Interview | Wednesday, 19 August 2009

The future of welfare: challenging or plain scary?

Charlot Zahra speaks to economist Joseph F.X. Zahra, the lead author of a Today Public Policy Institute report on the sustainability of the welfare system launched a few weeks ago

What led the TPPI to publish a report on the sustainability of the welfare system at this point in time?
The think-tank has always focused on topics which are of special relevance to the economic and social situation the country is at this particular point in time.
The purpose of the reports most of the time is not to find conclusive recommendations on the way forward but more to open a discussion and debate on the points that are being tackled.
The topic of social services and the sustainability of the social security system has been an issue on the country’s agenda for a number of years. We felt the need of reigniting a debate on this matter at a point in time where we are getting closer to a system that will no longer remain sustainable.

In a detailed report on the sustainability of the current system, the institute warns that if the status quo is not revised with a view to improving sustainability, “the system (will) most likely collapse under its own weight.” Why?
We do have a very expensive social system in today’s world and when one looks at the viewpoint of both equity and efficiency, the system leaves much to be desired.
We really do have an ageing population with special needs and one would need to deal with the necessary security and insurance for people to live in a decent manner in their old age.
We also have a lower population growth; where less people would be able to carry the burden of the system.
What we’re seeing is these two factors, as well as the need to adjourn the social security system in a manner that will better reflect the social situation of the country in a modern manner.
There is the need for a radical change in the way we develop the system; in the way we manage the system; and in the way we finance the system to ensure that social welfare remains sustainable.

What concrete suggestions does the report make to improve the sustainability of the welfare system in Malta?
There is no magic wand to solve the deficiencies of the system today. With this report, our intention is to be able to come up with a value set as well as some practical advice on how to reform the system.
I would like to start with a very important value point at this point. A number of other countries which have not so far reformed their welfare systems, rely on a structure with which citizens become dependent on government welfare, and, more dangerously, start aspiring to fit into that system.
Rather than looking for alternative ways on how one can retire, and choose to go for private schemes as against government-supported ones, we have a situation where people all across the income brackets become psychologically dependent on the welfare system.
What we are saying here is that insurance is there for people who cannot afford using health care, or education.
Rather than a safety net, we need a trampoline for persons losing their jobs or facing family difficulties in particular moments. This way, they can be assured that they can get support if they need it, but in a manner that they will not remain dependent on it. The social security system itself would help them jump out of the trampoline to become self-dependent again.
A comment which I made in the report is that the new system is based on the concept of self-determinism – rather than having the state determining one’s choice.
But to be able to do this, we also have to ensure that there is a proper regulator that designs a means-testing system where individuals, couples or households are tested in a continuous manner.
Difficulties we may be facing today are different from those that we may have faced ten, fifteen or twenty years ago.

So where does one draw the line?
The line needs to be drawn by coming up with what is considered the poverty level within Europe. One needs to make a proper assessment of who falls beyond the point of affordability.
People need to be pulled out from the poverty line with a means-testing system whose criteria are determined by means of a national survey to decide on the point of affordability: affordability of schooling, affordability of having children moving through higher education or tertiary education, the point at which people would afford to pay for their own health services.
We also have to encourage the uptake of private health insurance and this can be done through income tax incentives.
We also have to ensure that whatever is provided for free is truly provided to individuals who cannot afford it.

Apart from efficiency and sustainability issues, TPPI also questions whether the social services themselves are meeting the demands and requirements of today’s Malta. Could you elaborate more in this respect?
There are the traditional social factors, such as encouraging more and more children to continue education; making sure that people can get essential health services; or that the unemployed would be able to get their support not only to find a new job, but also to be able to get the re-training they need.
However, we also need to factor in new realities of anti-social behaviour, of teenage pregnancies, separation in families, and family models with single mothers or fathers.
Moreover, we need to factor in the reality of more elderly people needing support, not only in old people’s homes but also in their own home.
These are realities in which the social security system would have to be adjourned so that it better reflects what it is providing vis-à-vis the social ills we are living in today.

The report recommends that the vision adopted for such a reform would favour a complex social security system that offers personalised services and involves the non-state sector to a higher degree than at present? Could you kindly explain how this system would work?
Let me make a forceful point here, on the excellent work that is being made by a number of voluntary organisations or NGOs. There is now legislation recognising this sector and the value of NGOs.
NGOs with dedicated and highly-committed people can actually enter into the area of social provision and can do this job in a more efficient manner than government can do.
So what can government can do here? Government can support, encourage and provide incentives to voluntary organisations for them to be able to provide this type of service.
I’m not saying that this is not being done, but I’m saying that there is the need for more focus in looking at voluntary organisations as an alternative provider of services.
Where does the private sector come in? What does the private sector provide? The fact that there are private hospitals as well as private old people’s homes that provide social assistance but obviously - at a price, encourages government to become more on the spot and provide services in a more efficient manner.
Competition with the private sector will ensure that the government will improve its services, while encouraging government to become more efficient in the services that it provides.
If I am outside the system and I want a service, I have a choice – I would either pay for that service or ensure that what is being provided by the state as a service is being provided efficiently and without any wastage of resources.
We have seen, for instance, in old people’s homes, a successful example of how private-public partnership works.

It was reported that the report does not arrive at conclusions for the resolution of this issue but is merely an analysis of the situation. How fair is this assessment?
I don’t think it is fair, because the report definitely goes beyond analysis.
What it says is that rather than giving a ready-made formula and costs to that formula; it provides a very clear direction that can be picked up by government and opposition. The direction that is being given in the report’s conclusions and recommendations are areas which both the political parties represented in parliament are in agreement with. Although so far, they have lacked the courage to say that these things would actually happen.
How much can we afford health services to be free for everyone? How much can we afford having students at University being paid stipends to continue studying? How much could University education remain free for everyone? We know there are a large proportion of students whose parents can afford to provide this education to their children.
At this point in time, it is important to reconsider the concept that services - which are obviously important for the social fabric of this country - to be given entirely free for everyone.
And that’s why we are saying that these should be free for those individuals whom we want to incentivate to take them up, to encourage more young people in certain social classes to enter University to be encouraged into tertiary education and further continue their studies.
However, in the case of individuals who can afford to pay for their children’s studies, that area definitely needs to be reconsidered. These are areas where political parties hesitate to make explicit statements on, but we know that if this economy and our social status need to remain suitable, we need to call a spade a spade and get moving.
What we’re otherwise doing is burdening future generations with the heavy costs of this system.
Our responsibility is not only at what is happening now and the state of the society and population at this point in time, but we have a responsibility for future generations.

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19 August 2009


Malta Today


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