[WATCH] Pandemic punches €1.5 billion hole in public finances but minister pledges no new taxes

The next budget and the subsequent ones will not introduce any new taxes, Finance Minister Clyde Caruana has said, reiterating a pledge made several months ago.

Caruana was unveiling the pre-budget document on Tuesday with the theme, ‘What country would you like to leave for your children?’

This will be the first budget for Caruana, who was co-opted into parliament and made finance minister in late 2020.

Caruana said that the pandemic left a mark on every country, and it presented the world with the biggest challenges since World War II. 

According to Caruana, Malta had seen economic growth of 7.2% between 2015 and 2019 and a contraction of 8.3% in 2020 due to the pandemic. He said that the forecasted economic growth will be 6% in 2021 (3.8% in real terms) and 4.9% in 2022 (6.8% in real terms).

He also reiterated that the employment figures decreased steadily during 2021 and have gone below the 2019 level, to 3.3% in July.

Caruana noted that the action of the government during the pandemic cost the country millions that it afforded. He said that apart from a sharp increase in expenditure, the country’s revenue also decreased.

Caruana stated that until the end of 2021, the pandemic would have cost the country a total of €1.5 billion.

The debt-to-GDP ratio for 2021 was 65%, and it is forecasted to reach 65.8% in 2022.

Caruana emphasised the importance of the labour market in the economy and said that work was almost ready for a new political strategy for the market.

He mentioned the making-work-pay strategy “achievement” that saw people dependant on social benefits go down from 15,000 in 2013 to 6,500 in 2020.

The risk of poverty or social exclusion in Malta was limited to 20.1% of the population, while the EU27 average stands at 20.9%, said Caruana.

Pension expenditure rose over eight years by nearly 40% and now amounts to 6.5% of GDP, and Caruana remarked that pensions are vital for the battle against poverty.

He also said that the quality of life is also essential and noted that the reduction by 19% of carbon emissions by 2030 is a way forward.

READ MORE: Climate crisis: Malta’s 19% carbon reduction target ambitious enough

Healthcare is the government's biggest expenditure, said Caruana adding that everyone expects a quality of life as a right. Compared to 2010, the healthcare expenditure has more than doubled, and he announced that the budget would introduce a new list of free medicines.

Caruana also said that the government would be embarking on an exercise that would clamp down on abuses related to VAT evasion. He said that he wants to see economic development and not just economic growth, leading to a better quality of life.

When asked whether the obligatory education will go up to 18 years of age, Caruana said that the government has no plans for that and wants to focus on targeted training for the labour market.