Government to set up expenditure review unit

A foreign expert will be heading a new unit within the finance ministry, which will review government expenditure and identify areas in which efficiency can increase.

Finance minister Edward Scicluna said that the unit would be set up by May.

Asked by MaltaToday which areas would be put under scrutiny, Scicluna said: "We will be looking at all areas and identify why Malta is less efficient in certain sectors than other countries despite having the same levels of human resources."

He added that when a similar exercise was carried throughout the EU member states in 2007, Malta's health sector was found to be 30% less efficient than the EU average and further inefficiencies were highlighted in education.

"Carrying out an expenditure review is not about cutting services or introducing measures which could hurt people but it's about reviewing practices and systems used across the board and increasing efficiency," Scicluna said.

The minister noted that in the coming days he would be meeting European Commissioner for Economic and Monetary Affairs and the Euro Olli Rehn to discuss the budget and Malta's financial plans.

Malta risks re-entering the EU excessive deficit procedure after ending 2012 with a 3.3% deficit, which is in excess of the deficit-to-GDP ratio of 3% and a debt-to-GDP ratio of 60% targets set by the Stability and Growth Pact.

However, Scicluna sounded an optimistic note and explained that the Maltese government will be arguing that it would not be worthwhile for Malta to enter the excessive deficit procedure for a short period, since the government is aiming at reducing the deficit to below 3% in the coming months.

Asked how the government would ensure that Malta's deficit does not increase any further, Scicluna said: "The fiscal consolidation which sees the budget deficit falling by 0.6 percentage points will remain for the next three years. What has changed is the point of departure. Last year ended with a deficit of 3.3%. By keeping to the 2013 revised budget as presented we should which reach the 2.7% deficit target by the end of the year."

Scicluna stressed that the increase in the deficit was the result of expenditure overruns and overoptimistic tax revenues which had to be marked down by some 70 million to make them more realistic and tuned to the expected economic activity.

"For this year some revenues from income tax due to the widening of a particular tax bracket have been redirected to indirect taxes mostly excise taxes. What is required is a more realistic projection of revenues. It was this which had a bearing on the past fiscal slippages notably last year and this current year," Scicluna said.

The finance minister was speaking after opening a workshop on Public Sector Accounting Standards (IPSAS) in Floriana, in which Scicluna stressed the need to strengthen the ministry and its departments to ensure greater transparency and fiscal discipline.

"Greater efficiency and effectiveness is only possible if the groundwork is solid," Scicluna said, adding that this could only be achieved by strengthening the government's finances and its accounting standards.

Speaking on the introduction of more stringent fiscal measures at an EU level, Scicluna said: "This makes life difficult however it's the only way European economies can become sustainable."
Government is aiming at strengthening a number of departments and agencies to guarantee higher standards in running the country's finances, Scicluna pointed out.

"We need more rigorous scrutiny and better tools," he said, pointing out his intent to expand the responsibilities of the Treasury, to bring it on a par with other countries.

Scicluna added that the Treasury and the National Statistics Office should be as strong as the Central Bank, describing the two entities as the government's engines.

Stressing the need for an harmonisation of accrual accounting systems throughout the EU, Scicluna argued that the government cannot afford to have incorrect or delayed financial data.

"The government needs to have a clear picture of the country's financial situation on a monthly basis in order to know whether it is on track or not."