Clyde’s ‘frank assessment’, a missing video and the expenditure squeeze

Clyde Caruana has admitted giving social partners “a frank assessment” of government’s expenditure restrictions, insisting he will “soon” repeat in public what he said behind closed doors.

Nonetheless, the finance minister would not confirm the words he used during a meeting of the Malta Council for Economic and Social Development on 11 September. 

Several members of the MCESD, who were granted anonymity to speak freely about confidential matters, said the minister was clear about the constraints he faced as a result of the higher outlay on energy and fuel subsidies. 

“The minister told us in no uncertain words that we, the social partners, ‘do not know’ what is happening around us and that we have our ‘head in the clouds’,” a person present for the 11 September meeting said. 

Caruana reportedly told MCESD members not to go to him with wish lists because he had “nothing to disburse”. 

When contacted, Caruana described his presentation to the MCESD as “a frank assessment” of the current situation and how things were expected to develop in the next couple of months. 

However, Caruana insisted that he will be repeating in public, what he said behind closed doors. “In the coming days when I present the pre-budget document, I will be giving an equally blunt public presentation with the same detail and additional numbers,” he told MaltaToday. 

“The pre-budget presentation will outline what people and the social partners can expect from the budget,” Caruana said. 

Asked whether the €1,000 super bonus pledged in the election—an outlay of €200 million—will feature in the budget for next year, Caruana would only say: “In the pre-budget presentation, I will quell speculation surrounding energy subsidies and price stability, and also address the expectations emanating from the electoral programme.” 

Missing Facebook reel 

The first tell-tale sign of the tense exchange Caruana had with the social partners on 11 September came in the form of a missing Facebook reel. 

The MCESD regularly posts short videos on its Facebook page, giving a snapshot of what was discussed after every meeting. The reels with comments from individual stakeholders generally paint a serene picture of the discussions between the social partners, ministers and experts. 

But trawling through the MCESD’s Facebook reveals one missing reel. No video was posted in the aftermath of the meeting held on 11 September during which Caruana sounded the alarm on rising public expenditure. 

“There was no serene picture to depict after that meeting and so no reel was posted,” a member of the MCESD pointed out. 

The absence of the reel on the MCESD page is a minor detail but symptomatic of the problem-free picture the government has so far been painting about the economy and public finances. 

During the 11 September meeting, the MCESD presented the finance minister a document with budget proposals over which all social partners agreed upon. The unions and employer bodies individually then presented their own proposals to the prime minister during meetings at Castille. 

It was after meeting Robert Abela at Castille that the Chamber of Commerce on 19 September publicly called on the government to come clean on the situation. Just a week earlier, they had heard Caruana’s stark assessment of public finances at the MCESD. 

The rosy picture 

Another source present at the MCESD meeting with Caruana, said it was frustrating for the finance minister to speak in that way when most of his colleagues in Cabinet, including the prime minister, consistently paint a “rosy picture”. 

“But I was not surprised because there is a difference between what Clyde Caruana says and how his government acts but then again, the finance minister is also a part of the government,” the source said. 

A third source said the biggest problem is that people are not getting the “real picture” and government is “unwilling to take corrective measures that may disturb the false sense of serenity” it wants to depict. 

They pointed at the growing energy subsidy and the government’s inability to invest more in renewable energy, which both the finance and energy ministers have posited as a solution to break the dependence on imported fuels. 

“The scheme that helps people invest in renewable energy is underfunded and erratic, making it difficult for households and businesses to plan ahead,” the source said. 

A fortnight ago, Clyde Caruana had expressed concern over the higher outlay to subsidise diesel, which retails at €1.21 per litre—the lowest in the EU. 

The finance minister had told MaltaToday on 13 September that the subsidy on diesel alone had more than doubled in three months to around €75 million as a result of international market movements. 

Before the election, Caruana had said the government put aside a €250 million buffer to shield consumers and motorists from higher energy and fuel costs in the wake of the US-Israel war on Iran. But after the election, international oil and gas prices took a steeper upward trajectory, prompting the finance minister to tell MaltaToday on 13 September that he would need to take “a closer look at other areas of expenditure”. 

Advisory council warning 

Caruana has made it clear that he wants to stick to the deficit target of below 3%. This means that to keep energy subsidies intact and uphold the election super bonus pledge, the finance minister will have to curb expenditure in other areas of government. 

In its assessment of public finances for the first half of the year, published on 1 September, the Malta Fiscal Advisory Council, an independent government body, had recommended government contain expenditure growth in the second half of the year. 

“Expenditure has increased strongly during the first half of the year across several recurrent and capital expenditure categories, leaving increasingly limited room for further expenditure growth if the annual projections are to be respected,” the MFAC warned. “In this context, any new expenditure initiatives should, as far as possible, be accommodated within existing allocations and supported by clearly identified financing or offsetting measures.” 

The significant expenditure before the May election and the subsequent upward pressure on energy subsidies caused by international instability, has forced the Finance Ministry to apply the brakes. Sources within government told MaltaToday that entities across the board have been told to freeze unnecessary spending. 

“We are being told to justify every single item of expenditure,” a senior officer in one of the authorities said, adding that they were bracing themselves for “no or little increase” in next year’s budget allocation.