In a statement on public sector spending, George Osborne, the UK Chancellor of the Exchequer, stated that the road to fiscal sustainability in the UK would be achieved by putting an annual cap on welfare spending, the merging of health and long-term care and the ending of automatic pay rises (they are called progression pay in the UK) in the public sector.

In line with the thinking of previous Chancellors in a conservative Government, the target is to bring public sector spending to 40 per cent of the gross domestic product, while ring-fencing certain elements of public expenditure such as health, schools and overseas aid.

His objective is to create an affordable state in the long run. The concept of an affordable state links directly with the public sector deficit and the extent to which this is sustainable. The areas mentioned by Osborne are indeed very relevant to any country, as the bulk of public sector expenditure goes into three main areas.

First is the salaries of the persons employed by the public sector. Second is the expenditure on welfare, such as social services and various forms of benefits. The third element is the provision of public goods, that is services that society needs but which cannot be left to be provided exclusively by the private sector for various reasons. These would include health, law and order and education.

In Malta we are not any different. In fact, one notes that, once one removes these three elements, Government is left with very little discretionary expenditure. I am not in any way proposing that we go down the route suggested by Osborne. However, it is worth debating the issue.

The state’s coffers are finite, even though there are many who believe that it is not so.

So we need to make sure that there are enough resources to fund public expenditure in future and to eliminate all forms of waste in public expenditure. We may also have to consider eliminating expenditure that is not strictly necessary, even if it is not wasteful.

Let us put the matter in its proper perspective by looking at some data.

In Malta public expenditure represented 43.8 per cent of the gross domestic product in 2012.

This is as much as it is today in the UK, and which is believed to be unsustainable. It is worth asking whether such a level of public expenditure is sustainable or not in our country. Should there be a target to aim for?

They are two questions for which I do not have an answer, but for which we must find an answer. Compensation of employees absorbs 30.8 per cent of public expenditure while social benefits absorb 31.7 per cent. Between them they add up to just under two-thirds. Should there be some form of capping as is being done in the UK? This is also a question for which I have no answer.

One may argue that putting a cap on social benefits would ensure that governments do not try to outdo each other in who gives most hand-outs – irrespective of whether they are deserved or not and whether they are justified or not.

On the other hand, can we run the risk that persons become marginalised because of inadequate benefits? Yet we also know that benefit fraud exists and certain benefits may be too generous and do not incentivise a person to depend less on such benefits and more on income that one earns.

The issue of salaries of persons employed in the public sector is also tricky. They are not among the highest paid in this country.

However, people who work in the private sector would claim that many employed in the public sector do not do enough work to earn their keep.

One should also remember that those who work in the private sector do not take increments of pay progression for granted. They know that they have to work hard for them, and even after they do, it all depends on the financial situation of their employer.

This takes me back to the headline of this week’s contribution.

Can we, as a country, still afford the size of public expenditure as it is today? And if we do not, the problem does not just go away; it will be left for future generations to tackle. This is why we need a serious debate on how to make the state more affordable.