Editorial | Wednesday, 03 September 2008

Wanted: Political guts

The structural deficit is yet again ballooning with a 36 per cent increase on the figures registered in the same period last year. This warrants a serious and independent analysis of the real cause in the increase of the deficit, which we were led to believe, was under close control. Alas, the vicinity of the election put government yet again into spending mode, aggravated by the hikes in the prices of oil and food which are clearly beyond government’s control.
The cause of this increase is tied to the expenditure programme of government and its projected revenues. The writing has been on the wall for years and the message put very simply is that government must cut down its capital expenditure. It will have no alternative but to increase taxes, the same taxes it promised to reduce during the last election campaign.
Economist Edward Scicluna has predicted a possible €100 million off the mark from government’s projected target of €68 million, rendering the minister’s declaration that we shall be slightly off the mark as risible, especially with the minister claiming that government will be sticking to its overall estimate.
The truth boils down to a number of factors. Firstly, the world economic climate has had its inevitable consequences on our own economy, which we are not in a position to be immune from. The hike in oil and food prices as well as the increase in interest rates pushing up loan fees, have had an effect which is recognised by all. However, government can never abdicate the very tools at its disposal to reign in its expenditure.
But clearly, government cannot afford to do this, even if it resorts to further taxation, since in a depressed market people are most likely to be paying less and not more taxation. Consequently something has got to give. While fine-tuning its method of tax collection, government must move into higher gear in controlling its expenditure. If need be, the latter is done by setting up all the necessary mechanisms to ensure that costs are trimmed, and good value for money is provided to the tax paying community.
A blueprint for a better government would include a number of very basic cost cuts, which can be easily implemented. Firstly, does government require all the human resources at its disposal? How often do public sector employees simply clock in and disappear after giving at most two hours of a day’s work with next to no controls and a total absence of accountability? Who watches the watchdog? Why not make the system of government spending more transparent by informing people of all contracts won and the price agreed for a job to be completed? Why not give further powers to the public accounts committee to analyse moneys spent by insisting that this committee meets more often? These simple lines of action will help enhance trust in the way public funds are administered.
The way forward must include the barefaced truth that public finances will not be in order unless government trims its expenditure. The only way this can go through is by having the political guts to make further cuts and to put an end to all unwarranted subsidies, which too many people (including persons from the private sector) have basked in to the detriment of the average taxpayer.
The stark reality is that the global situation will have devastating effects on our economy, so we need to ensure that we invest where we can get the best return. This means further investment in education, rather than splashing the same old subsidies to companies which are doomed to fail.
There are harsh questions which need to be asked and the dire need that all EU funds, a once-only bonanza to the country, are spent well and with a long term view of making the country more competitive and better placed to face the economic difficulties looming.