It seems that, especially in a pre-election year, the drawing up of the country’s budget has to battle, to emerge amid conflicting misconceptions.

There is the misconception, artfully fomented by the Opposition and by the General Workers’ Union and possibly some other unions as well, that all that matters is the dirigiste approach to economy, that is to give the people, say, Lm1.50 more per week and hang the consequences.

Factories will close, people will lose jobs, but what the hell? The rest, especially those on the government payroll, would have obtained a good rise and thus pressure from other people to join the government service would increase.

All this, of course, is a throwback to the economic model imposed on us in the 1970s, still very present in many people’s minds, that the duty of the Budget Speech is to announce what has been put up, and what the minimum wage will be. Whatever happened over the past years, and decades, both around the world and in Malta, does not seem to have wiped out this basic, and flawed, approach to modern economics. The fact is that governments today, except perhaps in Burma, do not even dream of trying this front-wheel drive economic model given that it has not worked anywhere.

Of course, in all this there is also calculation –by saying that the government will be giving a Lm1.50 a week increase, and then the government gives, say only 75c, will lead to a generalized anger against the government, thus adding more mileage to the Opposition. And that by producing queues of people who all complain about rising prices and compare that to the government’s claim that the economy is improving, one would be creating an expectation of pre-electoral goodies that only an irresponsible government would think of giving.

But there is a contrary misconception as well – the misconception on the government side that just as the macro-economy is doing well, as it is continually being drilled into our heads, and confirmed by euro accession, the IMF report and so on, so too the micro-economy must be doing well as well. So some people in government would like to see themselves as being on the bridge of a big ship, steering from very high up, where the waves do not impact and where a small turn of the wheel turns the huge ship. The fact that there are people down there, and that many of these people are hurting or have their own problems does not seem to cut any ice. It’s the bigger picture that is the more important.

To make a historical, political, economic point: all the subsequent analysis continue to show that the economic model followed by the 1960s governments was the right one for Malta, but the poverty of those days, the repeated rundowns by the British Services, the insecurity this engendered – and the fresh and pro-active approach by Dom Mintoff as against the tired, half-hearted approach of the Borg Olivier Cabinet – urged people to choose risk and change rather than continuity. We now know that had they chosen continuity, the people of Malta would have grown better and quicker (including being in the EU as from 1973 for instance) without the traumas of the 1970s and the 1980s, but they were not to know that.

The Budget Speech is not what we used to think it should be in those days of a central economy. Nor is it there to tell us what “they” gave us. Nor to tell us what “they” have put up. It is the means by which the government addresses the country’s economy, corrects imbalances and opens the way to further growth.

In his interview in today’s paper, Parliamentary Secretary Tonio Fenech speaks a lot about balance and that, indeed, is crucial. Even, and especially in pre-election year, the government must preserve balance. The government cannot substitute the country’s economy, it cannot become itself the country’s economy. It must understand that its duty is to guide the economy, to promote its increased growth and to facilitate growth, but not by taking on a different role from the one it should have.

The economy has grown, but it can still grow further. There is still room for further expansion. The government’s prime duty therefore is to find ways to eliminate the bottlenecks, to incentivise growth, to smoothen the wrinkles of public administration that so often hamper and stifle growth.

Many would want to see government stimulating growth by seeding the economy by giving out a bigger wage increase than is warranted. We do not agree with this. The present COLA agreement itself is still not linked to better productivity, let alone bypassing the COLA mechanism by anticipating an inflation spike. The people will benefit only if their business grows, not the other way round. But yes, the government should think more proactively on lightening the tax burden, especially that which impedes so many from doing part-time work.

Over the past year, but not as a measure of Budget 2007, the government has taken steps to address problems in tourism, and if numbers are anything to go by, whatever the government has been forced to do seems to have worked. It is in like manner that the government and its budget must work. One area that has been repeatedly brought to the public’s attention is the current state of the construction sector, which is as important for Malta as tourism is. The government must tackle this problem, at least more holistically than the GRTU’s suggestions.

Deep down, at sea level, the government must persuade the people there is absolutely nothing wrong with the economy or the economic model and that any change in GDP per capita must come from the people themselves, not from the government. In the end, the real duty of the government is to stand aside and let the positive forces work.