Updated 11.25am

Malta cannot keep importing foreign labour at the rate it has been doing in the past years, Finance Minister Clyde Caruana said on Monday as he hinted at plans to introduce financial incentives for higher-value sectors.

Speaking at a Times of Malta event, Caruana acknowledged that tensions over the massive influx of third-country nations risked reaching breaking point.

“We need to strike a balance between what the business community needs, and what people expect,” he said.

“But it cannot keep going as it has been going in the past few years, full stop.”

That change would take time, he acknowledged, and people should not expect any significant changes over the short and medium term as any dramatic, sudden shifts risked grounding the economy to a halt.

Shifting to higher-value processes

Caruana said the Budget 2024 speech, which is scheduled to take place on October 30, would unveil plans to invest millions within the manufacturing and financial services sectors, to help companies move up the value chain into higher-value goods and services that are not as labour-intensive.

That was the only way of breaking Malta’s reliance on importing foreign labour, he said, given that the country’s birthrate is Europe’s lowest.

Caruana’s admission represents a significant change in perspective from the time he served as CEO of state employment agency JobsPlus. In that role, he helped draft the country’s labour policy and is widely considered to be the architect of Malta’s labour importation policy. 

In a 90-minute conversation with Times of Malta editor-in-chief Herman Grech, Caruana indicated that his ministry has been working overtime to trim the fat from government spending, in an exercise he described as “prioritization”. Various line items in government spending would see reductions, he said.

Catching tax dodgers

Caruana emphasised work to catch tax cheats and revealed that work to introduce AI-powered software to do so was in full swing.

The software, which Caruana first announced some months back, is now being tested on a sample of local firms.

“Just 40%-45% of them were fully compliant,” he revealed.

Cartels 'across the board'

The minister also made a frank admission about the possibility of cartels controlling local markets. 

“The size of the local market is what it is, and that therefore introduces a problem with competition,” he said. “The problem is across the board.”

Some of that problem might stem from “greed inflation” – companies raising prices to bump up their profit margins – but he noted that the problem is not a uniquely Maltese one.

He also expressed optimism about the impact a record-high COLA would have on the cost of living, arguing that while employers had seen a bump in profits from rising prices, they would now have to raise their wage bills and react by “lowering their profit margins”.

“We haven’t seen a wage-price spiral,” he said.

Employers argued earlier in the year that they saw signs of such a spiral developing. 

Caruana also said:

  • Golden passports are here to stay – at least until the European Court of Justice case is resolved
  • The country is spending enough on education but not getting the bang for its buck
  • Every single route operated by the current Air Malta "was running at a loss".
  • Media reports about corporate tax reform have not been quite correct, but the government has a plan drafted with the help of US consultants to bring it in line with what the OECD is pushing.

Attendees at the business breakfast. Photo: Chris Sant FournierAttendees at the business breakfast. Photo: Chris Sant Fournier

As it happened

Time's up 

11.02am Time's up, and the event comes to a close. We weren't able to get all your questions answered - there were just too many to do that. Thank you for having tuned in and for having contributed. 

Golden passports not going anywhere

11am  The country can live without the golden passports scheme, Caruana says. It brings in tens of millions of euros. But the minister says the government has no plans of phasing it out anytime soon.  

The problem with hiring workers

10.57am An employer says he can employ a worker in 2/3 weeks to hire someone in his office abroad, but more than one year to do so in Malta.

“It’s harming the growth of my company,” he says. “We pay good wages, I’m not importing cheap labour. But I need skilled people. Send Identity Malta an email, and it takes three weeks to get a reply. It’s a disaster.” 

Caruana replies: "We have to find a balance. Some are concerned about the influx, others are worried that they cannot find the necessary labour. But it cannot keep going as it has been going in the past few years, full stop. So we need to strike a balance between what the business community needs, and what people expect." 

Time to reform environmental taxes? 

10.46am Marie Briguglio wants to know: is it finally time to think about environmental tax reform, slashing taxes on income while increasing taxes on environmental misdemeanours – anything from construction noises to traffic congestion, water extraction, litter and other such things? 

Caruana says Malta has, percentage-wise, one of the highest environmental tax income rates relative to GDP within the EU. Though he acknowledges it's "nothing" near the levels raised by income tax or VAT. 

But the minister is sceptical about boosting government revenue by raising taxes. He thinks the private sector is more likely to use the money well than the public one.

"I'm centre-left but when it comes to taxation I'm more of a right winger in this country," he quips.

Incentives for greener buildings

10.53am Michael Stivala from the MDA argues that the property sector will continue to build according to demand. What he wants to see are incentives to build higher-value buildings. 

Stivala also asks the minister if there are any plans to cut red tape in the development sector. 

Caruana notes that previous budgets have been very generous with the property sector. He's open to incentives for energy-efficient buildings, but not until the right legislative framework is in place.

Alternative energy supplies

10.44am  Matthew Bugeja wants to know about the government’s plans to phase out energy subsidies. 

Caruana says new sources of energy supply – gas or renewable energy pipelines – will not come online in the near future. But a second interconnector will come online within this legislature and the government will also be issuing an expression of interest to develop offshore wind farms. 

Why the emphasis on GDP growth? 

10.35am Maria Giulia Borg, an economist, wants to know why the government is still solely emphasising GDP growth. The minister did not mention improving quality of life, she notes. 

If the focus will be solely on high-value GDP growth, what is the exit plan for low-skilled third-country nationals? As it seems the influx came as a surprise, to authorities she says. What plan is there for TCNs, given they are given just 10 days to find a new job if they are fired, before being sent away? 

Caruana replies: Growth is the cornerstone of everything, and as societies age they need to have the means to sustain themselves. So we need to continue pushing growth to sustain our way of life. But we need to ensure that the externalities created by that growth do not worsen people's quality of life. That's easier said than done, but it's a journey we need to embark on.

Caruana adds that 35-40 per cent of TCNs leave within a year. The high volume of TCNs is continuously regenerating itself - that high turnover is a problem for employers, he acknowledges. But we're in a sticky situation: we just don't have the people to fill all vacant positions, he says. 

The two solutions: have more babies (but we won't see the impact for 20-odd years) or focus on more value-added sectors. But in the short term, we need to rely on TCNs, he says.


10.30am  Caruana is asked if the Malta Enterprise Get Qualified scheme will be renewed, and he says yes, it will be.  

Malta's poor return on education spending 

10.26am Matthew Caruana from Junior Achievement wants to know about investment in education. 

Caruana says Malta is spending enough money on education, but the country does not get the results it should for the money it spends. Students are still getting similar O Level results to what his generation did, he says.

The minister believes the real problem is a social one: people do not appreciate education as much as they should. 

"I know this may sound a bit harsh, but this is the crux of the matter. If we really want to have a better society, if we want to stand out, then we need to ensure the young excel."

Overloaded infrastructure 

10.24am  Philip Fenech, whose focus is on the tourism and hospitality sectors, is concerned about infrastructural overload. 

Caruana says that money for these things has already been allocated. “We’re not waiting for the budget to take care of those things,” he says. 

What about the 'new' Air Malta? 

10.19am  We’re opening up the discussion to attendees. 

Vanessa Macdonald wants to know what will happen with the ‘new’ Air Malta. Will it be forced to buy Air Malta’s prime assets, and lumped with debt from day one? 

Caruana doesn't really answer the question. He says Air Malta has taken up more than half his “time, mind body and soul” over the past 30 months.

The new airline has to work on a commercial basis. “It has to turn a profit,” he says. 

Every single route operated by the current Air Malta "was running at a loss",  he says, adding that all the 17 routes the 'new' Air Malta will be profitable.

 Tourism numbers 

10.15am In 2022, Deloitte said we need 4.2 million tourists to get 80% hotel occupancy around the year. Isn’t this madness? 

Caruana says the market will stabilise itself – at some point the market will plateau and the situation will adjust itself, he argues. 

Worker exploitation 

10.12am Grech wants to know what is being done to slam the brakes on sectors that rely on the exploitation of workers. 

Caruana says that things are improving, but again the situation will not change overnight. 

Caruana's population bomb

10.07am Caruana had created a stir when he said Malta’s population will have to rise to 800,000 over the next 17 years to keep the economy growing at the current rate, unless a new economic model is revised.

It sparked panic – and suddenly everyone starting talking about “new economic models”. The reality is that we currently need third-country nationals to grow. How long can it go on? 

Caruana wrily says he doesn't speak publicly too often, so he like to jolt people when he does. 

People, everywhere. Is Malta's population an economic problem?People, everywhere. Is Malta's population an economic problem?

The minister says his budget speech will be highlighting investment in manufacturing and the financial industry - two sectors that will allow higher gross value added without adding as many workers. The government will help firms in these sectors move up the value chain. 

The issue won't resolve itself overnight, but these will be first steps, he says. 

Corporate tax 

10.02am  Caruana is coy about the corporate tax reform being planned. A report in a local media outlet is “not quite correct”, he says, though he declines to explain much more. 

“We have engaged US consultants. We’ve spent months working throughout the summer and our plan will be in line with what the OECD wants,” he says. 

'Tax clampdown is working'

10am Caruana insists there’s a lot of work done to catch tax dodgers and the clampdown is working. A significant chunk of economic growth is coming from the clampdown on that black market, he says. 

AI will soon catch tax cheats

9.57am  Some months back, the minister caused a furore when he announced plans to introduce AI-powered software to help identify tax cheats. 

And it looks like the plan is in motion. The software is being tested against a sample of firms. 

“Just 40-45% were fully compliant," Caruana reveals. 

People shopping for fruit and vegetables: food price inflation remains stubbornly high.People shopping for fruit and vegetables: food price inflation remains stubbornly high.

Minimum wage 

9.54am Caruana is coy on the minimum wage – negotiations between social partners are ongoing, he says. 

What would you like to ask the minister? 

9.16am Send us your questions via Facebook, or email them to me directly at bertrand.borg@timesofmalta.com. 

We will put a selection of those questions to the minister, and relay the replies.

What about COLA? 

9.53am The Cost-of-Living-Adjustment will remain on the high side in 2024 and 2025, Caruana says – it won’t be anywhere near the €1.75 weekly level we had some years ago.

But Caruana says he’s not too worried yet, as “we’re not seeing any wage-price spirals”.

“It’s true prices have increased, leading to an increase in profits. But now as COLA rises, wage bills will increase and employers will react by lowering their profit margins.”


9.51am Grech wants to know if Caruana thinks there is a cartel in the importation of certain goods, as MEP Alex Agius Saliba has implied.

Caruana says that the size of Malta’s market “is what it is” and that therefore introduces a problem with competition.

Pretty much every sector has a problem he says – the problem is “across the board”.

“It’s true there might be an element of greed inflation, even ECB chief Christine Lagarde has mentioned it,” he adds.


9.47am Inflation finally inched below the 5% mark last month, but it remains stubbornly high, as Caruana had predicted some months back. 

The rising cost of living is now the country’s biggest concern. What will it take for prices to stabilise or even go down?

Caruana says local demand is still going strong, adding upward pressures on prices. That, coupled with international events out of control, mean it is hard to keep a lid on prices.

The big line items 

9.44am Caruana says the priority is ensuring there is the money needed to pay for social measures. 

COLA increases, for instance, will add around €100m to the cost of pensions. New collective agreements will cost the government an additional €70m. Energy subsidies will cost around €350m.

“We’re going to put money where it really pays. The amount of prioritisation this year is significant," he says. 

Government spending 

9.42am Last year, Caruana had said that his staff had managed to trim €200m from ministries’ spending. How much will it be this year?

Caruana won’t say – “I’ll tell you on Monday,” he says with a smile – but reiterates that the focus was “prioritisation”. “There has been waste throughout the years, but this year we will address this in a significant manner.” 

Energy subsidies 

9.38am Caruana acknowledges that cutting energy subsidies comes at a hefty political price, but insists that the real rationale behind keeping them unchanged is purely economic. 

Grech asks why we should be subsidising energy guzzlers.  Caruana says subsidies can't last forever, but the aim is to slash the unit cost of energy. 

Slashing subsidies in one go would just further fuel inflation, he says. 

Are we running out of money? 

9.36am The first question is a simple one, and one that’s on many people’s minds: Is the government running out of money?

Caruana says no – we’ve still got leeway. He says he’s in favour of EU moves to reintroduce debt and deficit caps and that Malta is in line with those.

What really matters, he says, is the size of debt relative to the country's GDP. Malta's debt-to-GDP ratio is currently around 54%. 

Quickfire questions

9.35am Grech begins with a series of quickfire questions for Clyde Caruana. The minister’s answers are italics.

Will the budget introduce or increase any taxes at all?


What’s this budget’s biggest priority?

Keeping what we’re doing in terms of energy subsidies, and then spending significant resources on the social side.

Will there be a major cut in government spending?


Will there be any changes to the minimum wage?

As long as I’m aware, negotiations are taking place. Hopefully they’ll be over this week.

Will your budget speech stretch beyond two hours?

Yes. We’re trimming as much as we can, but yes.

 And we're off

9.33am Herman Grech introduces the minister and thanks the audience for attending, and with that the event can formally begin. 

What did Caruana say last year?

9.24am It’s the second consecutive year that we’re holding a pre-budget discussion with the finance minister.

Last year, Caruana had acknowledged that Maltese are, to an extent, tax dodgers and accused some business owners of predatory pricing tactics.  You can watch that conversation here

What would you like to ask the minister? 

9.16am Send us your questions via Facebook, or email them to me directly at bertrand.borg@timesofmalta.com

We will put a selection of those questions to the minister, and relay the replies.  


9.14am Good morning and welcome to this live blog. We'll be bringing you live updates of this Times of Malta event, being held at the Corinthia St George's Bay hotel in St Julian's. The event will begin at 9.30am. 

Caruana has had a busy few weeks preparing for the Budget 2024 speech and we’re keen to hear what he has to say about it.

The annual speech is no longer the red letter day it once was on people’s political radar, but it remains a hugely influential event that shapes government policy, spending and revenue collection throughout the year. 

Sign up to our free newsletters

Get the best updates straight to your inbox:
Please select at least one mailing list.

You can unsubscribe at any time by clicking the link in the footer of our emails. We use Mailchimp as our marketing platform. By subscribing, you acknowledge that your information will be transferred to Mailchimp for processing.