A budget that targets disgruntled Labour voters

The budget appears to target the most pressing concerns of non-voters, specifically lower-middle-class Labour supporters aged between 36 and 55, who have dependent children.

This is achieved through focused measures such as the doubling of recipients of the additional cost of living adjustment and the substantial raise in children's allowances.

However, it remains to be seen whether the €350 million allocated for energy expenses and subsidies will have any impact on relatively more affluent non-voters, particularly those without children. Despite feeling a pinch in their pockets, this group may not see a significant cash injection from the budget. 

The October MaltaToday survey indicated that the cost-of-living ranks as the top concern among non-voters, with 36% of respondents highlighting it as their main worry, surpassing other pressing issues such as foreigners (30%). Moreover, a significant 49% of non-voters reported a deterioration in their personal finances, while only 10% experienced improvement.

The impact on struggling families 

The survey also identified a substantial number of non-voters among those aged 36 to 55, with 45% in this age group expressing their intention not to vote in the next election. These individuals are more likely to struggle with raising children while dealing with the challenges of rising inflation. In this context, the substantial increase in children's allowance, set to rise by an annual €250 per child in addition to the previous year's €90, could help alleviate the discontent among this demographic. Furthermore, the government has introduced a "special" allowance of €500 per year for three years, if the children continue to live with their parents and are full-time students.

These specific measures are not means-tested, benefiting a broad spectrum of the Maltese middle and working class. Additionally, 95,000 households with incomes below the national median will receive extra cash ranging from €100 to €1,500 per year, depending on the number of children they have. The number of beneficiaries for this benefit will nearly double when compared to the previous year, when it was limited to those earning less than the average income. These measures supplement a COLA increase of €12.80, the highest ever. 

Nevertheless, the effectiveness of these measures may depend on whether the extra cash is eroded by inflation, potentially triggered by the rising cost of living in a budget lacking a long-term strategy for controlling food prices. 

For now, the budget could offer a glimmer of hope in a rather bleak scenario, as revealed by the MaltaToday survey, where 69% of all respondents and 87% of current non-voters believe the country is moving in the wrong direction.

Clyde Caruana presented the second budget of this legislature with a heavy emphasis on supporting low-income earners in the face of rising inflation (Photo: James Bianchi/MaltaToday)

The impact on disgruntled Labourites 

The MaltaToday survey also highlighted other demographics with higher proportions of non-voters, including residents in the southeastern region (36%) and the South Harbour region (32%). The high rate of non-voters in these traditionally Labour-leaning regions aligns with the increasing percentage of non-voters among Labour supporters (29%). This suggests that inflation has negatively impacted the perceptions of these voters, even on issues like corruption and the environment.

Avoiding Gonzi’s fate 

An educational breakdown further revealed that non-voters peak at 37% among those with post-secondary education, meaning respondents who continued their education after secondary level but did not attain a university degree. In this category, 46% have witnessed a deterioration in their personal finances, compared to 38% among those with a university degree. This is significant because the Labour Party has consistently gained support in this aspirational category since 2008, which was traditionally more aligned with the Nationalist Party. A pivotal issue that swayed these voters towards Labour was the surge in electricity bills during the Gonzi administration, which played a crucial role in shifting the perceptions of this demographic towards what they viewed as a distant and insensitive government. 

This is why the Finance Minister stressed in his speech that the government was focusing on the middle class by allocating a substantial €350 million for energy and fuel bill subsidies, aiming to prevent a repeat of the issues faced under the Gonzi administration. Furthermore, Caruana has committed the government to maintaining these subsidies until 2026, one year before the general elections. 

One fluke which may negatively impact the post-secondary educated category would that of having a larger portion of their income taxed at a higher rate when the COLA increase is factored in.

More affluent voters marginally impacted 

However, certain demographic groups, such as more affluent tertiary-educated individuals who lean towards the Nationalist Party and among which 36% intend not voting, see only marginal impacts from the budget. 

With the government committed to allocating a significant portion of its expenditure on subsidies until 2026, there is limited room for the government to introduce tax cuts that would benefit this category. Their views may already be clouded by distrust in the government, particularly regarding issues like corruption and governance. But although traditionally PN leaning this demographic may also include a significant portion of floating voters which were crucial in Labour’s construction of a new majority, sustained over three consecutive elections.

How red is Clyde’s budget 

While electoral considerations may be at play, Clyde Caruana's fiscally prudent budget also reflects a social democratic orientation and a specific focus on the most vulnerable, evident in increased pensions, benefits for categories like carers of disabled individuals, and a minor increase in the minimum wage. 

However, the indiscriminate allocation of energy subsidies constrains the government's ability to eradicate poverty with more transformative measures. The sustainability of government spending hinges on sustained economic growth levels, at a time when even Labour voters are increasingly concerned about the collateral damage caused by the economic model, including growing apprehension about foreign workers and unceasing construction. Although the government seems eager to convey the message that it is ‘correcting’ this economic model, through measures like increasing the stamp duty on properties in Gozo to match the nationwide level and introducing skill cards for workers in the catering industry, the budget falls short of outlining a new direction for the country.