NEWS | Wednesday, 10 October 2007

Budget carefully

As the Prime Minister puts the final touches to the forthcoming budget to be presented on the fifteenth of this month, he faces a daunting task. The dilemma facing him is whether to implement an electoral budget with the consequential havoc it can run on all government finances or a restrained budget keeping state finances on an even keel as his top priority. This newspaper favours a budget, which in no way upsets the economic fundamentals of the economy. Controlling the deficit and contained inflation have been the hallmarks of the way the Prime Minister has managed to stir the economy.
This is much to his credit and in no way should he risk throwing overboard all the benefits, which have been achieved. If the fundamentals are finally in place this is due to the increase in the Vat rate prior to dr gonzi assuming the top post in the land and to his immediate recognition on assuming office that the state finances were in dire need of attention? Accordingly taxation was increased and sacrifices made. They placed us in a position to meet the Maastricht criterion and qualification for the euro. His first decision to keep the ministry of finance appeared highly risky when made but has shown to be a wise decision. It immediately brought all departmental spending under the microscope of the prime ministers office. It meant that all ministers were finally made aware that money is indeed a problem and its spending should be made wisely and according to value for money criterion.
It is worth noting that even inspite of this constant gaze; government spending is still exceeding government revenues. A simplistic explanation is that most costs bundle themselves in the form of wages to the public sector, pensions and welfare pay outs, all of which inevitably increase yearly. While this is a valid explanation, it only goes half way to explaining the whole picture as government costs also include consultancy fees, over-runs on contracts, one off payments etc. It is here where a lot of the spending can be brought under tighter reign. This requires constant surveillance and attention. Government is well advised to reinforce all existing structures with beefed up powers to be in a position to detect and control any unnecessary costs.
Citizens do give much attention to the yearly budget while limiting their interests to where it affects them personally. While unfortunate, this is to be expected. Accordingly the annual wage increase attracts maximum attention with its cross the board ramifications. This is a throw back to the days of socialist central control economy, which places the fundamentals of all businesses on the same plain and in the same position to afford such increases. It carries little economic sense now that the country has joined an open and free market European Union. With time this practise too needs to be revisited. Its ramifications on the private sector are enormous. It certainly is an issue, which should be taken up for discussion at the MCESD.
The wage increase should take into account imported inflation as a result of the hike in the price of oil and cereals. Equally important is that government takes into account the effects of a strong euro vis a vis the dollar which is likely to have on our exports, including the invisible export tourism. It is a balancing act, which has to be done carefully in order not to upset the fundamentals of the economy.
Our advice is to see a budget, which carries on throwing big financial resources in education. In an information society powered by high Tech, small countries are fortunate to be able to compete with bigger countries on a level playing field. Size no longer matters as much. Societies are no longer exclusively judged on what they have but on what they know. Accordingly an educated work force is of fundamental importance. The budget also needs to address the environmental deficit we suffer from. Just as the economic deficit was addressed, attention should be given to investing further in the environment. This has a direct effect on our life styles. Much has already been done but there is a lot still to be done. Polluted waters, scars on the landscape, state of building construction sites, illegal dumping and the stench of tuna pens to just mention a few of a hit list which requires urgent attention.
The liberalisation and privatisation process should carry on in earnest. It is to governments credit that the number of persons employed in the public sector has reached record low levels of thirty percent of the work force. This is the most effective way of getting the public sector pay role under control, as also of inculcating a work ethic, which is par for the course in the private sector. The reduction of red tape and bureaucracy needs to be given attention, not merely by pious words of intentions but in deed. Government itself increases many of the costs of business. Delays too are the scourge of business with many projects often put on hold awaiting the necessary permits.
More stream lining, one stop shops are required and quickly.
We strongly urge government on the eve of the budget to keep the fundamentals of the economy in place. An electoral budget will throw all sacrifices made by the people to the wind.