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Being Brave: Reforming the Welfare State

Joseph FX Zahra  -  24/04/2013 08:43

One topic which is taboo in the run up to a General Election is the reform that is now well overdue in our welfare system. Malta’s welfare state is designed on the traditional Scandinavian model of the nineteen sixties with bits and pieces being added by subsequent Governments since then.  These additions increased the burden on the tax payer, and encouraged more people to depend on these generous schemes.  Since the mid nineties attempts were made to tackle pension reforms.  But also these have been done half heartedly and with fits and starts. Meanwhile our welfare system is becoming more unsustainable and increasingly subject to abuse and misuse. One classic example is the number of registered unemployed who are doing plastering and plumbing works in homes and still being a burden on the tax payer rather than a contributor by paying tax. One concrete step in improving the country’s economic efficiency and competitiveness, as well as to eliminate waste and abuse of our scarce human and financial resources, is to embark immediately on an exercise of welfare reform.

The underlying principles in this reform are justice, fairness, respect of the vulnerable and transparency in execution. But probably the strongest value is that of Choice – giving the opportunity to the citizen to choose the provider of a service, be it a private sector provider, a voluntary organisation or the state. The system at the moment does not give this choice, and it also discourages persons who can afford to pay for a service to seeking a private service, be it in education or in health. Choice is a fundamental human right, and state intervention since the seventies in Malta has distorted the value of Choice by making it more convenient and easy to go for state provided services for free when a large proportion of the users can afford paying for a service of their choice.  This dependency on the state factor is now a syndrome which makes it difficult to cure. The long queues behind the village offices of the numerous socialist ministers and parliamentary secretaries are an indication that five Nationalist administrations weren’t capable to cure this underlying state dependency syndrome.

A brave effort is being made in the United Kingdom at the moment to reform the Welfare State. The Conservative-Liberal Democrat coalition is determined to move on radical reforms that make it beneficial again for someone on unemployment support to seek productive work, as well as to simplify a welfare system that has become complex with the building of layers of subsidies over years. The Welfare Reform Act 2012 which started being implemented in the beginning of April this year, is aimed at creating the right incentives to get more people into employment, and to protect the most vulnerable in society without having a blanket policy that covers individuals who are given an opportunity for abuse. It also creates a fairer system with benefits to both those who claim support but also to the tax payer.

Will Malta bite the bullet and embark on much needed reforms? The social fabric of our country has changed over these last fifty years and what was a social need in the seventies and eighties is no longer today. The social problems have changed, and we have a different type of poverty and vulnerability in our society. Who is going to get the bull by the horns?

 

Joseph FX Zahra

Economist