For example, the labour participation rate is still low at 58% compared with an EU average of 70%; and the Maltese will have worked seven fewer days this year than the Dutch, who work longest, and three days fewer than the EU average, despite the abolition of the practice of compensation for a holiday that falls on the weekend. Since independence, moreover, successive governments have bequeathed a legacy of welfare schemes and free public services that have not only distorted incentives and encouraged waste and abuse, but are also largely unsustainable. It is no wonder, therefore, that the Government absorbs almost half of the GDP, the tenth highest percentage in the EU. The concept of value for money, moreover, does not always prevail in public sector procurement 1 . Let me mention just two examples of resource misallocation. The first is the absence of fees for government-supplied health care. One can, for example, obtain expensive medicines or have a heart by-pass operation for free, regardless of one’s capacity to pay. Not surprisingly, the budgetary allocation for medicines and surgical materials alone is forecast to increase by 13% next year to Lm21.5 million. The sustainability of the public health system is imperiled by the very manner in which it is financed. Sooner or later, the ability to provide free services to those who truly deserve them will itself come under threat.
What the typical student expects from higher education in terms of quality will increase once he or she is contributing to its financing, and higher expectations are known to be one of the drivers of an improvement in standards. Anyone who perceives something sinister in these proposals might look up a recent study by economist Andre Sapir. Using a fairly well-established typology, Sapir grouped the EU15 into four main social models, the Continentals, Nordics, Mediterraneans and the Anglo-Saxons, and then estimated the efficiency and equity of each. He shows that there does not need to be a trade-off between efficiency and equity. Just as importantly, however, he underlines that efficiency is always necessary for sustainability 3 . How do other countries approach this challenge? The experience of Singapore, which is twice as well off as Malta on a per capita GDP basis, is instructive. There, undergraduate education is heavily subsidized by the government, but the remaining cost is borne by the student. The student’s annual contribution ranges from the equivalent of Lm1,300 for an engineering degree to Lm3,800 for a medical degree. There are, however, means for the student to finance this co-payment through borrowing from the Central Provident Fund. This is a social security savings plan funded by contributions from employers and employees, and which go into three accounts. Let me mention two of them. One is the Ordinary Account, which can be drawn upon to pay for the family’s educational expenses, or to buy a house.