Editorial

Malta's two largest political parties must know something about the sustainability or otherwise of the welfare system that the rest of the people do not. Or do they? Judging by what both of them have been saying over the years, it would seem that their view on this is, at best, complacent and, at worst, most dangerous to the sustainability of the island's finances.

True, the Nationalist government has taken the first step towards reforming the pension system but, other than this, there does not seem to be that sense of urgency at grasping the nettle. Lip-service is constantly paid to the need of reform but the way forward is agonisingly slow.

Not for the first time, the European Commission has called on Malta to curb spending, particularly on health and education. It has extended by one year the time-limit within which the island has to bring the deficit in the government's finances down to the threshold established by EU rules but a string of observations it made as part of its decision to extend the time-limit are not all complimentary, contrary to the impression a government minister might have given when he commented on them.

When so many EU members are running deficits of much higher proportion than that registered by Malta, it was hardly surprising to see the Commission accepting the government's request for an extension of the time-limit. However, some of the points it made are hard-hitting and ought to be taken heed of unless the country wants to see a rapid deterioration in the sustainability of its finances. Particularly significant is the Commission's warning that "reforms should be geared towards enhancing the efficiency of government expenditure, especially in the high resource-absorbing areas of health and education".

It points out that "to reduce the risks of long-term sustainability of public finances, the Maltese authorities are invited to pursue further reforms of the social security system and reduce the budgetary costs of an aging population".

It is not just the Commission that has thrown the spotlight on this. The International Monetary Fund has referred to Malta's "spending slippages" in healthcare and, only last November, the governor of the Central Bank of Malta again drew attention to the need of adopting a more cost-efficient approach to the provision of public goods and services "whereby only those demonstrably in need would benefit".

Now this is exactly where the problem lies, for both the Nationalists and Labour believe that, in the case of health services, for example, these should remain free for all. This is a political stance that does not make sense in a situation that could put at risk, or, worse, rock the sustainability of the welfare system. Some months ago, a think-tank, The Today Public Policy Institute, warned that the welfare system could be running a deficit of €192 million by 2015. It felt there ought to be means-testing across the board.

Yet, there has been no attempt either by the government or by the opposition to bring the problem to the forefront of national discussion. Why? Because both the PN and the PL have already committed themselves to free healthcare for all and it would be against their political interest to reverse the stand now. So, the long-term sustainability of the welfare system is now hostage to the political interest of the two largest parties, unless, of course, these have something up their sleeves that the EU, the IMF, the Central Bank and the people do not know anything about.