The minister of finance and employment presented the 2024 Budget on October 30. The Budget is more than just a statement of forecasted public income and expenditure, as it is the main economic tool of government.

With monetary policy within the eurozone being determined by the European Central Bank, national governments still have a great say, albeit within certain parameters, on fiscal policy, with the Budget being the main tool. This means that the way government prioritises its expenditure and the way it plans its income tends to give a direction to the economy.

The aura which budgets used to have till the mid-1980s is long gone, especially since the so-called cost-of-living adjustment (COLA) mechanism determines the wage increase resulting from inflation.

Previous to that, the government used to take an arbitrary decision on the amount to be paid as a compensation for inflation. This amount used to be shrouded in secrecy till it was announced and was the highlight of the Budget speech.

Presumably many of us still make an effort to calculate what the benefits, that the government announces as part of its social welfare package, will mean to their pocket, and rightly so.

However, a budget is not just about demand management, which aims to put money into people’s pockets (no matter how important this may be), but also about supply side management, which aims to expand the economic potential of the Maltese economy. If we do not expand the economic potential of our economy, our social welfare programmes become unsustainable.

Control of public expenditure is essential if we wish to manage our public finances within the parameters which we have subscribed to as a country

Additionally, a budget should not be seen as a one-off event, to be forgotten within the week, but should rather be seen as a live document that guides the government’s decisions throughout the year. Once the initial excitement or disillusion of the Budget passes, the actual work starts.

Irrespective of whatever is announced in the Budget, in terms of allocation of financial resources to the various ministries, agencies, authorities, independent bodies, corporations, etc, once the dust settles, the government needs to give priority to controlling its expenditure.

This does not mean reducing social benefits or reducing expenditure on education and health. It means, rather, that the government needs to focus on the value for money of the expenditure on various initiatives.

The more the government controls its expenditure, the more financial resources it will have to allocate to its priority areas. Control of public expenditure does not happen at planning stage, that is when the Budget is being drawn up, but throughout the year. It is a function of the leadership of the public service.

The Budget does not give the authority to spend; it is just an approval to allocate financial resources. Expenditure decisions are then taken throughout the year. Control of public expenditure is essential if we wish to manage our public finances within the parameters which we have subscribed to as a country.

Once the dust on the Budget settles, the government needs to take decisions on the direction of our economy and make use of the financial resources allocated accordingly. In the context of this year’s Budget, this issue acquires more importance.

Both the government and organisations representing employers and the business sector are stating that we need to transition to a new economic model, whereby our economy moves up the value chain.

Again, this will not a one-off event but a gradual process which can only lead to a successful result if we work on it day after day, incessantly.

As such, when the dust settles on the Budget, the real work starts.