In a few days’ time the Minister of Finance will reveal in Parliament the government business plan for 2015. With reports on the economic state of the country regularly hitting the media, one can hardly expect any surprises. The headline economic figures for the Maltese economy are generally good, but long-term issues need to be addressed with more determination.

The most recent Fitch report confirmed Malta’s ‘A’ rating with a stable outlook. The GDP growth outperformed the eurozone average while with unemployment at 5.7 per cent we rank below the eurozone average. Perhaps the most remarkable achievement in the labour market was increased female participation thanks to incentives introduced over the past few years to encourage more women to return to the workplace.

The theme that will dominate this year’s Budget is that it pays to work rather than depend on the State to get by. I have often commented that some of the more negative aspects of the welfare state include the culture of entitlement that seems to be hardwired in the mindset of some people. It is no secret that quite a number of young and not so young workers live quite comfortably while unofficially being unemployed.

Malta’s black economy is among the biggest in the EU – by some counts it is as prevalent as it is in Greece and Italy. If people involved in the black economy were not claiming social benefits, some could argue that once people are working, whether in the official or the shadow economy, policymakers should be careful not to declare a holy war against those working without paying taxes or national insurance. But our national insurance fund needs all the contributions it can get to support our free health and other social benefits.

I would expect the government to be bold enough at this stage of the political cycle to introduce tough measures that discourage the culture of dependence on State handouts of those who are capable of working, but lack the motivation to do so. Only in this way can we continue to enjoy the benefits of the welfare state that are worth preserving: free health and education.

Another critical factor that can put our future prosperity at risk is the outcome of the major energy projects that should see Enemalta becoming a viable utility. As Fitch pointed out early in September, “Enemalta poses the main risk to 2015 fiscal outturns”. While businesses are, understandably, looking forward to the reduction in energy tariffs in March 2015, the success of this measure is dependent on the good management of the ‘execution risk’ – the ability of Enemalta and Electrogas to start producing and distributing cheaper electricity.

Subordination of priorities will be a major headache as public capital expenditure needs massive financial resources

One major area that needs to be tackled with determination is the supply of free medical services. While the attempts to improve the management of our public health system are admirable, more needs to be done to have a viable health system that caters for our ageing population’s present and future needs through more capital expenditure that is supported by a robust financial model.

If fiscal slippages start to crop up more frequently, it will become inevitable that the European Commission as well as rating agencies and the IMF will increase the pressure on the government to come up with a financing model for public health services that is viable. One can anticipate the form that such political pressure from the EU can take because this pressure is already being applied to countries like Cyprus that had the misfortune of needing support from the EU and the IMF to avoid bankruptcy. A national insurance scheme that spreads the burden of financing our free health system on all those in employment may be one of the solutions that the EU, rating agencies and the IMF may consider for those countries that fail to take steps to address the structural weaknesses of their public finances.

With such onerous obligations to address the weaknesses that still exist in our public finances, one can understand the challenge the Minister of Finance will be facing to find the money to prop up public investment in the physical infrastructure of the country. The subordination of priorities will be a major headache as public capital expenditure needs massive financial resources.

Better roads, more hospital bed capacity, major refurbishments of state schools, and a more efficient electricity and water distribution system are just a few of the major projects needed to underpin the strength of our economy.

johncassarwhite@yahoo.com