When the Finance Minister was recently quoted as stating that Government intended to introduce pre-determined spending limits, his ministry was quick to issue a media release to say he was misquoted.
Meanwhile, when the Labour government had introduced recurrent expenditure cuts in its 1998 budget, rather than agreeing with the policy measure in principle, the then Opposition had argued that such a measure could be difficult to apply and risked not working in practice.
Today, three and a half years after the last elections, we have no firm indication that Government really wants to make a case for the introduction of spending limits.
This is a pity because unless we have fiscal policies that are disciplined it will be hard for them to be really supportive of stable growth and employment.
Stranger still, a number of Euro areas have agreed to put constraints on national fiscal policies. So Government can hardly rely on the excuse of its EU membership bid for failing to adopt such a policy.
If we really want to introduce policies that promote much needed economic growth and employment we must be willing to do away with so called pro-cyclical fiscal policies.
Government still has to show a true commitment to the notion that the prime factor that can help us counter the large deficits and indebtedness of the past eight years is to implement a credible public spending control programme.
Some countries have found that when strictness is adopted in the introduction of spending limits a certain degree of tax easing could be afforded without necessarily compromising fiscal balance.
Rather than introducing continuous spending discipline to introduce long-run sustainability of public finances, Government has relied on the easy way out - excessive tax tightening and extension of the overall tax burden.
Even if they might not be attainable in the immediate future there are two important goals which we should aspire to achieve: the concept of balanced budget rules, which limit states` public debts (i.e., the US), and the golden rule by which borrowing is allowed only to finance public investment (i.e., German Länder and the UK).
In various other countries spending ceilings and targets have been defined in terms of either real or nominal annual growth rates.
Perhaps the most practical option for an undisciplined lot like the Maltese would be to adopt budget plans that include three- to four-year targets for various expenditure categories, while trying to predict as accurately as possible inflation trends.
Only in Portugal, France and Germany do expenditure targets apply to the whole government sector. In other countries expenditure limits cover only the central government and, in some cases, also social security funds.
In most cases the target does not include interest payments on public debt.
Ideally, expenditure limits should be set by a particular government on being returned to power, being then in turn extended over the length of its term.
A major consideration arises at this point.
Should such limits be mere components of a government`s medium-term goal or should they tie the hands of Parliament, being enforceable by law?
There are other countries where an overrun of an expenditure ceiling requires offsetting expenditure cuts.
An emerging trend is pushing towards legislation - something which I believe we can ill afford to introduce before accrual accounting is introduced right across the board of the public sector.
Perhaps the most exemplary model is the Spanish bill which includes a provision requiring that, should a deficit be in the offing, an action plan must be drafted for achieving a balanced general government fiscal position.
Such a path can be strewn with difficulties.
What would be the position of an unemployment-related expenditure item with a ceiling?
For this reason even the most fiscally rigid countries are recognising that if such measures are to work a certain degree of in-built flexibility is necessary.
One maxim which we would need to consider is that if growth turns out to be higher than expected and revenue outcome exceeds the projection, the extra revenue cannot be used for expenditure increases but solely to reduce taxes and repay debt.
Spending targets should be ideally set as from a certain date in the context of a medium term tax reduction plan.
We need to keep in mind three important considerations should we decide to push forward such a strategy.
¤ the need to exercise a publicly evident sense of political will;
¤ expenditure frameworks and ceilings need to be operationally simple if expected to succeed; and
¤ the importance of tight enforcement, monitoring and surveillance to ensure successful compliance.