals. To my mind that factor will be the extent to which the Budget will stimulate investment, so as to fuel future economic growth. Growth depends on the demand for our goods and services. In that regard, external demand is certain to weaken in the coming year. Even if our main markets avoid a double-dip recession, which is an optimistic assumption, austerity measures will cut back consumption and thereby demand for our (among others’) visible and invisible exports. That is the near term. In the medium to longer term, economic growth depends on investment.

In this regard the Budget is being presented against a disturbing background. Malta has not been laying down enough real investment. That was concluded earlier this year in a deep study by Prof. J Falzon, an academic economist who studies the real world, not just theory. The conclusion also appeared in the assessments of the rating agencies that examined the Maltese economy.

Because of different emphasis on the size of the public debt – whose formal measurement does not include the loans of public sector entities guaranteed by the State of Malta – the agencies came to slightly different conclusions. Yet all of them focused on inadequate investment. The government might say that was due to the decline in construction activity, which the Finance Minister will hope to stimulate somewhat by giving financial aid to refurbish old houses.

The decline is a contributing factor. More disturbing is what representative of three leading manufacturing export companies had to tell the Business Times, as reported by this newspaper on Thursday. They were of one voice that they had to put investment plans on hold, or see it go to group plants abroad, for reasons related to government action or inaction. They made their points succinctly and tellingly while stressing that they were not venturing into politics.

The larger part of public expenditure is non-discretionary. It is set, for instance, on education, social security, the police and armed forces and so on. The impact of the expenditure will come through the discretionary part – capital expenditure and measures which the Finance Minister will propose to boost economic activity. In bigger economies measures to expand consumption matter far more than in Malta, where consumption leaks quickly into imports. Even there, though, the real investment climate is very important.

Here, it is essential. What the Budget proposes to do about that, not least to reduce bureaucratic impediments to investment decisions, will be a major economic yardstick by which the Finance Minister’s speech and proposals to sustain them it will be measured.