Under the motto “Growing together”, Gilles Roth presented a 2026 budget that seeks to reconcile discipline and solidarity. In an uncertain world, the Finance Minister wants to reaffirm the Luxembourg model: a strong welfare state supported by an open economy. “Our social model and our economic model are two sides of the same coin”, he insisted to MEPs on Thursday morning. “Two sides that grow together.”

This budget is first and foremost a political response to the fear of social decline and the slowdown in growth. The Minister places confidence at the heart of his message: “Budgetary policy must give citizens security. Growing together also means rebuilding confidence. As for the figures, they reflect this desire for balance: the public deficit will be limited to 0.4% of GDP in 2026, debt will remain stable at around 27%, and nearly 46% of the budget will be devoted to social policies, the highest share since 2019.

Taxation as a lever for purchasing power

The first social strand of the budget involves taxation. Mr Roth has adopted a simple idea: to relieve the net income of households without weakening the budget base. “We want a fairer, simpler and more humane system”, he says. The government is implementing a minimum wage net of tax, a full exemption for single parents up to €52,400 gross and a tax credit of 922.5 euros per child.

A new allowance of 9.000 per year will encourage voluntary career extension, while a single tax class will be introduced in 2028, simplifying a tax system that is often criticised for being archaic. “Those who work more, bring up children or commit themselves for longer must be encouraged”, sums up the Minister.

These reforms represent a cumulative effort of almost €900m over two years, and are aimed at boosting consumption while preserving the competitiveness of businesses.

Housing, a pillar of the social model

On the housing front, Mr Roth speaks bluntly of a “national priority”. The sums committed bear witness to this ambition: €2bn of investment over four years for the construction and acquisition of affordable housing. “

The State has already purchased 485 housing units on plan via the Vefa programme, for a total of €306m. Housing subsidies have also been increased: the rent subsidy will rise to €60m by 2029, and the interest subsidy on mortgages will reach €45m.

For the Minister, it is a question of maintaining a delicate balance between social support and stimulating the market: “We must avoid housing policy becoming a wait-and-see policy. The market must be revived, not frozen.”

Health and family: the heart of the model

Health and the family remain the pillars of the social model defended by the government. The Fund for Children’s Futures will manage €1.6bn - including more than a billion for family allowances and almost half a billion for parental leave - while the health budget will climb to €494m, an increase of more than 10%.

“Health is not an expense, it is an investment in well-being”, stressed Gilles Roth. The government is financing the modernisation of hospitals, the strengthening of prevention and the digitisation of the healthcare system. The Hospital Fund will almost double, to €275m.

This philosophy extends to the field of education: the education budget will rise by 9%, to €4.7bn, to cater for a growing school population and improve the quality of teaching staff.

Social cohesion also involves direct measures to help the most vulnerable. Energy subsidies and cost-of-living allowances have been extended, Revis has been strengthened and the supplement for the elderly has been increased.

The Minister mentions a “GDP of well-being”, a new indicator designed to measure the social impact of public policies and already put in place by the previous coalition. The related expenditure amounts to €4.9bn, or 5.2% of GDP, covering the fight against poverty, housing and income redistribution. “We are learning to measure prosperity differently,” explains Roth. “Economic figures are no longer enough; we also have to take into account people’s well-being.”

Social spending as an economic strategy

Despite the austerity shown, Gilles Roth calls for an “anti-cyclical” budget, designed to support domestic demand and stabilise society. “While social measures cost money, they also pay off in terms of stability, confidence and social peace,” he argues. This choice, he says, is not a luxury but a necessity: in an international environment marked by uncertainty, the Luxembourg model must remain “predictable and supportive”.

Bottom line, the 2026 budget illustrates a clear policy line: social welfare as an instrument of economic stability. Mr Roth makes no secret of the fact: “We are choosing common sense. Prudence in the figures, ambition in solidarity.”

Between record public investment, unprecedented military spending and costly social policies, Luxembourg is treading a fine line. But Gilles Roth is proud of this budgetary realism: “This budget is one of renewed confidence. With confidence rather than anxiety, with dynamism rather than stagnation.”