When, during the leaders’ debate in the UK, Gordon Brown attacked Nick Clegg on his proposal to cut without fear or favour education tax credits, Clegg answered that his income was sufficient for his needs and that tax credits ought to go to those who really needed them. He didn’t have to add that this would help save millions of pounds when the country is up to its neck in debt.

And so, not only did that particular debate come down to plans for financial solvency, but it also opened up the on-going debate about social provision, one that the governor of the Central Bank of Malta has referred to quite recently. It is of course more than just a financial problem. It is a political problem as well as a social and cultural one.

The political one is about the changing of a society containing elements of inequality and exclusion into one of equity, inclusiveness and social peace. Specifically it is about the cultivation of solidarity between different groups of income, gender, age, physical and mental condition, and, in today’s world, also ethnicity. The eradication of poverty and the creation of jobs are strategic goals for such a policy.

The financial argument is that it all takes money and unless a country is expanding its commercial, financial and industrial base, and therefore making money, the latter can only come from additional taxes. Of course, as we all understand, there is a limit to how much tax a government can impose. Ask the Greeks and they will tell you all about it.

So, as both Nick Clegg and David Cameron stated, the road to recovery (and not just for the UK) lies in making things for sale as opposed to relying mainly on services whose export is limited, rewarding work, creating welfare independence and getting value for money, incidentally the taxpayers’ money. All of this demands a system of education that can deliver the necessary workforce. Of equal if not of greater importance is good governance which is an absolute in bad times.

And here we hit the real problem. In good times, and even those less good, political parties found it relatively easy to obtain votes by promising more and more benefits, thus fostering what is referred to as welfare dependency. In the UK there are now around three million families with members who have never earned a penny; rightly or wrongly they live on the social provision paid for by others. Is this solidarity or an abuse of solidarity?

The argument for reducing the social cost by targeting and reducing the high leakage and under-coverage found in universal schemes, is that policing and administering the system is so costly that in the end there will be no real difference in cost between the universalism of social provision and its limitation to those actually in need of it. There is also the argument that targeting allocates limited resources to an identified subgroup while possibly creating corruption and clientelism as people struggle to go on to the benefit list. Furthermore, in times of recession, classes that had been exempt from the scheme could very well find themselves in need and will have to struggle to get on to it precisely because the money is tight.

Will schemes to reward work really make a change? Cameron believes they will. Brown claims they are already doing it. Clegg informs his audience that, as presently applied, they didn’t work as expected in the UK. His proposals include a lowering of the tax threshold so that people at the bottom end of the pile will receive some badly needed oxygen; he is suggesting that in the UK, the first 10,000 will not be taxed, thus giving back to the family some 700 pounds. He believes that such a benefit is far better than giving people handouts for at least you have some incentive to reach the 10,000 pound target. Malta has applied similar provisions.

The alleviation of poverty however is one thing but the creation of wealth to move the country forward is quite another. If there is no creation of wealth, there will certainly be no alleviation of poverty. Clegg said he has no problem with people or institutions creating wealth as long as that wealth is used to stimulate economic activity in the country. Cameron in turn, was inversely proposing that entrepreneurs should not be so highly taxed that they would practically be driven into tax havens elsewhere.

People needed jobs and those could only come through the creation of profitable enterprises which need money to be set up. Here of course we come to the banking crisis and Clegg’s suggestion that banks be split up so that those safeguarding peoples wealth would be different from those taking enormous risks with peoples money in order to give their shareholders, their risk-takers and their directors, bonuses amounting to millions a year.

It is pertinent to note that this double horned dilemma is already with us. While Malta’s social provision (which includes the health provision) is under strain, few of our entrepreneurs have managed any real breakthroughs in the European market as optimistically forecast. Fewer still are in the business of research, training and innovation. Business here still prefers to find its workforce ready trained and have state organs drum up business for them. We seem to cling to the well-worn paths of old in a frenetically changing world.

This has to change. Government should play just the honest broker and reward successful industries lining up its own interests on the same level playing pitch. Lombardy has just seen a revolution in its medical services when the regional government asked state and private health care to compete in providing the best services (the citizen still gets it for free either way) and then rewarding the best. I quote the medical area simply because that’s where most of my expertise lies. The fact remains however, that a government is there to push the whole country forward.

One important caveat is to have regulators able to really defend and safeguard the interests of consumers without fear or favour.