A budget for most but not all

Clyde Caruana had two major obligations he was unwilling to compromise on when preparing the budget for 2027. He wanted to keep the indiscriminate energy subsidies and ensure the deficit will remain below the 3% benchmark.

Based on the upward trajectory of international oil and gas prices, Caruana has allocated a massive €400 million next year to subsidise fuels, electricity and household gas. This outlay will once again, cushion Maltese families and businesses from the external shocks caused by runaway oil and gas prices. It is not to be underestimated in the volatile international climate we are experiencing.

The savings for families and businesses are significant when compared to what they would have to pay if fuels and electricity are charged at market prices.

However, once again, Caruana chose to apply subsidies across the board, indiscriminately. There was no attempt to inject some social justice into a scheme that has grown so big that it risks compromising Caruana’s second obligation—the 3% deficit target.

Instead, the finance minister opted to raise taxes on tourism and trim expenditure in other areas.

Caruana has delivered on the Labour Party’s main election plank—the €1,000 super bonus. It would have been politically uncomfortable to renege on it after making it a major election pledge. Parents will also benefit from the tax cuts announced last year (the second and third tranches will come into effect in 2027 and 2028). These measures will ensure people have more money in their pockets.

The increase in the ecotax on tourist accommodation, including short-let apartments, is a bold and welcome move. It creams off money from a sector that is enjoying a windfall but at the same time is causing added pressure on public infrastructure. The new ecotax regime is expected to raise €214 million in 2027, which wholly makes up for the super bonus outlay.

But it is on the cost saving side that Caruana has spelt out a narrative that can have unsavoury social consequences, even if it will earn him plaudits from a majority of people.

The change in eligibility criteria for certain benefits such as free public transport, free childcare, and the cheque for atypical work, will now exclude non-EU workers unless they have been in Malta for five years. Additionally, non-EU workers will have to pay a higher driving licence fee. Collectively, these changes will save public coffers around €46 million.

In essence, Caruana is trying to placate public discontent with overpopulation by being tough with a category that is crucial to the country’s economic model but has no voice.

Forcing third country nationals to pay for public transport or deny them the cheque for atypical work will do nothing to reduce overpopulation, solve overcrowding on buses or reduce traffic congestion.

They are measures that create hardship among a category which includes people on the lowest incomes. The median income of third country nationals, who worked a full year in 2024 stood at just €18,200. This figure is approximately 38% lower than the national average.

The irony is that Malta will keep on importing foreign workers in an economic model that keeps pushing for growth by quantity but has no shame in declaring that these workers are expendable; easily exploited and quickly replaced. These foreign workers will continue being paid the lowest possible wages and made to work the longest possible hours, while paying national insurance and tax.

The finance minister brags about how socialist he is but when push came to shove, his choice and that of his government, was to castigate the most vulnerable. But what is more worrying is that the targeted measures feed into the prevalent ‘us and them’ mentality.

At a time when this country is witnessing the horrors of Malta’s first racially-motivated murder—the trial by jury of Lorin Scicluna, one of two people accused of killing Lassana Cisse in cold blood—the budget’s ‘us and them’ rhetoric simply adds fuel to the fire.

It is regretful that the Labour Party, on the one hand talks about the inevitability of importing thousands more foreigners every year and on the other has no qualms treating them as second-class citizens.

Caruana gave racists and xenophobes their pound of flesh by creating a distracting culture war from which the government can score points even with people who may feel excluded from the budget. But what will Caruana do when the racists and xenophobes come asking for more than a pound of flesh?

The Labour Party will undoubtedly gain electoral brownie points for taking a sharp turn to the right but we just hope it understands the dangerous genie it is letting out of the lamp.