Political parties, social partners react to minister’s Caruana Budget 2024 speech

Today the government confirmed it’s tired – Bernard Grech reacts to budget

Today the government confirmed it’s tired, said PN Leader Bernard Grech, in his first reaction to the budget presented by Finance Minister Clyde Caruana.

Speaking to journalists, Grech said that the government did not provide solutions to several important matters, such as how it is going to get back the €400m back from the fraudulent hospital deal or how it is going to address the ever-increasing population.

He said that the people are constantly feeling the weight of the population which is increasing “by thousands, yet the government wants to continue to endorse its current economic plan”, while explaining how it is based on the importation of foreign workers who are low earners.

A direct effect of this is that nationals are left competing for health services and are suffering traffic problems, continue Grech.

Moreover, he said how there also seems to be a lack of investment in the environment.

Commenting on the announced increase of €15 to pensions, he said that this figure also includes the COLA adjustment, which leaves the pensioner with less than an actual €3 increase.

He said that this is not enough, as the cost of living is affecting the quality of life of the elderly.

Referring to the multiple negative reactions from social partners, Grech said that even this shows lack in investment from the government’s side.

“There was also no indication for a new hospital in Gozo,” said Grech, while also saying that the same happened regarding the also promised new mental hospital.

Moreover, he said that during earlier parliamentary questions, Health Minister Chris Fearne indicated that the government was going to continue investing in the outpatients department, “however there was no mention of it in the budget”.

Additionally, Grech also noted, how despite the government recognising its failure to predict the heavy usage of electricity distribution last July, there was no substantial investment to address the infrastructure.

Clear on social objectives, vague on wealth creation – Chamber of Commerce

The Malta Chamber of Commerce, Enterprise and Industry noted on Monday that an increasing portion of the government budget is being spent on recurrent expenditure. In addition to energy subsidies, social assistance for pensioners, vulnerable persons and low-income households feature highly in the budget. This is commendable as it helps the most vulnerable strata of society to keep up in the current inflationary environment.

The flip side of heavy social expenditure is that the spend on infrastructure is inadequate especially when one considers population increases in recent years and the resultant pressures on energy distribution, waste management and our traffic-congested road network. This budget was another missed opportunity at introducing concrete measures to disincentivise private car use in congested areas and during rush hours.

There is little clarity in the budget on how the government is going to improve the productive capacity of our economy, beyond mention of a number of schemes to incentivise businesses to make digital and sustainable investments, the chamber said. The Malta Chamber is concerned that the emphasis on subsidies is creating a culture of dependence and subsidies now constitute such a substantial portion of our GDP that our economic growth is being fuelled largely by subsidies. The government is relying on increases in tax revenue resulting from wage increases, most notably due to COLA, that are fully taxable since there has been no revision in the lower income tax bands, ignoring the recommendations of all social partners including The Malta Chamber.

It must be borne in mind that this budget is being presented against the background of the ongoing war in Ukraine, and a new threat to the stability of international energy prices arising from the war in Gaza with its potential for destabilisation in the oil-rich Middle East. Additionally, the claim for €100m, in relation to the failed hospitals’ deal, is still being contested by Vitals Global Healthcare. All the above could have a significant impact on public finances in the coming fiscal year.

The Malta Chamber is pleased to note that the government is finally considering introducing automatic enrolment in private pensions and the launch of a specialised commercial court, both of which were proposals of The Malta Chamber. Other positive developments, which draw on the recommendations made by the Malta Chamber, include the regulation of temping agencies, venture capital for startups, incentives for family businesses, schemes related to ESG for SMEs and the use of technology for law enforcement. The government was finally bold enough to withdraw an incentive related to the purchase of property in Gozo to protect what is left of the greenbelts of Gozo and increase incentives for the renovation of properties in urban conservation areas.

This budget mentions a number of ideas that need to be explored further and developed in detail to become more tangible. As always, The Malta Chamber is eager to see more tangible proposals that will provide the required impetus for a leap in quality, higher productivity, sustainable growth and improved competitiveness of our economy.

Budget 2024 is rich in social measures, but lacking in long-term vision – MEA

In its initial reactions to the national budget speech, the Malta Employers’ Association (MEA) described the national budget placing an emphasis on social measures but does not really address the need for economic restructuring to have a sustainable and competitive economy through private investment and higher valueadded activities.

The MEA noted, with satisfaction, that the government intends to continue with its efforts to shield households and businesses from the brunt of high energy prices. “This assistance may become more critical in the months to come if energy prices become unstable as a result of unrest in the Middle East, but could come at a higher cost which may generate pressures on the budget deficit. The budget includes diverse positive measures aimed at protecting vulnerable groups. The measures to incentivise pensioners to remain active in the labour force are welcome and should yield positive results. The MEA also looks favourably on the incentives announced for family businesses,” it said.

Regarding Air Malta, MEA said that it waits with anticipation for a complete reorientation of the new airline to ensure that it is run on commercial lines and that the mistakes of the past are not repeated.

“With respect to education, there is little emphasis on investment in vocational skills to have a better match between the output of students and the requirements of industry.”

“The budget commits to a strong investment in infrastructure, which is a good sign given the various shortcomings that both businesses and households face. On tourism, the budget is rather vague and does not present a clear strategy about any re-orientation in this industry to attract higher value tourists.”

“COLA will be an issue in 2024. The unprecedented increase, even though muffled by the energy subsidies, will affect many businesses negatively and may fuel further inflation. The licensing of outsourcing agencies is welcomed as a means to avoid exploitation of TCNs workers,” it said.

MHRA says budget is a resounding commitment to support economic expansion

The Malta Hotels and Restaurants Association (MHRA) referred to the budget presented by Minister of Finance, Clyde Caruana, “as a resounding commitment from government to support the resurgence and expansion of the Maltese economy in the face of ongoing global economic and geopolitical challenges“.

Specifically, MHRA acknowledges the wide-ranging social benefit schemes.

In response to the budget, MHRA president Tony Zahra remarked that in 2023, the tourism sector served as the driving force behind the economy, “and the Minister of Finance affirmed that it is expected to retain this pivotal role in 2024. MHRA emphasises the importance of connectivity for the industry, and therefore, the launch of the new airline on 31 March remains a crucial element for the industry’s success in 2024. While the budget caters to this new initiative, MHRA notes a reduction in the subvention for the Malta Tourism Authority“.

“The budget speech however didn’t specifically mention any particular initiative in relation to tourism, despite that tourism faces various challenges next year, especially further expansion of the tourist accommodation, which means increased efforts to expand connectivity and seat capacity.” MHRA reiterates that the government needs to revise the tourism policy for next year and ensure that existing incentives for more hotel development are discontinued.

“Furthermore, given that the hospitality sector heavily relies on human resources, the substantial increase in COLA (Cost of Living Adjustment) this year could potentially impact the industry’s profitability. To counteract this, the industry must strive for productivity gains or increase per capita spending within the hospitality sector.”

MHRA appreciates the government’s intervention in the energy sector, recognising its significance in managing industry costs and keeping inflation rates in check through subsidies.

MHRA further asserts the importance of close monitoring of public finances, ensuring good governance and accountability, “given the projected deficit for next year, even though government plans to narrow the negative balance compared to this year“.

MHRA reiterates its longstanding vision for the industry to enhance its product offerings, attracting higher-spending travellers to Malta. “Indeed, private investments in the capital city have already attracted such discerning travellers, and MHRA now expects the government to match these substan

tial investments by providing both human and capital resources to enhance the Maltese islands’ infrastructure and general upkeep. In this light, MHRA expresses concern that the budget refers to a drop in capital and infrastructural projects.”

“Labour staff shortages will remain one of the biggest challenges for the sustainability of the sector and this needs longterm planning, as a change in the economic model was mentioned once again, but nothing was said to put our mind at rest that our sector will have to depend on human resources. Reference to an increase in the cost for permits in recruiting foreign workers is deeply concerning since this will have a major negative impact on the hospitality sector.”

MHRA also points out that nothing was specifically mentioned regarding incentives to help the tourism industry transition to meet sustainability and climate change targets.

MHRA will be commenting in further detail as the financial estimates will be made available to the association for review.

Budget could have ensured that ‘nobody remains a beggar of the state’ – ADPD

ADPD’s chairperson Sandra Gauci has questioned the just nature of this year’s budget, saying that the minimum wage increase is still not sufficient enough for those in poverty to deal with the increasing cost of living.

Gauci said that while the announced rise in Malta’s minimum wage is “a step in the right direction”, she argued that this is “far from what is necessary for a decent living”. Moreover, she also mentioned the lack of announced reduction to the expenditure of subsidies. In their initial budget reaction, ADPD reminded that Finance Minister Clyde Caruana himself had described this level of expenditure in energy to be unsustainable.

The party referenced an independent study carried out by Caritas Malta which identified the level of family income necessary to sustain a family of two adults and two children. This 2020 study found that this bare minimum level of family income was €14,000, around €4,000 more than the minimum wage. According to this study, this increase should have grown to €78 per week, rather than the announced €15 over three years.

Gauci said that “what is needed is a permanent increase in the ‘temporary COLA’ for those at risk of poverty”.

ADPD said that while it is positive that the government has recognised the need to raise the minimum wage, they condemned the lack of transparency in how this level of increase was established. “The criteria used to establish the announced increases are secret,“the third party said, “It is not known how the minimum wage agreed between the socalled social partners was worked out”.

Furthermore, Gauci made reference to the energy subsidies by highlighting that this was a missed opportunity to encourage a more sustainable way of living. “We are not convinced that the cost of €70,000 per hour in subsidies is necessarily the best way to allocate the limited resources of our country,“Gauci said in her statement. In this regard, she stated that “international prices will remain high”.

ADPD are proposing for the “basic and essential consumption of electricity for homes” to continue to be subsidised though for the rest of the subsidy to be re-mixed.

Gauci discussed that a reduction in subsidies could utilise this funding for other needed sectors “that really lead to an improvement in life for future generations” such as education, “an urgent transition” to renewable energy sources, and others.

ADPD concluded their statement by highlighting that “there needs to be a wiser use of the limited resources” of the Maltese islands.

A budget that continues to improve the quality of life through growth and stability – GWU

The General Workers’ Union said it is satisfied with the measures announced for the Budget 2024, which it described as a budget with the largest expenditure on social benefits ever made in our country and one that continues to help and support the vulnerable people. All this in the context of an international crisis.

The secretary general of the GWU Josef Bugeja said that: “The GWU is satisfied that this is another budget that continues to improve the quality of life, gives stability, strengthens the standard of living of workers and pensioners, while ensuring economic growth.”

He continued that for the GWU the most important measures are the strengthening of the national minimum wage over four years, the increase in social services including pensions and the continued subsidy on the price of energy, fuel and cereals, which cost of the subsidy will amount to €350m. All this without any introduction of any new taxes.

The GWU is satisfied with the increase of service and widows pensions and the addressing of the anomaly of the pensioners who were born before 1962, increase in the students stipend, Children’s Allowance and Carers’ Grant, strengthening of the additional COLA mechanism and cash grants for small and medium enterprises.

“We appreciate that the process of addressing the injustices of the past, including those of the shipyards, will also continue. This is in addition to several measures that will improve the environment around us to further improve the quality of life.”

The GWU also appreciated the fact that the national debt will remain below the levels requested by the European Union even though the government is introducing a number of unprecedented new and additional social measures.

The government took on board many of the proposals put forward by the GWU including the continuation of subsidising energy and fuel, regulating the outsourcing and temping agencies and the principle of equal payment for work of equal value, the union said.

Bugeja continued: “We believe that the compensation for the cost of living should not have been taxed and the public administration workers, the public sector and the contractor workers, who provide service to the public administration, should have been given the relativity in wages apart from the cost of living compensation.”

As suggested by the GWU, the government will ensure that workers must uphold honesty and fulfil their obligations. The government pledges support for employers who treat their workers and consumers with fairness, ensuring that this country remains financially strong without putting burdens on future generations.

SMEs ‘should have played a more prominent role’ in this budget

The greatest reassurance of this budget is that the energy subsidy will remain for as long as necessary. This offers basic but very important assurance, the Chamber of SMEs said on Monday.

The SME Chamber notes that in the budget speech there was no emphasis or new incentives on how SMEs can be strengthened.

Another important topic was the plan to renew the economy and it seems that the government wants to attract economic growth from high-end sectors. Targeting high-value adding sectors is important. At the same time, however, we are forgetting the absolute majority of the businesses that contribute towards the Maltese economy.

It is therefore more important to see that our country’s small and medium-sized businesses are incentivised to renew and modernise to be future proof. The SME Chamber will therefore continue to work to address this gap and give priority to Maltese SMEs, it said. Government admitted that

around 100,000 are affected by poverty, UHM says

In a statement published in reaction to the 2024 budget announced by the government, UHM Voice of the Workers said that the government’s decision to give additional aid apart from the Cost of Living Adjustment, and its “boasting that 95,000 families will benefit from this measure”, is an admission that the problem of poverty is affecting around 100,000.

It said that this revelation is evidence of a lack of drive within the market and that the wage is not enough for families to experience a decent quality of life. It added that this is causing the government to take sporadic measures in order to raise these families from the poverty level.

“This is not the way of a new economic vision for the improvement of wages and conditions in the labour market,” UHM said. It added that these sporadic measures are eroding the collective bargaining process and disrupting the systems which are supposed to protect the livelihoods and incomes of families. It continued that these measures are having to be taken due to low and compressed wages.

UHM said that it is very disappointed that the government did not heed the union’s request that the Cost of Living Allowance would not be taxed. “A fair Malta means a budget of deception,” the union said, referring to the government’s chosen theme for the budget.

The union said that not taxing the COLA would have resulted in Maltese and Gozitan families pocketing €30m, which it said is necessary for those families to cope with the rising cost of living. It continued that the government rejected this proposal despite it being supported by the political parties as well as all of the unions and employers’ associations.

It said that the government has deceived the unions after promising them for a second consecutive year that it would introduce a mechanism which corrects the additional COLA and the relativity for the public service and public sector workers. “Of this, it did nothing.” The union continued that this has been done in a circumstance where there was the highest COLA and therefore damage will be done to COLA inclusive arguments.

“This means that thousands of workers will be taking a bigger hit with the cost of living than they took this year, while the government’s wage scales will be disrupted,” UHM said that this goes against the principle of meritocracy.

“We could have made another budget of €500m with the money we gave to Steward and Vitals,” UHM said. It added that while the government did not find the funds to carry out the concrete measures proposed by the union, “it had no problems at all to put forward €500m in the hospital agreement”.

over 2024 Budget

Forum Unions Maltin expressed disappointment as it said the government had failed to live up to its word that there was to be a salary adjustment for public sector and public service officers.

“As had happened last year, it is clear that the government has gone back on its word and betrayed the workers,” said the Forum.

It continued by saying that “in the absence of this mechanism”, thousands of workers will not only not benefit from this budget, but lose out.

“With this result these workers will be poorer, with much less spending power than this year.”

The Forum described this as a “big blow for all workers” especially given the unbridled cost of living, adding that this is a direct result of another budget where “the government has again failed to introduce concrete measures to curb the cost of living”.

The Gozo Business Chamber noted the budget’s principally social aspect in the face of international pressures and also praised various measures addressing Gozo.

The included the prospective start of the rural airfield project, the completion of important projects in the upcoming year such as the Gozo Aquatic and Sports Centre, the completion of Dar San Ġużepp, the Victoria Primary and Middle Schools, and the new health centre in Victoria, the acquisition of an MRI machine for Gozo, the provision of accommodation for Gozitan students studying in Malta and those for relatives who have their family members currently undertaking care in Maltese hospitals.

But the GBC said that even with the recent publication of the Gozo Regional Development Strategy, the chamber believes that the budget failed in transforming the Gozitan economy into a more sustainable economy and to sustain a long-term vision for the island.

The GBC had already noted that while the blanket 2% tax on the purchase of property in Gozo was beneficial at a point when the market was stagnant, such a blanket measure as currently formulated was incentivising the development of small apartments concentrated into massive projects, within communities that cannot currently absorb such type of development. Nonetheless the chamber had also advocated that the savings from the removal of the reduced stamp duty should be directed to incentives which are aligned to Gozo’s socio-economic priorities.

It said that except from the increase from €30,000 to €40,000 for first-time buyers in Gozo, who buy property in Urban Conservation Areas, such incentives have not materialised in any way.

In 2022 the Gozo Regional Development Authority (GRDA) had also highlighted that the present scheme be transformed into: targeted incentives that are aligned with the achievement of policy objectives, namely: (i) encourage more upmarket property development in Gozo; (ii) limit eligibility of the scheme to low-end, dilapidated and vacant property which is repurposed into medium- to higher-end real estate in selected development zones; (iii) at the same time, subject small units to either higher stamp duty and/or additional fees to disincentivise the construction of small, low-end units and (iv) promote green and efficient buildings.

“Unfortunately no such type of incentives have materialised. Such a situation may simply lead to an increase in prices, without actually directing the current construction industry to more sustainable practices and upmarket property development,” the GBC said.

The chamber had also proposed schemes for the finishings of existing property, as the risk of the current property stock of small apartments remaining vacant is now very high. “Unfortunately, none of its proposals in this direction were taken into consideration.”

The chamber reiterated the need for a new hospital for Gozo and for new law courts, as well as for a new incentive framework to attract companies to the Gozo Innovation Hub.

The chamber was dissatisfied that sectors, which need support such as importers and artisans established in Gozo that require assistance in the transport between the two islands, were not addressed.

Forum Union Maltin expresses disappointment

Gozo Business Chamber