‘Another budget without tax increases’ – Clyde Caruana launches pre-budget document
The budget for 2022 will be another budget without an increase in taxes, Finance Minister Clyde Caruana said during his first prebudget document launch.
Caruana, who took over the finance portfolio late last year after the resignation of Edward Scicluna, said that the motto for this budget was “The country you wish to leave for your children.” Although the country is recovering economically from the effects of the Covid-19 pandemic, proper investments in key sectors especially the employment industry need to be proposed, Caruana said.
The presentation of the document will be followed by public consultation exercise, with Prime Minister Robert Abela and Caruana set to meet members of the public in Triq is-Santwarju Żabbar on 16 September.
In yesterday’s presentation, Caruana acklowledged the “tough period of the pandemic which which left a mark on everyone. The pandemic has presented itself with challenges never seen by anyone since the war. The daily life of everyone changed drastically and situations like these beg one to ask the questions what he or she would do for a better future.”
We will be victorious in our efforts to return to normality, Caruana said. This would be another budget without an increase in taxes. This is contrary to what is happening elsewhere, Caruana said, as other countries in the coming months will be following the steps taken by the U.K and increase taxes.
The main reason as to why Malta does not have to increase taxes is due to the fact that the Maltese
economy growth rate has been the second strongest in the EU, Caruana said.
The reduction in Malta’s economic growth was lower when compared to other EU countries. “Thanks to the proper investment in the employment industry, we had a solid foundation to tackle this problem,” Caruana said.
The Maltese economy in 2022 is expected to grow 6.8% and it is better than the average expected growth of other countries in the EU.
Caruana said that decisions taken during the pandemic to protect the employment sector meant that Malta has the lowest unemployment rate in the EU. Furthermore, Caruana confirmed that during the pandemic, the rate continued to decrease and it currently stands at 3.3%, which is lower than the percentage of July 2019.
When compared to other countries in the EU, the employment industry growth is one of the highest and this is not due to people not registering for unemployment anymore but rather due to the fact that better opportunities were created. “Malta has therefore registered the highest year on year increase in employment in 2020.”
The change in inactivity rate has also decreased. The inactivity rate refers to people who can work but choose not to. In this regard, Malta has the second best rate in decrease of inactivity in the EU. “This all indicates that the work environment in our country is stronger than ever. This is why we do not have to add taxes. This is why I say with confidence that we can reduce the deficit.”
During the pandemic, the expenditure rose exponentially, Caruana said. The government has also decreased the income and therefore without a doubt Malta returned to a state of deficit. “Although there were critics of the expenditure of the government, experience has shown that countries whose governments properly invested in a strong employment industry saw the economy bounce back.”
“The deficit figures for this budget are already better than what they were in February. In February we were looking at a 67 to 68% rate of deficit. Going into 2022 the debt would stand at 65.8% and while the deficit figures in 2021 stood at -12%, while going into 2022 they will be at -5.6%.
The pandemic cost the Maltese people a total of €1.5 billion in two years and Caruana said that “the expenditure was needed and there are no regrets in this regard.”
“There wasn’t a moment which made me say money was wasted. The pandemic brought about the best decisions that could have been taken. Through the decisions we took, we are in a position to look hopeful.”
In order to keep investing in the employment industry, addressing the issue of proper access to quality education is needed in order to reduce the gap between skill acquired and the labour market shortages.
The new measures which are being proposed are all going to be completed because it was made sure that all the resources needed for them would be available, Caruana said.
The amount of people in 2013 who were dependent on social benefits was more than 15,000; in 2020 that figure was reduced to 6,469. Caruana said that this led to “a reduction of €36.5 million from social benefits expenditure by the government from 2014 to 2020.”
The risk of poverty in Malta was 24.6% in 2013 while in 2020 it was 20.1%, with the EU average being 20.9%. Caruana said that “One does not reduce the risk of poverty by simply giving out money and benefits but by helping people find work and giving them the opportunity to work. If someone is healthy and willing to work, they should always be given this opportunity.”
When it comes to pensions the government expenditure in this regard amounts to €848.9 million yearly. This has risen by 40% in the last 8 years.
In 2020 the expenditure for healthcare by the government was just shy of €900 million, €74 million of this was just for the pandemic effort. In comparison, in 2010 the total expenditure was that of €347 million.
The people want more, the people want something better and this is what this budget will be doing, Caruana said. This does not mean a bigger economy necessarily but a developed economy. This entails an improvement in all aspects which make up a quality life worth living.
We can do this because this government has the resources to do so, Caruana said.