An interesting publication by the National Statistics Office earlier this year is the one titled Social Protection: Malta and the EU 2012. It captures data for the period 2007-2011 and focuses on “all interventions by public and private bodies that are intended to relieve households and individuals of a known set of risks or needs”.
Social protection systems, which I have often referred to in past contributions as social welfare, are expected to address those less advantaged in society and their expected outcome is a reduction in poverty levels.
Finding out the
cheaters makes politicians highly unpopular,
but it is ethically
wrong to condone benefit fraud.
Those resources
could be allocated to those who really require social welfare
The data on Malta show an improved welfare system in terms of the financial resources applied. In 2011, a total of €1,240 million were spent, representing 19 per cent of the country’s Gross Domestic Product.
This is an increase of 27.5 per cent over the levels of 2007, when expenditure was €972 million, representing 17.4 per cent of the GDP. Thus, over a four-year period, a bigger share of the wealth created by the country has been devoted to social welfare. The number of beneficiaries in 2011 stood at 106,247 compared to 98,915.
The NSO report refers to 19 different types of expenditure, but the bulk of the expenditure goes to social security contributory benefits which amount to just over €561 million, reflecting 45 per cent of total expenditure on social welfare. There are then other elements which are worth highlighting.
Healthcare takes up €271.6 million and is the second highest item of expenditure. Non-contributory benefits account for €166.8 million. There are other significant items such as the Treasury pensions (€86 million) and expenditure for the care of the elderly and the disabled (€55 million).
There are also other items that may be considered as minor, but still worth a mention – such as the €8.7 million spent on third-country nationals and refugees and the €3.7 million spent on the voluntary retirement scheme of former dockyard and shipyard employees. Two other figures that stick out are the €8.3 million spent on energy benefits and the €37.3 million that are paid to employers as reimbursements for sick leave taken by their employees.
I know comparisons are odious, but they are still worth making. On a per capita basis, Malta spends around €4,000 on social protection. The EU average is just under €7,000. There is one big spender – which is Luxembourg – that spends around €14,500 per capita on social protection. The richer countries of the EU tend to spend between €8,000 and €10,000.
In the EU as a whole, 28.2 per cent of the GDP is spent on social protection. The country which allocates the highest percentage of the GDP to this expenditure is Denmark with 32.4 per cent, followed by France, Sweden, Finland, Austria, Germany and Belgium.
There are a number of considerations that need to be made and that emerge from these data.
First, is there a link between the percentage of the GDP spent on social welfare and economic growth? Some will claim that the lower the percentage, the more resources are devoted directly to activities that generate growth. But data do not seem to prove that this is the case.
Secondly, irrespective of how much is spent on social welfare, there surely needs to be a continuous analysis as to whether the ultimate outcome of reducing poverty levels is being achieved. It is not the inputs that count but the outcomes. As a rider to this, there needs to be a cost-benefit analysis of each item of expenditure to ensure that we get the best value for every euro spent.
The fourth consideration is the effort made to combat benefit fraud. Finding out the cheaters makes politicians highly unpopular, but it is ethically wrong to condone benefit fraud. Those resources could be allocated to those who really require social welfare.
We also need to ensure as a country that the generosity of the social protection systems does not serve as a disincentive to work. It is known that this happens at times, and it should not be allowed.
The final consideration (and I am sure there are others to be made) is about how we define poverty and who are the so-called ‘new poor’ in our society.
In the long run, we must appreciate that social welfare is an important tool not only to support disadvantaged individuals but to maintain social cohesion, without which our economy cannot grow.