The government's bills

Iam somewhat intrigued by the fact that the high-ranking officials at the Finance Ministry or wherever seem unable to make a reasonably accurate estimate of government recurrent expenditure. It is either that or else the administration spends without enough regard to what has been approved in its annual estimates commonly referred to as the budget.

It is of course true that certain market fluctuations and situations like exploding oil prices are unforeseen and therefore cannot be forecast. I do not however understand why on an expenditure bill of just over €2 billion, we should, this year, have a margin of error of no less than €263 million or 12.8 per cent of the sum originally budgeted.

By way of example, expenditure at the Investment, Industry and IT Ministry is projected to exceed the original estimate by nearly €100 million. This over-shoot is accounted for by the cost of the early retirement scheme for the workers of Malta Shipyards and by the government's intervention in favour of Enemalta. Fair enough.

But was the government not aware in November 2007 that it intended to privatise the shipyards this year and that certain costs would inevitably be incurred? Enemalta was suddenly faced with rocketing costs in its fuel bill but were other costs forecast correctly? I am not questioning the expenditure but rather the lack of accurate budgeting.

I also fail to understand how we could have miscalculated interest payment on loans by a whopping €97 million. There must be some logical explanation here.

Even the Finance Ministry will exceed its budget by nearly 27 per cent and is expected to run up a bill of €81 million against the projected €64 million.

In our business, I feel we would not have done a very thorough budgeting exercise if our operating costs exceeded our budget by more than three per cent. We review our expenses monthly comparing them to budget, thus exercising very tight control. This also gives us the opportunity to take appropriate action where necessary.

Perhaps the time has come for public finances to be managed on a "commercial" basis. Accurate forecasting is a sine qua non of successful business practice and I don't see why it should be any different with the public sector.

By far and away the biggest item of government's spend is that on social security. The amount of benefits paid alone is a staggering €619 million, an average of €1,500 per head of population or €5,000 for every household. The Maltese are justifiably proud of the social security protection provided by the State but are we sure that these benefits do, in fact, go exclusively to deserving cases? An average of €5,000 per household seems like a high figure to me and it would be interesting to see what is spent in other EU countries. If we add another €177 million, which I presume is the cost of the Social Security Department, then the total amount spent on social security is a €796 million or 35c of every euro spent by the government!

On a general note, I feel that too much emphasis is placed on revenue streams (taxes, tariffs etc) while not enough focus is made on a concerted effort to curb expenditure. Had overall expenditure been reduced by 2.5 per cent, there would have been a saving of €50 million and possibly no need to increase energy tariffs.