The budget has now been presented in Parliament. The government has had to reach its conclusions on what is best for the country on its own. It may be claimed that after all this is the responsibility of the government, but in a society which we wish to become more democratic, joint decision-making is always better than any other approach. I continue to insist that it is indeed unfortunate that the social partners have lost what is probably a unique opportunity by failing to reach agreement on the social pact. It would have brought about an element of certainty in the economy, at a time when, from the demand point of view, there is still a great deal of uncertainty.

Essentially the social pact would have enabled the social partners to adopt common strategies for economic growth in an increasingly globalised environment. It focused on the collective agreement for public service employees as this was seen as an important measure to address the fiscal deficit and thus reduce the need to raise the tax element further; but it also focused on issues that were meant to increase the competitiveness of firms operating in Malta. To claim that discussions on the social pact dealt with just the remuneration package of public service employees is a deliberate distortion of the truth.

It was a unique opportunity because in other countries where such agreements have been reached, it had always been in a situation of a grave crisis. By this I mean a situation where the economy would have practically collapsed, with both unemployment and inflation around the 20 per cent mark. We are nowhere near that situation and so we would have had the chance to look at things more rationally. I hope we would not have to experience a collapse of our economy before any agreement on the social pact would be reached.

The likelihood is that now we will have months of bickering on the measures announced in the budget, while we are meant to put the economy to work to achieve growth. It is already very evident that the decision not to allow public holidays that fall on a weekend to be increased to the vacation leave entitlement will remain the centrepiece of several comments on the budget. However, the incentives that the budget provides to stimulate economic growth and job creation may be conveniently ignored.

Admittedly the budget does contain some measures that may hit families negatively. This is not an issue that should be taken lightly by anyone; even though lower income families have been protected. What is probably the hardest hitting measure - the surcharge on the electricity bill - shall hit more those households that spend more on electricity. Households that spend less shall pay less.

However, there is no escaping the fact that the fiscal deficit needs to be addressed to make it sustainable; that electricity rates have had to go up because the cost of providing such a service has gone up; the pensions system needs an overhaul to make it more equitable for the whole of the population and not just for some; social services fraud needs to be minimised if not eliminated totally; the monopolies that still exist need to be removed (including the one at the ports) because they bring about rigidities in the economy that in turn lead to increases in costs; the involvement of the public sector in areas which could be more productively managed by the private sector needs to be reduced.

Even so, the budget also allocates resources aimed at creating economic activity across the board. The incentives aimed at stimulating activity in the financial, manufacturing, tourism, and services sectors should serve as an encouragement to local and foreign entrepreneurs. At this stage the business sector needs to show it is alive and kicking, and it can only do this by investing and looking at these incentives not as some form of cash handout but as assistance to create employment and generate profits. And there is no conflict between job creation and profits as after all it is only profits that enable the business sector to grow and employ more people. In other words, it is only profits that guarantee jobs.

This budget gives a very clear message to the business sector that the government is willing to help economic activity to grow, but it is the business sector that must invest. This brings us back to the social pact.

The social pact would have ensured a sense of commitment to all the budget measures as well as agreement on the priority areas towards which the resources available to government would be channelled. It would have given the country a sense of direction on economic and social issues in the first years of membership of the EU, thereby enabling the business sector to operate more effectively.

It would have given a clear signal to investors that the country is capable of facing economic realities in a mature manner thereby safeguarding employment and attracting further investment.

Unfortunately, this was not to be. As it is the government was left on its own to give the economy the sense of direction. In effect the budget that was presented to Parliament on Wednesday (even without the social pact) is a document that seeks to address aggressively the key issues facing the country, namely the fiscal deficit, employment creation, education and the environment. There was no mincing of words by the Prime Minister (being himself the Minister of Finance). There was no standing back from the responsibilities that need to be shouldered, even though some of the decisions taken may well lose votes for government.

It was a budget with a very clear strategy. We want economic growth; this economic growth cannot be achieved at the expense of social solidarity; economic growth in Malta can only be sustained if there is investment in education and the environment; this economic growth will not be achieved through direct involvement by government in the economy but through the private sector with the help of incentives given by government. Pity that we do not have the social pact to support it!