How socialist is Clyde’s budget?

In his red tie and with a barely concealed air of glee, Clyde Caruana delivered the kind of budget speech that governments relish. It was one filled with cash handouts and tax relief.

It was a feel-good budget, designed to reassure households that Labour remains on their side at a time when most European governments are imposing harsh austerity.

But beneath the reassuring arithmetic lies a more complicated story. The state is spending hundreds of millions of euros to protect household incomes, yet foreign non-EU workers, who help sustain the economy are being excluded from benefits and asked to pay more.

With a few exceptions, wealth at the top remains largely untouched, while the government looks to tourism and continued economic growth to help finance its promises.

The question is not simply how much Labour is giving back, but what kind of economic and social model this generosity is designed to preserve. Is Caruana offering a helping hand to working people while preparing Malta for a different future, or using the proceeds of an expanding economy to make the existing model more palatable?

And how socialist is a budget that protects most workers but excludes the most vulnerable among them?

Subsidies for some, exclusion for others

The budget’s generosity is real. The government will spend around €400 million next year subsidising energy and fuel prices. The total expenditure on these subsidies reached approximately €1.4 billion between 2022 and 2026.

The measures announced in the budget add to this support. Eligible workers are promised a €1,000 tax free super bonus, while additional cost of living adjustment grants range from €200 to €1,500. Pensioners will receive a €10 weekly increase, and families with children are set to benefit from further income tax relief as tax thresholds rise again next year.

These measures put money into people’s pockets and help households cope with the cost of living. For many, that support is welcome and necessary. But the political and ideological questions begin when we ask who qualifies.

Making foreign workers pay

Third country nationals are excluded from selected benefits, including free childcare, free public transport, the atypical workers’ benefit and the super bonus.

The budget also increases the cost of employment and living in Malta for some foreign workers. Work permit fees for non-EU nationals will rise from €600 to €800, alongside a new annual €400 “infrastructure contribution”. Non-EU residents holding category B or B1 driving licences will also face a new monthly administrative fee of €83.

The budget thus draws a distinction between groups of people who may live and work in the same country, pay taxes and NI here, contribute to its economy and face similar pressures on their household budgets. It is punishing a category whose median employment income is 38% lower than the national average. While the median employment income for Maltese nationals who worked full-time for a whole year in 2024 amounted to €32,500, that for third country nationals stood at €18,200.

In this sense it turns the table upside down. Instead of taking from the rich to give to the poor, on this aspect the government is taking from the poorest to give to the natives, irrespective if they are rich or poor. And if foreign workers help generate the economic growth that finances these benefits, why should their access to support be more restricted?

The government can argue that a growing population places additional demands on infrastructure and public services, and that those who use these services should contribute towards their cost. But the question is whether these charges are a fair way of financing that infrastructure, particularly when considering that these workers are brought here by Maltese employers to cater for Malta’s economic needs.

Foreign workers pay rent, buy food, use transport and contribute to the economy through their labour and consumption. Crucially they pay taxes and national insurance. Many businesses depend on them to keep operating. Essential public services such as healthcare and waste collection depend on them. The same economic model that attracts these workers is now being used to justify charging them more.

Meanwhile, the underlying causes of Malta’s dependence on imported labour, including low wages in some sectors, limited productivity growth and an economic model that relies on continually expanding its workforce, remain unaddressed.

It is easier to raise fees on workers with limited bargaining power than to demand that businesses pay higher wages, invest in productivity or reconsider their reliance on a constant supply of new labour. But does charging workers more solve the pressures created by the economic model, or simply transfer some of its costs onto them?

A working class divided by entitlement

This approach echoes a wider European debate about the future of social democracy. Denmark’s Social Democrats, for example, have combined support for a strong welfare state with tougher immigration policies and restrictions affecting migrants’ access to residence and welfare entitlements.

The comparison is not exact.  While Denmark’s harsher approach is mostly directed at people seeking asylum, in Malta the Labour government is addressing concerns triggered by an economic model it has actively encouraged.

But the underlying dilemma is similar: How can social democratic parties preserve public support for redistribution while responding to concerns about immigration, population growth and pressure on public services?

One answer is to define solidarity more narrowly. The state protects the living standards of its citizens while imposing additional conditions and costs on those who come from abroad to work.

This can be politically attractive. It allows a government to maintain generous benefits for its core constituency while presenting restrictions on migrants as a way of protecting the welfare state. Crucially it is also imposing hardship on thousands of people who do not have a right to vote.

But it also risks dividing workers who share many of the same economic interests. A Maltese worker and a foreign worker may both struggle with rent and housing, overcrowded buses and the cost of living. They may work in the same sectors and depend on the same public infrastructure. Yet their eligibility for benefits and the charges they face is now different.

Unlike tourists, foreign workers are not simply additional consumers of public services who give little back. They are also the people who staff hotels, restaurants, construction sites, care homes and other parts of the economy. If the welfare state depends on the wealth they help generate, can solidarity reasonably stop at the border—a border which remains in place even if these people live in the same country?

The few socialist exceptions

For all its generosity towards households, the budget does relatively little to redistribute wealth directly from those at the top. In fact, Clyde Caruana boasts of delivering another tax-free budget.

This is hardly surprising in a small open economy, where the risk of capital flight has to be considered, but it also represents a missed opportunity in using taxation to discourage wasteful and speculative practices. For example, while we ‘charge’ foreign workers for simply being here, domestic companies still extract groundwater for free to sell it as mineral water, while indiscriminate subsidies militate against increased investment in renewable energy.

Still, there were a few notable targeted measures, which offer a glimpse of how things can be done better in the future. Annual registration fees for private pleasure boats and yachts between 10 metres and 24 metres will rise, with the government projecting around €3 million in additional revenue.

The budget also seeks to close a loophole involving the transfer of property development rights, known in Maltese as trasferiment tal-arja, through fuller disclosure and valuation audits intended to ensure the real economic value of transactions is taxed.

Caruana’s stroke of genius

Higher eco-contributions on tourist accommodation and cruise passengers, alongside a €5 fee for booking a slot at the Blue Lagoon, are further examples of targeted revenue measures. The extra €193 million in projected revenue from tourism-related taxes and charges comes across as one of Clyde Caruana’s budgetary strokes of genius. It creates a new supply of revenue. But this in itself raises questions about how dependent this will make us on a growing tourism market.

It’s not hard to imagine people grumbling about coping with more hotels in residential areas being shut down by the political retort that they owe their pampered lives to the very economic model they decry.

For tourism is central to the budget’s revenue strategy. Tourism-related charges are projected to generate €214 million, compared with €21 million in the 2026 estimates. The accommodation eco-contribution alone is expected to bring in €182 million, with rates rising to €8 for hotels and €10 for short-let apartments. Further revenue is expected from cruise passengers and non-resident ferry passengers.

The scale of the projected accommodation revenue is striking and equals the estimated annual cost of the super bonus, put at around €200 million. This does not mean the eco-contribution is formally earmarked to pay for the bonus. But the comparison illustrates how closely the government’s spending promises sit alongside the revenues generated by tourism.

Malta welcomed more than 4.5 million tourists and recorded around 28 million guest nights in 2025. These figures help explain why tourism offers such an attractive source of revenue. But they also raise a question about the sustainability of a welfare model increasingly supported by a sector that depends on high visitor numbers, infrastructure and a substantial foreign workforce.

The wisdom of handouts

There is another cost to consider. Money spent on one measure cannot be spent on another. If the super bonus costs around €200 million a year, could some of that money make a greater long-term difference if invested in lifelong education and reskilling, housing subsidies, stronger healthcare or the green transition?

A yearly one-off payment can help a household meet its bills. For poorer households it can make a big difference, for example by spending the money on long-due home repairs. For richer Maltese who are also entitled to the benefit it means an extra holiday.

In contrast, better education and training can improve people’s prospects over decades. Investment in healthcare can strengthen public services, while a serious green transition could reduce environmental pressures and help prepare the economy for a future less dependent on the constant expansion of tourism and imported labour.

This is not an argument that immediate financial support is unnecessary. It is a question of priorities. Is the budget helping Malta move towards a different economic model, or using the proceeds of the existing one to make its pressures more bearable?

Interventionism is not socialism

The budget is interventionist and welfarist, but intervention is not the same as socialism. It uses public money to protect the household incomes of the native population without fundamentally changing how the economy generates its riches.

Labour may have found a way to combine generous welfare for Maltese citizens with a tougher stance towards migration. But in the process, it has narrowed the meaning of solidarity to those considered part of the national in-group.

This raises an uncomfortable possibility. Rather than offering a socialist vision, the budget offers a glimpse of a Dubai-style economy, where pampered citizens enjoy generous state support while armies of transient foreign workers build, maintain and service the economy, with fewer entitlements and a more precarious place in society.

But what happens when the economic model that pays for this arrangement falters? If the super bonus, energy subsidies and other promises depend on continued expansion, high tourist numbers and the importation of labour, is this really a route towards greater social security, or a more comfortable way of postponing the day when Malta must change course?

Caruana’s feel-good budget may offer immediate relief. But beneath the red tie and the reassuring handouts lies a bigger choice—a social democracy that invests in a more sustainable and inclusive future, or a high-volume economy that pampers those inside the circle irrespective of their wealth and income, while depending on the labour of those kept outside it.