30 March 2005

The Web

Are the finances on track?

During his March press conference, the prime minister stated that the country’s finances are on track and that deficit control is in line with projections. ECOFIN’s approval was cited to show that all is according to plan. Only a few weeks later the government released statistics showing that its expenditure had gone up as compared to figures last year and that the deficit has increased. Where, exactly, does the truth lie?
Lawrence Gonzi justified the increase in expenditure as being caused by the inclusion of an extraordinary item of expenditure. Beyond this justification one must, first of all, admit the difficulty of stopping the haemorrhaging of our public finances. This year has seen a hike in the price of oil and a worldwide strain on the tourism industry. It must also be remarked that each year the social security bill in the form of pensions and wages inevitably increases. These are increased on a yearly basis in the budget. The increases are justified as a corollary of the increase in the cost of living resulting from cost of living basket calculations. Increases subject to an increase in productivity are not, as yet, a criterion in the granting of higher wages. This is yet another issue that needs to be open to public discussion.
It would be madness to state that the foundations of the economy are firmly in place. Our economy is fragile. It is a very open economy. Barring the strong export orientated foreign owned companies with their own markets, our economy is very vulnerable and immediate action needs to be taken for the economy to be placed back on track. Hence the necessity of creating competitive building blocks for the economy. This must all be seen within the context of an economy that is not growing and has not been growing for a number of years. Addressing and overcoming our deficit problem in the short term involves having a surplus in government finances, something we are very far away from achieving. As a result of stagnation, and a lack of growth, government revenues in the form of direct and indirect taxation such as the eco contributions are all bound to decrease since companies and individuals are trading less and profits are shrinking. Only growth can lead to increased government revenues.
Government finances can only be controlled efficiently if government starts taking on a business-like approach to public finances. Cutting costs is all very well. But unless growth takes place simultaneously, there is no way that things will turn round. Indeed government needs to pull out all the stops to overcome this very difficult situation. Regrettably all governments, in fairness this one to a lesser extent, have lacked the necessary political will to take hard decisions in view of the potential political fallout. We need to start running government differently. It must be leaner and smaller.
Our country must give consideration to elevating technocrats to a policy making role. This cannot be done by introducing these people into the cabinet since our constitution does not provide for this eventuality, but lesser formal roles can be envisaged. Traditionally all ministers have resorted to appointing persons on the basis of their political credentials. Private secretaries and the secretariat of ministers are made up of a restricted but bloated number of usually around 20 persons that are not members of the civil service but are appointed at the pleasure of the minister.
They are political appointees. Apart from all persons who are formal civil servants, it is this restricted number of persons who, by daily contact, have the ear of the minister. When multiplied by the number of ministers and parliamentary secretaries, this amounts to an army of persons who, if well qualified and experienced, can give a fundamentally supportive role to government. Just imagine if each minister appointed well qualified and experienced persons related to the particular portfolio of the ministry. Their workload would give an incredible amount of added value to government. Being technocrats, their advice and work would be performance related, not constituency directed and focussed as is the case at present.
Too many political appointees are simply dedicating their time to constituency work in furtherance of the re-election of their minister. This is a full time, five year dedication supported by the public exchequer. Government with persons chosen on the basis of their merit would look more professional, more focused and, as a result, more successful. What better way to really getting the finances on track?

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Editor: Saviour Balzan
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