Government people are expressing alarm and surprise that after what they all believed to have been a good Budget, the very same supporters who should have been jumping for joy are scathing in their condemnation.

Obviously, one cannot speak of the Budget on its own. It is like the second half of a football game, with the first half being the electricity rate increases announced a week before, and extra time constituted by the mass job-shedding by the clothing industry.

It has been called a “no tax Budget” and it stakes its popularity on that. As this paper said last Sunday, it would have been suicidal to dole out more taxes in the wake of the electricity and fuel rates increases. For the government to expect thanks for not having been suicidal is rather rich.

The Budget is based on the statement that the economy is now doing well. The Budget Speech bases this statement on public finances (the deficit), GDP growth, and the figures for the gainfully employed.

Well, that’s one way of looking at it.

On 30 April, the country joined ERM 2 and committed itself to a policy framework that aims to lead Malta to adopt the euro by 2007-2008. Apart from the other monitoring exercises by IMF, the World Bank, the rating agencies and the European Commission itself, Malta’s economy is now analysed twice a year by the special ERM tool which is the Excessive Debt Procedure. According to these standards, things do not look as rosy as they were made to look last Monday.

It is very easy to condemn those who try to be analytical as “Nay-sayers” and “gloom and doom merchants” or “downers” but facts are facts, however one looks at them.

The fact is that in 2004 the government’s general indebtedness amounted to 75.6 per cent of GDP, three points more than in 2003, and over the 60 per cent benchmark established by the Maastricht Treaty. And it increased to 76.7 per cent over the next 12 months. Plus, it would seem that the government itself posits government debt as being 67.3 per cent of GDP in 2008.

Even before the electricity and water rates increases, inflation was moving upwards and the first four months of this year showed the economy to be in decline. One problem here is that while the rest of us can only reason on the basis of figures and statistics that are publicly available, the prime minister was speaking on the basis of more recent figures which are not yet available to the general public.

For instance, the figures for exports for the first half of the year show a decline of 15 per cent but the Prime Minister said the decline in real terms amounted to 6.8 per cent and he explained this away as being due to lower prices, not lower volumes.

In the end, it all points in the same direction: Malta is losing its competitiveness.

This was admitted by the Prime Minister. This is the core problem of Malta. But one prime reason for this increasing uncompetitiveness is the wave of mostly government-induced costs and taxes which aim to heal public finances but which have increased productivity costs. One way of looking at things is to see that, as was said last week by Angelita La Spada (equilibri.net) the ham-fisted way in which the government has attempted to reduce the deficit has increased, rather than reduced, uncompetitiveness.

Even before the electricity and water rates increases, the load of taxes has contributed to a higher rate of inflation which leads workers to ask for higher wages.

According to a recent investigation by Mercer Human Resource Consulting in 65 countries including Malta, it was found that all over the world, prices would increase more than wages by 0.2 per cent in 2006. But Malta was the only country of the 65 where, even before the water and electricity rates were hiked and the additional 50c bonus a week (which according to Tony Zarb is “not enough” and according to Alfred Sant “would not have been enough had it been Lm100”) where wages would outstrip inflation.

Now in the “no taxes” Budget, all this has been made even worse. When the rate increases were announced, it was said that “the government would absorb a good chunk of the impact” (The Times, 26 October). Now we find that the Budget neatly passes on the presumed inflationary impact of the oil price increase to employers. On the other hand, it is true that the capping of electricity costs to industry has saved them from paying huge sums.

The closure and job shedding in the clothing industry was long coming but coincided, with all its traumatic effects, with the upheaval of recent days. Following the Budget, all entrepreneurs will undoubtedly be asking themselves if doing business in Malta is still worth it. Comments made over the last few days by entrepreneurs who are already relocating or opening factories in cheaper locations suggest that many are doing their sums and coming up with the same answer time and again. Ditto for those Maltese entrepreneurs who are finding that other (even nearby) locations are less regulation-strangled, more business-friendly and cheaper, far cheaper. Expect more job shedding as a result.

This is what the government must address, and this is also why even its supporters are not exactly jumping for joy after the Budget. For they know the figures may say one thing, but what they see, and touch, around them, tells them differently.

The potential for growth is there; the Maltese are hard-workers and resourceful, they love challenges and they adapt easily to changed conditions. For all the gloom and doom spread by a negative Opposition, and for all the fuel and electricity hikes over the last few days, there are crowds everywhere at weekends, even in the deep, deep South, even in the restaurants which are said to be pricier than in London or Rome.

The economy is visibly shifting from manufacturing to services and there is more employment than the figures show. The economy is shifting gear and it is doing so with no visible trauma or disruption. Yet more must be done, even more than the government promised in the Budget.

Two Budgets away from the next election, those who put it there want to see it do more, tackle those issues that have not been fully tackled so far, and strengthen, not reduce, Malta’s competitiveness.

In other times, other supporters would have been happy with a government that employed everyone in the public sector. Times have thankfully changed. Malta is now fully in a globalised world and the country and its government must learn how to swim in these turbulent waters.

Forget cutting taxes as a pre-electoral gimmick: what the government’s supporters want is real cuts in government expenditure so that the government-induced costs are reduced and the load on people, families and companies lightened.

Now that would make a good, a really good, Budget. Next year, perhaps?