High inflation is worrying governments everywhere as they struggle to kick-start the recovery after two years of economic disruption caused by COVID. The impact of rising fuel and food prices has opened a debate on how best to mitigate its adverse effects on businesses and households, especially those suffering from financial insecurity.

The government has announced a major initiative to manage this challenge. The proposed revision of the cost-of-living mechanism, which is the only defence some families have against the toxicity of high inflation, is long overdue. Hopefully, the revised index will go a little way towards pulling vulnerable households away from the poverty trap.

The latest fiscal measure announced by Prime Minister Robert Abela and Finance Minister Clyde Caruana is an injection of €70 million in the economy in the form of helicopter money to be distributed to pensioners, students and workers.

A few weeks before the election is due, the government has, unsurprisingly, adopted fiscal bazooka tactics, ostensibly to stimulate spending and ease the burden of inflation on as many people as possible. Creating a feel-good factor is always a favoured weapon of politicians when they are facing an electoral test.

Taxpayer cash can be used much more effectively to help the more vulnerable sectors of society

Putting a significant amount of public money into people’s pockets may help mitigate the downside effects on an economy still struggling to take off after two years of pandemic disruption. But taxpayer cash can be used much more effectively to help the more vulnerable sectors of society cope with rising prices.

The underlying dynamics driving inflation mean that food and fuel prices are expected to rise for longer than initially anticipated. Abela’s stimulus money may well add to the inflationary pressure locally. Those €70 million he has just showered on everyone could have been used to provide extensive, longer-term support to the more financially vulnerable, whose well-being is the most under threat from inflation.

The government is also trying to square the circle when it says it will spend more to support the economy without raising taxes.

Households, governments, businesses – faced with too many debts and not enough money – sooner or later have to straighten up, reduce spending and reckon with their bills. It may not be politically expedient for the government to state this obvious truth, but it needs to be said if the people are to be treated with respect.

Students, for instance, will undoubtedly welcome the €100 cheque, but the burden that today’s fiscal laxity will place on their future prosperity must not be underestimated. The income gap between the relatively well-off and those at risk of poverty is increasing. It may be politically convenient to spread the stimulus money on a broad section of the community rather than target the smaller financially vulnerable category. But it is morally unjust and socially inequitable.

So far, the government has not said how it intends to manage the fiscal costs of all its pandemic measures and its initiatives to mitigate high inflation. In the weeks to come, the IMF, the rating agencies and the European Commission will start advising governments on how best to repair their strained public finances. The government is labouring under a delusion if it hopes that economic growth in the next few years will be enough to prevent any increase in taxation.

The government has done well to start addressing the effects of rising food and fuel prices on households. But there can be little doubt that its latest initiative is motivated by short-term political advantage rather than the need for prudent fiscal management while supporting the more vulnerable members of our society.