The Annual Budget puts forward a proposal for public spending for the upcoming year. This plan is a clear indication of Government’s overall priorities as well as its economic and social objectives. The process is spearheaded by the Ministry for Finance and Employment; however, the final budget document is also a reflection of extensive consultation and liaison with all relevant stakeholders.
The first step is the formulation of the budget. Initially, the Economic Policy Department formulates macroeconomic projections. These are predictions on the state of the economy and are used to project the expected revenue for Government. This information is submitted to the Budget Affairs Division, which in turn adds additional forecasts for revenue. From these figures, a spending ceiling is established to set the upper limit of spending.
From here, a process of consultation begins. Ministries and Departments prepare a set of business plans. The plans outline a Ministry’s planned spending in a list of priority items which include allocations they would need to make for specific functions or projects falling under their remit. These business plans also provide an indication on their planned spending over the upcoming 3 years. Bilateral meetings are then held between the Ministries and the Ministry for Finance and Employment to discuss the business plans extensively. This allows the Ministry for Finance and Employment to make their proposal for financial allocations under each Ministry. These allocations are then submitted to Cabinet for their final decision.
Another important factor is Government’s overall vision which is shaped by political priorities and commitments as outlined in the electoral manifesto, as well as emerging priorities throughout their legislature. In preparation for the annual budget, Government issues a pre-budget consultation process with the aim to engage in discussions with the public and various stakeholders. This includes representatives from different economic sectors and employers’ associations as well as trade unions, civil society, and other social partners. This feedback is gathered so as to better address fiscal, economic and social aspects raised by this consultation process.
The Budget is also drafted within the EU context. Priorities at the European level will be reflected in Member State budgets. Moreover, each year, a draft budget is submitted to the European Commission and is evaluated prior to its approval by the Maltese Parliament. The EU member state budgets, and the medium-term plans are also monitored by the EU Commission to ensure that they are in line with the fiscal policy coordination and surveillance framework.
After the budget document is approved by the Cabinet of Ministers it is raised to the Maltese Parliament, where a vote is taken on its adoption. Once adopted, government departments focus their energy on the implementation and monitoring of the yearly budget. The Budget Affairs division monitor public revenue and expenditure throughout the year. They are also in charge of monitoring the implementation of each budget measure. Moreover, the Treasury Department maintains the Government’s cash flow position, whilst also keeping account of government spending.
Public Finance is regulated by a legislative framework which includes a number of laws, as well as a dedicated Chapter in the Maltese Constitution. Chapter 9 deals with Public Finance and establishes the Consolidated Fund. This fund is an aggregate of all the revenue which Government collects. Another important element is the scrutiny by the relevant institutions. The National Audit Office audits departmental accounting statements, as well as those public sector entities and companies where Government has a share of 51 per cent or over. Another important entity is the Fiscal Council, which reviews and assesses Maltese fiscal and economic policy, with the aim of ensuring fiscal stability. They also have an important role in the Fiscal Responsibility Act, which regulates the above-mentioned process.
The budgetary process is the result of the work of countless individuals across Government in the preparation, delivery, and the regular monitoring of actual Government spending. It is also a mechanism that ensures Government’s accountability towards the distribution of public funds.
The Budget implementation
The Implementation Directorate is a permanent structure within the Public Service and forms part of the portfolio of the Office of the Prime Minister. The Office is the result of a reform within the Public Service back in 2013 when it was tasked with the responsibility to inform the public about the status of each measure listed in the budget speech until it is implemented. This includes the monitoring of measures beyond the budgetary year to ensure complete implementation. The work of the Implementation Directorate guarantees accountability as following the necessary monitoring, results are published in an annual publication titled ‘It-Twettiq tal-Baġit’.
The Implementation Directorate while at the centre, does not work alone as it collaborates with various important stakeholders including all Ministries and many Government Departments and Entities. The process commences with the delivery of the budget speech and the following day the Office together with key stakeholders meets to list the budget measures. Each measure is assigned to a particular Ministry and is aligned with the Programme of Government and with the Aims, Targets, and Indicators of the United Nations’ Sustainable Development Goals.
The list of measures, once confirmed by Permanent Secretaries in each Ministry that it pertains to their respective portfolio, is officially circulated to each Permanent Secretary and a short period is allowed for the preparation of an action plan for the implementation of each measure. The Implementation Office carries out the vetting of all action plans which are finally approved by the Cabinet of Ministers.
During 2024, through an ad-hoc IT System, all Ministries will be submitting monthly reports to the Implementation Directorate and the latter will evaluate and rate the degree of implementation of each measure. The implementation reports submitted by Ministries are vetted and evaluated by the Directorate against the previously approved deliverables in the action plans adopting a traffic light methodology.
The planning of the implementation of measures permits the Implementation Directorate to monitor, measure, and manage implementation. The use of data analysis tools permit the Directorate to learn about delays early and is therefore best positioned to take any necessary action to find solutions.
Article by The Research Directorate, Office of the Permanent Secretary, Ministry for Finance and Employment and The Implementation Directorate within the Office of the Prime Minister.