Clyde Caruana warns mass transport proposals 'could royally screw' Malta

The finance minister says families will be biggest beneficiary of Budget 2026

COLA to be less than €5; pensions to see 'hefty increase'
Restaurants currently pay average €4,500 in corporate tax a year
Four day week ruled out 'for now', would cost €360m a year
Families to be biggest beneficiary of Budget 2026
Caruana backs President on rejecting Binance millions
Clyde Caruana jokes he is 'opposition in government' in pre-budget chat

Clyde Caruana has poured cold water on plans for a mass transportation system, warning that the country could be "royally screwed" if it went wrong.

The finance minister was speaking weeks after the prime minister resurrected the idea of a possible metro network in Malta.

“I’m the only person who has voiced scepticism over mass transport proposals," he told a Times of Malta business breakfast less than one week before he unveils the government's fiscal plans for 2026.

He warned that any big capital project ends up in cost overruns and that projects like mass transport would run into the billions and would have to be carried over three or four legislatures.

Clyde Caruana warns mass transport proposals would cost billions. Video: Times of Malta

“As a finance minister, I don’t feel at ease to keep a straight face in public and say that this will not have an impact on finances,” he said.

Caruana said he was warning about both his own government's proposals and the PN's proposals for a trackless tram system, questioning whether enough people would give up their cars to make the project viable and walk the 20 minutes or so to use a tram or metro.

“I am duty bound to speak my mind about this because I don’t want this country to go into something and then realise that we’re making a mistake. If we get it wrong, we’re royally screwed," he said.

Finance Minister Clyde Caruana, left, and Times of Malta editor-in-chief Herman Grech at the end. Photo: Jonathan Borg

However, he also ruled out measures like extra taxes or street parking to discourage car use, describing penalising car ownership as political "suicide".

Caruana, who at one point jokingly referred to himself as "the opposition in government" was outspoken on a number of key issues such as a proposed four-day week and tax paid by restaurants.

In his annual pre-budget sit-down with Times of Malta's editor-in-chief Herman Grech, Caruana told the guests at the Xara Lodge in Rabat that families will be the biggest beneficiary of the budget.

He promised a "hefty increase" in pensions, said that health would be one of the "biggest priorities" in Budget 2026 and announced that the Cost of Living Allowance would increase by less than €5.

LIVE BLOG

And that's a wrap

11.07am With all this talk of productivity, it's about time we got on with the working day.

Thank you for joining us over the last two hours.

We'll be back in just six days for our budget live blog. Join us then.

Don't forget about Gozo

11am A student in the audience feels Gozo is often overlooked. Caruana says there will be incentives for Gozitan students to make it easier for them to study in Malta. And he admits the economy in Gozo needs a bigger push to ensure that sustainable business roots itself in Gozo.

"Easier said than done because limitations in Gozo are more drastic than Malta," he admits but promises Gozo "will get its fair share".

And while we're on Gozo, is the tunnel proposal dead?

Caruana seems to have said enough about mass transportation for the morning.

“Let’s move on to something else," he says.

Occupational pensions

10.58am Vanessa Macdonald, formerly of this parish and now a freelance media consultant, asks about the prospect of introducing private pensions.

Caruana says he wants to be "more than 100% convinced that what we are doing is in the utmost interest of the people who are going to contribute" before he goes ahead. "So far I’m not 100% convinced by the discussions we’ve had so far".

Maria Galea from the Malta Entertainment Industry and Arts Association asks whether the market failures affecting the stability of the creative and cultural sector will be addressed, and if book publishers will receive subsidies to offset the drastic increase in paper costs. She is told there would "definitely" be some measures to address this sector.

Maria Galea from the Malta Entertainment Industry and Arts Association. Photo: Jonathan Borg

Busy parent? Tune in at 7.20pm

10.53am Michael Spiteri from KSU asks about the "demographic crisis" and suggests a measure from Poland, which introduced income tax exemptions for people with two children. Can we expect something similar?

Caruana says he won't let the cat out of the bag until Monday.

If you are a busy parent and want to know what the budget has for you, Caruana says to tune in around 7.20pm on budget day as he expects to make his family proposals around then (that's around an hour into the budget speech).

Michael Spiteri from KSU poses a question to Clyde Caruana. Photo: Jonathan Borg

Four-day week: not now

10.48am Paul Abela from the Chamber of SMEs wants a direct answer on the four-day week. He's against it, will the finance minister rule it out?

Caruana is clearly against it - for now. For the economy to enjoy a shorter working week, people have to become much more productive than they are today, he argues.

"I understand that people want to enjoy more leisure time, but money doesn’t fall from the sky," he says. When productivity goes up, "I would consider it, but not now". For the public sector alone, it would cost €360 million, let alone the private sector.

"That money has to come from somewhere," he says. "It’s something that the country should aspire to achieve but are we there yet? I don’t think so."

Privatising KM Airlines

10.42am Tony Zahra from the hotel and restaurant lobby MHRA is up first and asks about KM Airlines, saying it needs to remain a national airline.

Caruana says the majority stakeholder will remain the government but KM Airlines "must run on commercial lines". He wants private sector involvement.

Earlier, he said the airline cannot afford to be in the red and "we have open channels" with the private sector. He says its workforce has been reduced from 1,000 to 400 people.

Question time

10.40am It's now roving mic time. We’ve spotted diplomats, lobbyists, financial experts and business groups at the Xara Lodge this morning. They’ll all have some topics they’ll want to hear from Caruana about.

Members of the audience at Times of Malta's Budget 2026 business breakfast. Photo: Jonathan Borg

Private sector must be 'pushed to embrace AI'

10.37am Caruana says AI will feature in the budget. "It would be a big mistake if we are late to the adoption for more AI into our production processes," he says. "We have to push the private sector to embrace this technology".

Caruana backs President on Binance

10.36am Caruana is asked about President Myriam Spiteri Debono's decision to reject a multi-million dollar donation from cryptocurrency firm Binance. Was she right?

He points out that the issue revolved around the company wanting the beneficiary individuals to open cryptocurrency wallets themselves.

“You either give to charity or you don’t. Don’t dance around it," he says.

Should government finance political parties?

10.33am Caruana is asked if he supports party financing. “Neither yes nor no, ” he says.

He is "definitely against" government bailing out political parties and "definitely in favour" of political parties operating at arm's length from vested interests.

“Today that demarcation is murky," he admits.

Mass transport could 'royally screw' us

10.28am Caruana shoots down the two mass transport proposals on the table: a metro and a trackless tram.

Projects will run into the billions and have to be carried out over three or four legislatures, and we can only imagine the cost overruns, he warns. And nobody is mentioning the cost to maintain them.

“As a finance minister, I don’t feel at ease to keep a straight face in public and say that this will not have an impact on finances," he says.

”And in order for this to work, someone has to tell the public that they have to give up their cars. We’re not a nation used to walking - is anyone here willing to give up their car and walk 20 minutes to use a tram or metro?"

He says he doesn't see many hands.

A new flight route?

10.23am If you thought there were too many tourists on the street, this summer, well Caruana is "not confident that the numbers will go down".

"If we’re at four million, nobody will say ‘let’s go for less than that'", he says. But we have to improve the quality of the people that visit, he argues.

The only way to bring higher quality tourists is "by opening routes to places where people are more affluent”.

Is he hinting at another route, beyond the New York direct flight recently announced?

"There aren’t markets in Europe where there is a significant volume of affluent people. This cannot be achieved through Europe, it has to be achieved through other destinations. There is more work being done on this,” he hints.

On the aim of doubling tourists, that's “an ambitious target".

Caruana aka 'John the Baptist'

10.21am Another quip from the finance minister. In a conversation about the construction sector, Caruana is asked if he ever feels alone in Cabinet?

“I sometimes admire St John the Baptist. I have my own credo, it doesn’t mean all the things I say materialise,” he says.

Malta's reputation

10.20am Malta’s reputation “has improved significantly. We have been through a rough patch and a lot of the damage has been undone”, he says.

The HSBC deal

10.16am Caruana seems pleased with HSBC's deal with Crediabank. He was opposed to APS's early bid.

"I always said I wanted more competition. 90% of our banking market is dominated by three banks. If we have less players, it becomes more of a cartel," he says.

He says of the bargain deal, that HSBC weren't in a hurry to get out of Malta, they were in a hurry to get out of Europe. As for CrediaBank, "trust is something one earns" but we have a bank from the Eurozone, which means anything they will do will need to be approved by regulators "so that gives reassurance to consumers".

Pensions will see 'hefty increase'

10.13am Another budget hint. Pensions will "definitely" see a hefty increase, more than the rise in the cost of living allowance, Caruana says.

He also says third country nationals have helped avert the pensions time bomb.

One reason for Labour losing its supermajority

10am Caruana has previously predicted that population would hit 800,000 by 2040 (it's currently just over 570,000).

Asked if there is a willingness in cabinet to change this, he says there is "because people spoke during the European Parliament elections".

So was that why govenment lost its supermajority in the EP elections?

"It was definitely one of the many issues," he says.

Overpopulation

10am Caruana agrees that without third country nationals, the country would collapse. So what is the answer to the problem of overpopulation?

"The people we have are here and rendering a service," he says. "But the creation of wealth needs to come more from capital than labour".

The emphasis must be for employers to become "more capital oriented". In the measures to help employers to be announced next week, many of them will be aimed to help the industry become more capital-intensive, rather than labour-intensive, he says.

He envisaged Malta's population to reach 600,000 within two to three years.

Caruana's contrary reputation

10am Caruana's answer to a question about the economic model causes a ripple of laughter in the room: "At times I tend to be the opposition in government," he says.

A budget vox pop

9.59am Our journalist Emma Borg spoke to citizens about what they think the finance minister’s top priority should be for Budget 2026.

Here’s what they said:

What should the finance minister's priority be for Budget 2026?

Health 'one of my highest priorities'

9.57am Caruana is a fan of farming out services to the private sector. More than €15 million has been spent to outsource patients to the private sector. "For certain patients, there will be no waiting lists by the end of the year," he says, committing to continue this scheme.

"One of my highest priorities, perhaps not shared by everyone, is health," he says. "I think health should be our biggest priority for years to come".

He says the inflation being seen in specific medicine and treatments, especially oncology, is exponential. For the next five years, even to keep up with the latest medicine, the bill is going up by €60-80 million a year.

"We have one of the highest longevity rates in Europe, which is good, but costly," he says.

COLA will be less than €5

9.52am Caruana gives us another nugget. The cost of living allowance (COLA) this year will be less than €5.

Cartels still going strong

9.49am Long-time followers of this event will remember Caruana's comments back in 2023 when he said cartels can be found all across Malta’s economy, in an admission about the lack of competition within various economic sectors.

He has the same view two years on. “I don’t think that something changed in the past years," he said. "Did something change? What proof do you expect me to show you? The market is what it is, whether it is telephony or banking. It’s quite natural that whoever is in a market tries to squeeze profits, it’s not rocket science.”

'I don't think government should intervene' in bonds

9.43am We've reported recently about turbulence in the local bond market. If push comes to shove and there is a risk of default, Caruana stands firm.

"I don't think the government should intervene," he says. "God forbid that government is going to be an insurer for bonds. I stand my ground on this." He says to get involved "would be hugely irresponsible of me".

"If people think government shoud be the insurer of last resort, that would be irresponsible and lead to moral hazard," he says. "People would think government would be there to shore up (their investments)."

However he is "not concerned" about defaults. While he points out that there are two particular bonds with issues, monitoring is taking place to make sure these issuers follow their obligations.

PN's three key proposals would 'cost €600 million'

9.38am Caruana says the PN's key proposals on corporate tax, four-day week and VAT on restaurants would be costly, amounting to some €600 million.

"You can do them, but either something has to give or taxation has to increase," he says.

Four-day week 'not realistic'

9.35am If you were hoping for a four-day week, don't be. "It's not realistic," Caruana says. He's done the maths and says it would cost 360 million euro a year, "a 20% increase on what we pay today". He is also "sceptical" on whether it would incease efficiency.

Restaurants pay just €4,500 a year taxes

9.33am Caruana has spent a bit of time dismissing the PN's budget proposals. But while doing so, he gives us a surprising statistic. He says the average tax paid per restaurant is about €4,500 a year. "So you and I probably pay more tax than the average restaurant," he says.

A fertility budget?

9.27am Caruana is tight-lipped on what measures he plans to announce to help boost the dismal fertility rate. “You’ll have to wait until Monday to find out," he says.

But he points out that he has already hinted that if government does something it has to be equivalent to many millions because otherwise families wouldn’t even notice.

Will there be measures? “Let’s say yes,” he says.

More from income tax

9.23am Caruana says the government is still going to collect more from personal income tax, despite last year’s tax cuts. "There will be a few hundreds of millions more collected in income tax," he says. People are "declaring now", when they didn't before. Government revenue is increasing beyond what can be explained through economic growth, he says.

Expenditure has increased given significant collective agreements. In terms of revenue, increases have been beyond €500m each year, beyond tax elasticity i.e. beyond what would be expected through economic growth.

He says the number of people evading tax is dropping. "There are a few, but the number has gone down," he says.

"The biggest creditors to the inland revenue department today don’t go beyond a couple of millions. Before there were individual companies who owed tens of millions."

No tax increases, and a deficit decline

9.20am Caruana boasts that he's going to start by giving us a headline. He says he has already hinted that there will be no increase in taxes. But it will be a responsible budget, like previous ones, he says.

The deficit will continue to decline gradually. "We are seeing that deficit will drop to 2.8% for next year (from 3.3% this year)", he says.

Quickfire Questions

9.17am The event begins and we kick it off with a series of quickfire questions for the minister. His answers are in italics.

Who will be the biggest beneficiary of this year’s budget? Families

Which sector irritates you most? Sectors which focus most on their gains but don’t give two hoots about society at large.

Is there still time for people here to offer suggestions you’ll actually consider? Yes, there’s still some room for manoeuvre. The big measures are in place.

Will this be the last Budget before the general election? That’s not a question I can answer.

The Prime Minister said this will be the “best Budget ever.” Will it? It will be a good budget. It will be a nice budget.

Welcome

9am Good morning and welcome.

We’re at the Xara Lodge in Rabat this morning, for a Times of Malta event featuring Finance Minister Clyde Caruana.

Caruana will be in conversation with our editor-in-chief Herman Grech, with the focus obviously being on the Budget 2026 speech scheduled for October 27. That's less than a week's time.

And expectations are high. The prime minister has already promised it will be 'the best budget in history'.