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Published on November 22, 2007

As the election campaign shifts into high gear, political parties are pushing varying degrees of populism in their policy platforms. Individually, most of these populist policies look very much like the vote-grabbing measures they are, but collectively they add up to an unmistakable move towards a welfare state. Should the Thai public be worried, as such generous entitlement programmes will require huge amounts of taxpayers' money to implement and maintain? Not so much, according to the country's top economists and government planners - as long as the policies are well-conceived and come equipped with sound financing options, and as long as the future government that will implement them strictly adheres to sound governance principles and good economic stewardship rules.

As a democratic country with a liberal economic system, we as a society must first come up with a definition of a welfare state that we can live with. Surely, Thailand, at its current stage of development, cannot afford the sort of generous entitlement programmes offered by wealthy, industrialised countries. Although there is a limit to what Thailand - a middle-income developing country - can do, the way the country dispenses existing public welfare programmes still leaves much room for improvement in terms of operational efficiency, cost-effectiveness, priority-setting and targeting of those that deserve assistance, particularly the poor and the destitute.

The best way to go about establishing a solid welfare system is to ensure that our limited resources make the most impact and to concentrate efforts on helping those who have persistently failed to lift themselves up from the poverty trap. Prime targets for assistance include poor households headed by poorly educated, low-wage earners. Extra attention must be given to providing free social services such as healthcare and basic compulsory schooling, so that all people, particularly the young, grow up to be competitive, productive members of society who are capable of taking advantage of opportunities to move up the socio-economic ladder. To achieve this - if it indeed chooses to expand social services including free education and universal healthcare beyond the current level - it is imperative that the future government seriously considers restructuring the tax system. Without an overhaul of the tax system, it is unlikely that the government will be able to raise enough revenue to pay for these services.

There is no such thing as a free lunch.

According to the Fiscal Policy Office, for the current level of public welfare, a whopping 40 per cent of government spending goes to health and education. To raise the entitlements any further without finding ways for the government to increase revenue intake would be fiscally irresponsible. Let's not forget that Thailand is still struggling to find money to improve infrastructure and logistics systems crucial to sustainable economic growth, even as we try to improve the overall quality of life and competitiveness of the workforce. To complicate the matter further, Thai society is also ageing rapidly, resulting in a growing proportion of elderly people depending on a shrinking population of young, productive citizens.

The government that takes office after the December 23 election will have to make hard choices on how to improve the quality of education and universal healthcare, both of which are vital if Thailand is to compete successfully in the global economy. It must make sure they are sustainable in the long run - without running up a dangerous level of national debt and without compromising the country's other concurrent needs. The government must make these decisions in a responsible manner, which means a gradual move towards improving social welfare programmes in both qualitative and quantative terms. At the end of the day, the new government will have to consider making politically unpopular decisions like increasing tax rates or expanding the tax base in order to bring in revenue that is significantly above last year's Bt1.4 trillion.

Any political party that promises additional entitlements without also discussing possible restructuring of the tax system - including raising VAT or introducing property and inheritance taxes - is telling lies and giving false hope about programmes that cannot be sustained for long. Such parties should be dismissed as manipulative and populist, and they do not deserve to rule.