The Malta Independent
This is an extension of deliverable No 5 expounded upon last week where I argued for a freeze in public sector hiring and freeze in public sector employment benefits.
Whilst employment costs hold greater scope for delivering economies to address the public fiscal deficit also from the expenditure side, it is essential that economies need also be made in the operating costs of central government and public entities.
I have already conceded here that economies could be largely symbolic given that the discretionary element in such operating expenditure is pretty small in the overall expenditure picture. Further I quite agree that there are areas like Law & Order and Public Health Services where operating expenditure cannot be reduced ( indeed may have to be increased) in order to keep essential services at an acceptable level. It is not therefore to be expected that not much mileage could be gained from this source.
But economy drives in the operating expenditure budget are still needed for two reasons. Firstly because without such drives the crawl in the operating expenditure growth will continue and therefore we would be helping even if we simply manage to stem that crawl. Secondly it is because such operating budgetary control could be highly visible and as the Maltese saying goes,: “l-ezempju jkaxkar”. While in themselves they could make negligible contribution to addressing the public finance deficit from the expenditure side, such economy measure could be highly visible and could send a strong message eradicating the “money no problem” mentality and installing in its stead the “value for money” mentality.
Operating expenditure could therefore be subjected to cash limits with annual increases below the level of inflation thus forcing the managers of public expenditure budgets to think creatively how to get more mileage out of existing resources. The old habit of solving all problems by going for the easiest of solutions, that of writing a cheque from somebody else’s account, must stop. I say somebody else’s account because government is administering public funds, not its own funds, and whenever government pays anything out of public funds it is actually paying from the taxes we pay or from the proceeds of the debt that government incurs in our name, the burden of which will continue to be carried long after the government’s term comes to its democratic end.
The habit of duplicating expenditure through the creation of satellite entities performing a public sector job at private sector pay has also to be re-visited as we cannot load this micro-economy with bureaucratic structures that are designed and suited for much larger outfits.
The drive to outsource routine operations at an economic and controllable cost which can be aborted if circumstances so demand (unlike internalisation of such processes which cannot be easily aborted with the existent job for life mentality in the public sector) and the needs to engage resources on a definite term basis needs accentuation and better implementation. The rush to deliver services on an electronic basis must continue so that we can come to the point where those who insist on physical delivery of such services will then have to pay for the higher processing costs involved in such physical delivery. This must go hand in hand with the creation of technology centres at local government level to help overcome the technology freight of the certain sectors of the population who would otherwise feel the bite of being left out of the digital world as they fall on the wrong side of the digital divide.
But I think we can go further. We have built a society that interacts with government at various levels and this involves a lot of duplicate transfer payments. For example I pay income taxes and other forms of direct taxation but then receive free health, free education and a subsidy on a host of other services from the state. This has been built round a praise-worthy social model but as a bye-product it involves substantial waste as the false perception of such free or subsidised services leads to overuse and abuse.
Given our relatively small size and our ability to be at the cutting edge of IT technology it is possible to eliminate this free lunch mentality whilst protecting the social element of such services by concentrating the interaction between the individual and the government in case of direct taxes (payments) and direct benefits (receipts) at one single point.
I dream of a system where government charges economic recovery rate for all services, even social ones like health and education, and the individual gets the state subsidy at one point in his tax bill which produces a single bottom line figure of amount due to or due by the State.
This will deliver great efficiency gains. Our schools and hospitals will start being run on a commercial basis without losing the social necessity of keeping such services ‘free’ and accessible. It would automatically give the private sector the incentive to compete for the provision of services which are currently largely within the competence of the State. Competition of supply is the most forceful manner to deliver economic efficiencies at the operating level.
This is an extension of deliverable No 5 expounded upon last week where I argued for a freeze in public sector hiring and freeze in public sector employment benefits.
Whilst employment costs hold greater scope for delivering economies to address the public fiscal deficit also from the expenditure side, it is essential that economies need also be made in the operating costs of central government and public entities.
I have already conceded here that economies could be largely symbolic given that the discretionary element in such operating expenditure is pretty small in the overall expenditure picture. Further I quite agree that there are areas like Law & Order and Public Health Services where operating expenditure cannot be reduced ( indeed may have to be increased) in order to keep essential services at an acceptable level. It is not therefore to be expected that not much mileage could be gained from this source.
But economy drives in the operating expenditure budget are still needed for two reasons. Firstly because without such drives the crawl in the operating expenditure growth will continue and therefore we would be helping even if we simply manage to stem that crawl. Secondly it is because such operating budgetary control could be highly visible and as the Maltese saying goes,: “l-ezempju jkaxkar”. While in themselves they could make negligible contribution to addressing the public finance deficit from the expenditure side, such economy measure could be highly visible and could send a strong message eradicating the “money no problem” mentality and installing in its stead the “value for money” mentality.
Operating expenditure could therefore be subjected to cash limits with annual increases below the level of inflation thus forcing the managers of public expenditure budgets to think creatively how to get more mileage out of existing resources. The old habit of solving all problems by going for the easiest of solutions, that of writing a cheque from somebody else’s account, must stop. I say somebody else’s account because government is administering public funds, not its own funds, and whenever government pays anything out of public funds it is actually paying from the taxes we pay or from the proceeds of the debt that government incurs in our name, the burden of which will continue to be carried long after the government’s term comes to its democratic end.
The habit of duplicating expenditure through the creation of satellite entities performing a public sector job at private sector pay has also to be re-visited as we cannot load this micro-economy with bureaucratic structures that are designed and suited for much larger outfits.
The drive to outsource routine operations at an economic and controllable cost which can be aborted if circumstances so demand (unlike internalisation of such processes which cannot be easily aborted with the existent job for life mentality in the public sector) and the needs to engage resources on a definite term basis needs accentuation and better implementation. The rush to deliver services on an electronic basis must continue so that we can come to the point where those who insist on physical delivery of such services will then have to pay for the higher processing costs involved in such physical delivery. This must go hand in hand with the creation of technology centres at local government level to help overcome the technology freight of the certain sectors of the population who would otherwise feel the bite of being left out of the digital world as they fall on the wrong side of the digital divide.
But I think we can go further. We have built a society that interacts with government at various levels and this involves a lot of duplicate transfer payments. For example I pay income taxes and other forms of direct taxation but then receive free health, free education and a subsidy on a host of other services from the state. This has been built round a praise-worthy social model but as a bye-product it involves substantial waste as the false perception of such free or subsidised services leads to overuse and abuse.
Given our relatively small size and our ability to be at the cutting edge of IT technology it is possible to eliminate this free lunch mentality whilst protecting the social element of such services by concentrating the interaction between the individual and the government in case of direct taxes (payments) and direct benefits (receipts) at one single point.
I dream of a system where government charges economic recovery rate for all services, even social ones like health and education, and the individual gets the state subsidy at one point in his tax bill which produces a single bottom line figure of amount due to or due by the State.
This will deliver great efficiency gains. Our schools and hospitals will start being run on a commercial basis without losing the social necessity of keeping such services ‘free’ and accessible. It would automatically give the private sector the incentive to compete for the provision of services which are currently largely within the competence of the State. Competition of supply is the most forceful manner to deliver economic efficiencies at the operating level.
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