And now for the next trick: making ends meet!

Reducing costs across the board will always prove more difficult than it seems.

From the underlying tone of the speech made last Wednesday by Finance Minister Edward Scicluna while speaking at a business breakfast for non-governmental associations organised by his ministry as part of the pre-budget consultation exercise, it is obvious that he will be finding it very difficult to manage to make ends meet come next year's budget, to be announced in November.

This means that he has to see how he can balance the books - or rather keep to an acceptable deficit level - either by raising revenue (i.e., an increase in taxation) or by reducing costs or, as is probable, a bit of both.

To be sure, his emphasis was on reducing costs across the board, announcing "a spending review" to identify the deadwood in the public sector that has to be removed in order to trim unnecessary expenditure. The minister had already spoken of the need for reducing expenditure at a meeting of the Malta Council for Economic and Social Development, and he has been constantly harping on the importance of cutting costs by changing practices that may be irrelevant to today's needs.

Minister Scicluna rightly argues that without controlling the deficit, the country cannot have economic stability, and without this stability we cannot "give certainty to local and foreign investors" that leads to more enterprise, generation of wealth and job creation.

In spite of the evident difficulties, the minister seems to have expressed his confidence in the government's ability to deliver on its commitments to the country. Time has to tell whether these are just the brave words of an overly optimistic minister. Reducing costs across the board will always prove more difficult than it seems. Unions will keep pressing government to employ more people and give state employees better working conditions. The minister acknowledged that there are "powerful forces" pushing to continue doing things as they have always been done, but I seriously doubt whether he realises the big challenge he has looming in front of him.

Resistance to change has been the bane of many a politician. As Nicolo' Machiavelli warned in The Prince over five centuries ago, "There is nothing more difficult to take in hand, more perilous to conduct or more uncertain in its success, than to take the lead in the introduction of a new order of things." He even explains that "whenever the opponents of the new order of things have the opportunity to attack it, they will do it with the zeal of partisans, whilst the others defend it but feebly, so that it is dangerous to rely upon the latter."

I wish Minister Scicluna all the luck he needs to really remove the deadwood. Whether he succeeds - even in removing part of it - is still to be seen.

The government's main recurrent expenditure is in wages and salaries. Firing people can hardly be envisaged, but the minister has hinted at reforming work practices to make for a more efficient output from government employees. Here he will find the full wrath of the unions turned against him. They are the defenders of practices that could have made sense when they were introduced, but now only serve to boost the money that state workers take home.

Reforming such practices is a gargantuan task, as the unions argue, in a way, as if all the perks that some state employees have are no perks at all but a part of their take-home pay. The argument will be made that these workers are used to a certain level of living and it would be unfair if they were expected to lower their standards. The unions will fight and stick to this position till kingdom come.

Another thing that is clearly on the minister's mind is the promised reduction of electricity and water tariffs as from March 2014 - an electoral promise that the government can hardly break. One wonders whether this could be brought about without making Enemalta's financial position even more precarious than it already is. Enemalta is debt ridden to the tune of over €800 million, and the promised reduction before the beginning of some sort of reduction of this debt will only aggravate matters. Perhaps the government is hoping that by that time Malta will have started importing electricity from the European grid through the Sicily-Malta interconnector and closed the inefficient Marsa power station. Whether this will happen on time is still to be seen. Even so, this will help in avoiding an increase in Enemalta's debt, rather than in starting to reduce it.

This can only start - hopefully - when and if the gas-operated plant starts producing cheaper electricity. This is scheduled for March 2014, although observers have always had doubts about whether this tight time parameter is realistic. These doubts are still there, of course.

While the reduction in tariffs will start next March, other measures to be announced in the budget are normally operative as from the first of January, if not earlier. The minister is confident that the government is on track to push the deficit down to 2.1% next year, while at the same time addressing the country's pressing fiscal deficit and debt levels and guiding the public sector, including entities such as Enemalta, towards financial sustainability. Moreover, the minister seems set on avoiding the tight situation of the country's finances being complicated by overly optimistic revenue forecasts.

With the EU's monitoring eyes straining to examine Malta's next budget, the government can hardly afford to present a budget that would be considered generous to the taxpayer. It is normal for any administration to present austere budgets in its first two years in the legislature, with the hope that it will be able to loosen its tight hold on money as the next general election approaches. The current financial situation indicates that the present administration has no alternative but to follow this established pattern. In other words some type of increase in taxation is to be expected, even though there was not even a slight hint of this in the minister's speech.

Whatever the Edward Scicluna says or does, Joseph Muscat stands to face the first real dent in his popularity in January, when next November's budget starts to hit home, followed by some relief at the end of March. However this 'relief' will affect family budgets much later, as the first utility bills based on the reduced domestic tariffs will not be in mailboxes before May.

This will not go down well with the electorate and could very well signal the beginning of the end of its fascination with the Joseph Muscat phenomenon.

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Minister Scicluna would have an easier time with the budget if he had found a billion euro nest egg waiting for him rather than the huge debt mountain that your party left behind. The debt servicing payment is a big chunk of the recurring expenditures he must deal with. Additionally, the minister didn't inherit a plethora of state assets to sell. Amazing, how these little facts escaped your attention. It would be refreshing if for once a PNer took responsibility for the debt mess they left behind. Alas, I'm not holding my breath for any admission to happen.
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"The argument will be made that these workers are used to a certain level of living and it would be unfair if they were expected to lower their standards." |<>| Perit, remember Greece? Unless this administration finds means to unclutter the public sector, and move this deadwood to the private sector, no new "Movement" would be able to resurrect the dead.