We Maltese have come to love our welfare system. Many of us look at government as a fountain of endless benefits to be exploited for maximum personal advantage. We tend to forget, or ignore, the fact that the State is us.
We want free education and health, adequate pensions, generous children’s allowances and student stipends. The list is endless and each one of these benefits has become a sort of ‘sacred cow’ for our society. And, yet, there is no ‘free lunch’ and the money for these benefits has to come from taxpayers.
It is a big mistake to assume that our society will be able to afford these benefits indefinitely unless steps are taken to strengthen our economy. As more of us continue to have fewer children and live longer, the financial burden of our welfare system will have to be carried by relatively fewer workers.
About one third of our national budget (about €1,200 million) is spent on social welfare. Over recent years, the government did not have the money to pay for all these benefits and was obliged to raise money in different ways.
It was obliged to sell much of our family silver (such as Mid-Med Bank, Malta International Airport and Public Lotto), to borrow heavily (our national debt now exceeds €5,000 million) and to use funds which supposedly were meant to be our ‘savings’ (national insurance payments entitling us to a future pension) and which were used to finance current pensions rather than future ones. The EU has repeatedly warned us that this is not sustainable.
Our society now has three options as to how it can meet this challenge and these are not mutually exclusive.
The first option is to increase government revenue. Increasing the tax burden on Maltese families would probably send our economy into a recession; EU rules (the Maastricht criteria) do not permit us to increase our indebtedness.
The government has few assets left which it can sell. The only way for government to increase revenue is through accelerated economic growth and through innovative initiatives (such as the individual investor programme).
A second option is to reduce expenditure on welfare or other government expenditure such as investment in the infrastructure, to bring it closer to what our society can afford. This seems to be the least palatable for us citizens and runs counter to our ever-rising expectations. Politically, this is a ‘no go’ and, hence, it is no solution.
A final option is to seek to improve the cost-effectiveness of our welfare system. Is the money being spent in the best way in meeting the needs of our citizens?
This goes beyond control and cutting abuse and includes revisiting the very purpose of each social measure. Our society is changing very fast and so are its needs.
Reducing poverty remains a priority, even though, in recent years, there grew the belief that the poor have only themselves to blame for their condition. Addressing poverty is not charity. It is about social justice and empowering people to be able to enjoy a decent standard of living. The poor need to be given the proverbial rod and taught to fish.
Achieving greater social cohesion improves the way of life of each one of us
In a modern society, poverty is not just about having enough food and other necessities but includes considerations relating to social inclusion.
However defined, poverty in our country is on the rise. It is a complex and multi-faceted issue that cannot be countered effectively through piecemeal solutions. Low incomes lead to lower education, inferior jobs, bad health and lower incomes; a vicious circle. The solution is not to throw money at the problem, as this increases the risk of inducing more people into the ‘poverty trap’.
The last budget was intended to ‘make work pay’. This should continue to be the main thrust of the government’s efforts.
Adequate income support needs to be combined with a link to education, adult training and the labour market. This is what the recently-published green paper entitled A Framework for Poverty Reduction and for Social Inclusion sets out to achieve.
The government is committed to address poverty in a holistic manner linking education, employment and health considerations. The green paper is a point of departure not arrival but, at least, now we have a government that acknowledges that poverty is a big challenge which is to be addressed by all of us together.
The government may not achieve the ambitious target it has set for itself: to reduce those ‘at risk of poverty’ by some 22,000 persons. The reduction of the electricity tariffs is a first step in this direction and the government is allocating a further €10 million to help achieve this target.
Additional measures to be announced in Budget 2015 will be specifically meant to help families and the elderly with very low incomes. This will offset some of the injustice suffered by these low-income earners with the revision of the income tax bands.
Social justice and solidarity is what should differentiate the Labour government from its predecessor. The government is keen to improve the management of our economy and society. These go hand in hand for better management of the economy releases resources that can be made available to address poverty and improve the well-being of our society.
Achieving greater social cohesion, over the longer term, improves the way of life of each one of us.
fms18@onvol.net