Bad diagnosis - wrong medicine

The Malta Independent

Bad diagnosis ` wrong medicine

The day before the budget the CoS published the GDP figures for the third quarter which showed a reduction in real terms over the same period of last year. By all measures this is a worrying development .

One would have expected the budget to make a sober assessment of the serious situation and to prescribe the right medicine for the prevailing tough circumstances. It was not to be .

On the contrary the Minister wasted his energies in cheap partisan propaganda by claiming that the deficit in 1998 was Lm150 million . He unashamadely blamed Labour for the structural fault in government finances as if it is possible, let alone probable, that such a deficit could be created in 22 months.` Lino Spiteri, the ex Labour minister who presented the 1997 budget, could not have written more timely when on budget day he shredded the government`s pretensions that current budget problems have a Labour certificate of origin.

The sobriety shown when in the budget speech for 1999` Minister Dalli admitted that the `current financial situation is the result of large structural defects that were layered on each other over the span of several years` was proven to be a very rare moment of departure from the state of permanent partisanship so evident` in the management of the national coffers.

A bad diagnosis inevitably leads to prescription of the wrong medicine.` Reciting` his eight budget speech the chief architect (by his own admission) of` the structural faults in our public finances that were layered on top of each under his presidency at the Ministry of Finance, the Minister prescribed more of the same medicine that has stalled the economy and is driving it to near breaking point.

A prescription of more taxes and wholesale privatisation is exactly what the country does not need.

Tax enforcement and efficiency by all means. But drawing another Lm57 million (+9.22%) in taxes at a time when the economy is expected to grow at 5% in nominal terms (and even this looks optimistic) is sheer poison medicine for a sick patient. Economic recovery cannot be stimulated simply by more efficient tax collection. Economic recovery depends as much on growth stimulation and expenditure control as on efficient tax collection.` Together they are the three legs of the tripod that must support any serious recovery programme.

And projecting privatisation revenues of Lm47 million in the next 5 weeks by the end of the year and a further Lm260 million over the next 3 years is nothing short of crisis disposal of assets to plug a financial hole.

The Minister while persisting in his highly partisan speech and approach expects the Opposition to pronounce itself on better ways to break out of the impasse which he has brought us into. Meanwhile he is doing his best to ensure that whoever follows` will find no pool of special funds in the form of tax arrears, tax enforcement and privatisable assets which can be used to finance a re-structuring programme. God helps whoever follows seems to be his motto.

Democracy will work its way to allow ample time for the Minister to watch the Opposition`s solutions to the problems he created being applied in practice. At the time he will protest from the opposition benches that he had the right` solutions in hand. As if eight budgets are not enough to provide a real lasting solution.

True solutions to our economic woes must be largely based on growth and expenditure control even if for some time things may have to get worse. The solution lies in` massive investment in education and re-training of our workforce to make it more mobile and willing to seek productive jobs.` This will` reduce the operational expenditure of central government which otherwise will keep getting fatter and fatter demanding` more consumption` whilst all around it are starving to death.