Budget 2027: Beyond status quo

Clyde Caruana has characterised tomorrow’s budget as one where decisions will be taken. “In previous budgets it was all about giving; this budget is about decisions that need to be taken,” the finance minister told his host, Karl Bonaci, when interviewed on F Living last Wednesday. Caruana added: “This is what I am loving about this budget.” 

The finance minister did not say much else to help us decipher what Budget 2027 will look like but there is a lot to chew on in those few words. 

For starters, the minister was a bit disingenuous when he said previous budgets were all about giving and had very little to do with strategic decisions. While it is true that the most significant measures were about giving, the previous budgets also made strategic decisions not to disrupt, in any way, the existing economic model based on unbridled growth. 

A decision to maintain the status quo remains a decision nonetheless. Similarly, a decision not to trim the excess fat in public expenditure—something the minister recently admitted is a reality—is also a decision. The question is: Was the decision to maintain the status quo the correct one in the circumstances or was it dictated simply by electoral considerations? 

Which brings us to this year’s budget appointment and the minister’s remark that it will be about the “decisions that need to be taken”. Our interpretation of Caruana’s words is that the economy needs recalibration and public finances require some pruning if energy subsidies are to be kept intact, while the deficit is kept below the 3% mark. 

On the economic front, it seems government is waking up to the reality that Malta’s rapid growth in a relatively short time span is now causing disquiet in communities and forcing public infrastructure to buckle under the weight. 

The issue is not whether Malta should forfeit its target of 4% annual growth but what activity should the country engage in to generate that output at a lower social and infrastructural cost. 

We can suggest a few decisions the minister could announce in the budget to move away from the status quo and start to address some of the pressing issues. Ultimately, Malta has to wake up to the reality that it is not immune to what is happening around us and our financial resources are not unlimited. 

The following are some suggestions we believe can start to shift the status quo: 

Tourism 

• Ensure new rules on short-let apartments become applicable to all such accommodations and not just newly-licensed ones. If need be, phase them in over two years to allow for adjustments. 

• Increase the licence fee for short-let apartments and ringfence the additional income for more investment in community policing. 

• Introduce a three-year moratorium on new licences for short-let apartments. Malta does not need more of this type of tourism. 

• Re-direct 50% of the support offered by the Malta Tourism Authority to party and festival promoters to more sustainable and less disruptive tourism events. 

• Increase the eco tax paid at accommodation establishments by 50c and increase the capping to €27. Ringfence all eco tax income for investment in smart public cleaning infrastructure with a view to make it less labour-intensive.  

Energy 

• Ensure adequately-funded grant schemes to encourage households to invest in solar panels, battery systems, double-glazed windows, solar films and replacement of appliances with more energy efficient ones. 

• Ensure the energy efficient schemes mentioned above have a set time frame so that suppliers and potential consumers can plan ahead. 

• Double the money invested into the upgrading of the electricity distribution network to speed up the upgrading process and ensure the system is resilient even at high temperatures.  

• Introduce an automatic compensatory mechanism for consumers whenever they suffer from prolonged power cuts. 

• Ban the use of subsidised diesel and petrol for all seacraft except registered fishing boats and maritime supply vessels. 

• Increase household swimming pool licence fees by 25%. 

Productivity 

• Businesses that invest in worker retraining, automation and measures to improve productivity, would have their top tax rate cut to 25%. 

• Provide greater incentives to encourage more investors to put money in start-ups that create higher value-added thus directing some of the millions going into property into productive activities. 

Parents and workers 

• Introduce a pilot study within government that allows parents of children aged under-11 to work 30 hours a week with the unworked 10 hours being compensated at minimum wage rates by government. 

• Eligibility to the above scheme will be lost if children are regularly absent from school. 

• Introduce the maternity and paternity leave extension electoral pledge in 2027. 

• Fulfil super bonus pledge but admit the party was overzealous during the electoral campaign. As a result, introduce the super bonus over three years with the first €300 due in 2027, going up to €600 in 2028 and finally, €1,000 in 2029. 

Good neighbourliness 

• Clamp down on the illegal occupation of public land by setting up a joint all-year-round task force between the Lands Authority, the MTA and the PA, clearly designate public areas on which tables and chairs are allowed with permanent physical markers, increase annual fees due for permits to use public spaces for commercial gain. Abusers will lose their concession after three infringements. 

• Outdoor music in Valletta, except for large-scale public activities, should stop at 11pm. 

Affordable housing 

• Introduce tax incentives to encourage property developers to sell a set percentage of their building portfolio at 30% below market rates to increase the number of affordable housing units for first-time buyers. 

• Introduce incentives to encourage property developers to sell directly to first-time buyers and other home owners thus cutting out the market speculators acting as middlemen that are contributing to higher prices. 

Trimming fat 

• Carry out a human resources audit of government agencies and entities to determine where there are excessive staffing levels. Redeploy unnecessary staff to other government entities where staffing is inadequate or outsource these workers to the private sector. 

• Merge government entities where there is duplication of work. 

Transport 

• Sign a memorandum of understanding with the Opposition to agree on a hybrid mass transport system with a rollout plan spread over 15 years and covering the main built-up areas. The MOU would include measures to discourage private car use that would be introduced gradually in line with metro delivery, and a pricing strategy. Government can set up a company that would be responsible for implementing the project and funding could be in the form of a designated mass transport bond and EU funds. 

• Introduce on-street parking metres in commercial centres such as Sliema, Gżira, Mosta and Hamrun with money generated from the scheme going to the respective local councils. Remove on-street parking in Valletta except for residents, and double the capacity of the park-and-ride facility at Blata l-Bajda.