At all times and in every country, budget time presents opportunities for political tightrope walkers and prestidigitators, who try all sorts of tricks to mesmerise their audiences. Some manage to steal the show. Those of them who are clumsy are caught in the act.

Spectators, who are more discerning and less impressionable than the average, are fully aware that the artistry of the performers involves sleight of hand and illusory skills.

Reality is as incontrovertible as it is obstinate, and will not vanish with the spells of conjuring tricksters.

Conflicting presentations

The fact remains that public opinion is generally confused when it is confronted by wildly conflicting presentations. In such situations, public opinion is all the more likely to go by the yardstick of its own experience. It is, naturally and invariably, likely to concentrate on the actual state of affairs, and to take predictions about the future with a grain of salt. This all the more so when past predictions turn out to have been off the mark, not to say deceptive.

This year’s budget debate is no exception to the rule.

On the one hand, you have a Prime and Finance Minister who claims that the economy is “on track”, and that he is seeing “signs of growth being registered in the economic environment”. On the other hand, you hear the same Prime and Finance Minister saying, “sacrifices are inevitable”.

He is referring to sacrifices yet to be announced – but, well before he spoke, the government had, with the stroke of a pen, and without consulting Parliament in advance, jacked up the price of fuel, including petrol, diesel oil and paraffin, and scaled down the student stipend system.

This, after introducing an airport departure tax (arguably the highest in the world), extended the reach of Value Added Tax by a considerable margin, and authorised increases in the price of bread and public transport fares, among other things

Heavy toll

A report released by the EU in Brussels in the second half of October revealed that between l995 and 2003, “Malta experienced an increase in taxation amounting to 6.7 per cent of GDP” - one of the heaviest tax increases in the European Union! It goes on to state: “Malta relies heavily on indirect taxes, with its share of the total tax well above the Union’s average.” (Malta, 42.6 per cent; the combined EU average 37.8 per cent)!

These measures have taken their toll. Taxpayers have been squeezed to the point that the pips of the middle and lower income groups are beginning to squeak

This is the ugly face of reality, and no amount of political cosmetics will hide the truth, which is under scrutiny in Brussels.

The statistical office of the European Community (Eurostat) only recently disclosed that Malta’s fiscal deficit for the year 2004 (-5. per cent of GDP) was the third highest in the EU member states. This was way above the three per cent Maastricht benchmark.

Ominous disclosure

Even more ominous was the disclosure that Malta’s debt ratio, at 75.9 per cent of GDP, overshot the 73.4 per cent estimate set by the European Commission early last year, when it published its opinion on the update of the convergence programme submitted by the Gonzi administration.

Although the convergence programme was considered “essential for Malta’s long-term financial sustainability”, the government continued to over-spend, and to increase the debt burden during the year 2004.

All of this represents water that has passed under the bridge.

The government did not learn any lessons. It continued to overspend this year and it has continued to

borrow.

A press release from the National Statistics Office, carried in The Malta Independent of 1 October 2005, disclosed that recurrent expenditure in the first eight months of this year was l3.1 per cent in excess of the same period in 2004.

Outstanding central government debt at the end of August reached Lm1,410,6 million, representing an increase of Lm59,5 million, or a 4.4 per cent increase on the Lm1,35l,1 million outstanding at the end of August 2004.

Political mumbo-jumbo

The official figures speak louder, and far more eloquently, than words. The clinical outcome is far more persuasive than the political mumbo-jumbo of politicians who have lost the plot, even if they are never lost for words.

The stark truth behind all this is that, after so many years in office, the government has not succeeded in revving up the economy. It has taken more of your money. It spent it all. It went on borrowing. And now, it wants more!

The number of inactive people in Malta – those who can work, but do not – is the highest in the European Union. In 2004, the economically inactive population (aged 15-64) in Malta stood at 4l.7 per cent. The average inactivity rate across the EU is about 30 per cent.

When these are the facts of life, and when the emerging situation is beginning to have an impact on the economy, and to bite the taxpayer and consumer, to say that “the economy is on track” imposes too much of a strain on the imagination!

The facts leave no room for fiction.

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