There is no reason why the annual reports issued by the National Statistics Office should be any more insightful than the quarterly ones. But there it is… The Government Finance report for 2023 is out, and that means we pay a lot more attention to the numbers.

How much is the government bringing in – and where is the money coming from? And how much is the government spending – and what is it spending it on?

And then, those most important calculations: is one number bigger than the other? And how does that impact the accumulated figures of the previous years?

The starting point for any discussion is what the accumulated figure is and whether that debt is sustainable.

We might be able to run into the red with our household budget when school fees are due if we know we can make that up over the following month or two. The same applies for one-off emergencies. But at what point should you begin to worry about whether you can afford it?

The Nationalist Party recently raised the red flag about one segment of the government finance: recurrent spending. But is that really all we should be looking at?

The ability to spend is a fundamental tool of any government policy. And the ability to spend money that you don’t have (yet) is a very important tool. The Nationalist Party knows this well and we should certainly not have to remind it about its own spending patterns when in government.

Running up debt to get Malta through COVID-19 was one of the tools which saved the country from far worse consequences, whether by saving lives through its vaccination policy, or by saving people from the disastrous economic consequences through various support measures.

The issue is not that the government is spending, but whether that spending is going to the right places – and not being squandered – and whether it is sustainable in the long run. It is the latter that has raised the red flag as far as the Nationalist Party is concerned.

Revenue is the starting point: you can’t decide how much you can afford unless you know how much money you have raised. Revenue has gone up, by an impressive 9.3 per cent in the past two years. In 2023, this meant €6,413 billion came into the government coffers. But in that year, it spent €7,221 billion.

This is not exceptional: except for a brief period around eight years ago when we earned more than we spent, we rely on deficits. This is not as bad as it sounds in theory: the government makes up for this by borrowing, mostly through Malta Government Stocks, and as long as people and institutions are willing to lend it money for a reasonable interest rate, the wheel is allowed to turn.

Malta is fortunate as, so far, it has been able to rely on local borrowing to a great extent, unlike other countries which rely heavily on international money which comes with geopolitical strings attached and demands interest rates which may make the cost of borrowing unsustainable.

Would it be better to have no debt and no debt servicing costs? If the government did not have to pay €214 million in interest on those loans, what else could it have spent this on? Health? Education? Roads?

And this is where it becomes interesting. How much money is being “squandered”, spent inappropriately, spent haphazardly, spent without cost/benefit analysis, spent without regard to improving productivity, infrastructure, efficiency, social equality, and income security?

Whether we are talking about the money misspent on roads, flyovers, property leases or film festivals, CEOs with multiple full-time jobs, unqualified people in non-existing jobs, this is what really matters. It is not even about whether it is sustainable because the only thing that really matters is whether it should have been spent at all.