Issue link: https://maltatoday.uberflip.com/i/1547431
9 maltatoday | SUNDAY • 1 NOVEMBER 2026 ANALYSIS Clyde Caruana's budget? al 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 eco- nomic model that relies on continually expanding its workforce, remain unad- dressed. It is easier to raise fees on workers with limited bargaining power than to de- mand that businesses pay higher wages, invest in productivity or reconsider their reliance on a constant supply of new la- bour. But does charging workers more solve the pressures created by the eco- nomic model, or simply transfer some of its costs onto them? A working class divided by entitlement This approach echoes a wider Europe- an debate about the future of social de- mocracy. Denmark's Social Democrats, for example, have combined support for a strong welfare state with tougher im- migration policies and restrictions af- fecting migrants' access to residence and welfare entitlements. The comparison is not exact. While Denmark's harsher approach is most- ly directed at people seeking asylum, in Malta the Labour government is address- ing concerns triggered by an economic model it has actively encouraged. But the underlying dilemma is similar: How can social democratic parties pre- serve public support for redistribution while responding to concerns about im- migration, population growth and pres- sure 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 al- lows 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 in- terests. 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, restau- rants, 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 house- holds, 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 repre- sents a missed opportunity in using tax- ation to discourage wasteful and specu- lative practices. For example, while we 'charge' foreign workers for simply being here, domestic companies still extract groundwater for free to sell it as miner- al 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 pleas- ure boats and yachts between 10 metres and 24 metres will rise, with the govern- ment projecting around €3 million in ad- ditional revenue. The budget also seeks to close a loop- hole involving the transfer of property development rights, known in Maltese as trasferiment tal-arja, through fuller dis- closure and valuation audits intended to ensure the real economic value of trans- actions 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 budg- etary 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 grum- bling about coping with more hotels in residential areas being shut down by the political retort that they owe their pam- pered lives to the very economic model they decry. For tourism is central to the budget's revenue strategy. Tourism-related charg- es are projected to generate €214 million, compared with €21 million in the 2026 estimates. The accommodation eco-con- tribution 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 pas- sengers. The scale of the projected accommo- dation 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 close- ly 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 at- tractive source of revenue. But they also raise a question about the sustainability of a welfare model increasingly support- ed by a sector that depends on high vis- itor numbers, infrastructure and a sub- stantial foreign workforce. The wisdom of handouts There is another cost to consider. Mon- ey 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 educa- tion and reskilling, housing subsidies, stronger healthcare or the green transi- tion? 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 Mal- tese who are also entitled to the benefit it means an extra holiday. In contrast, better education and train- ing can improve people's prospects over decades. Investment in healthcare can strengthen public services, while a seri- ous green transition could reduce envi- ronmental 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 immedi- ate 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 wel- farist, but intervention is not the same as socialism. It uses public money to protect the household incomes of the native pop- ulation without fundamentally changing how the economy generates its riches. Labour may have found a way to com- bine generous welfare for Maltese cit- izens with a tougher stance towards migration. But in the process, it has nar- rowed the meaning of solidarity to those considered part of the national in-group. This raises an uncomfortable possibili- ty. Rather than offering a socialist vision, the budget offers a glimpse of a Du- bai-style economy, where pampered cit- izens enjoy generous state support while armies of transient foreign workers build, maintain and service the economy, with fewer entitlements and a more precari- ous place in society. But what happens when the economic model that pays for this arrangement fal- ters? If the super bonus, energy subsidies and other promises depend on contin- ued 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 fu- ture, or a high-volume economy that pampers those inside the circle irrespec- tive of their wealth and income, while depending on the labour of those kept outside it.