The PL/PN spending arms race: can Malta afford these billions?

Robert Abela stood before business leaders on Monday and held up a copy of the European Commission’s spring economic forecast for Malta.

That document, he told the Malta Chamber audience, was proof the country can afford the €6.3 billion worth of promises made in Labour’s electoral manifesto.

Hours later, Alex Borg raised the stakes. The PN’s vision for Malta would cost €6.7 billion, he said during an interview on Il-Każin x Times of Malta.

Both political leaders spent the campaign's first two weeks promising voters heaven on earth, then another two insisting their pledges are more credible than the other's.

Now we know how much each party expects its electoral plan to cost – and the figures reveal something significant about the way in which campaigning has changed.

How will the country afford these massive outlays? A closer look at both leaders' calculations should have voters shifting nervously in their seats.

Labour's ghost train?

While Labour’s electoral manifesto sets an annual 4% GDP growth target, the Commission report Abela cited projects 3.7% growth this year, then 3.6% in 2027. The Central Bank’s projections are also less ambitious than Labour's.

The difference between 4% and 3.7% may appear insignificant, but it adds up: a 0.3 percentage-point shortfall amounts to roughly €80 million in missed revenue every year.

Abela's explanation also leaves questions about Labour's mass transport promises unanswered.

While Labour’s manifesto mentions the party’s €2.8 billion, 15-year ‘Malta in Motion’ light rail project, Finance Minister Caruana has repeatedly made it clear that his fiscal projections do not factor in that expenditure.

In other words – as things currently stand, it appears there is no money for the mass transit system promised by Labour.  

PN's phantom figures?

Over on the PN side, there are even more questions to be asked.

Alex Borg has promised voters new and refurbished hospitals, a new school every year, investment in an offshore fuel hub, a raft of personal and business tax cuts, lower electricity bills, a fully functional metro line and reduced national debt – all within five years.

That suggests the PN is expecting stratospheric levels of GDP growth. But unlike Labour, it has not published any fiscal forecasts. Voters still do not know how the party expects to finance its big infrastructural plans without blowing up the national budget. 

Borg says money from its Hurd’s Bank fuel hub and growth in the AI, data and ‘new space’ sectors will provide the necessary firepower. But the PN leader is making very definitive commitments he intends to finance using very uncertain, as-yet hypothetical income.

That marks a change from its 2022 campaign, when the PN had published an entire document detailing its economic and fiscal forecasts based on its electoral programme.

Back then, the PN said its proposals would cost €6 billion – plus a further €2.8 billion for a ‘trackless tram’ promise – and presented tables and graphs of how it expected Malta’s economy to grow to cover those costs.

All that work did not pay dividends at the polls, as the party lost to Labour by just under 40,000 votes. This time round, it may have decided voters are not interested in fiscal detail.

Numbers don't add up

What is clear is that both parties have decided to play a very dangerous populist game.

Just nine years ago, then-Labour leader Joseph Muscat was warning that the Nationalist Party’s €1.1 billion worth of electoral promises was totally unrealistic and would blow up national finances.

Now both parties are promising voters six times that amount through various tax cuts, grants, subsidies and investments.

Instead of a month-long competition on policy, citizens have been subjected to an arms race of state spending, to be charged to taxpayers' credit cards. 

Robert Abela is fond of reminding voters that Malta’s economy is now three times bigger than it was when Labour assumed power in 2013. Back then, the party told voters that its electoral promises would cost €732 million to implement.

Malta's debt and deficit burdens are significantly lower now than they were back then, but the ratios are still out of balance. The economy has tripled in size; electoral promises to voters have grown by a factor of eight. 

How will Abela or Borg square that circle?