The executive sends its budget plan to the Commission and estimates that measures such as the ERTE have created 285,000 jobs in the underground economy, reducing the structural deficit to 3.3%.
Historic spending, record tax revenue and commitment to deficit reduction despite the uncertain economic environment around us. This Saturday, almost at the last minute, the government sent the budget plan to Brussels containing the roadmap that will mark the public accounts for the next financial year.
A document in which it is once again clear that all the objectives of the Executive are based on the hope that the economic cycle will endure the current flare-up of inflationary tensions and the energy crisis and that this in turn will allow the good evolution to be maintained and the resilience the labor market has shown so far.
The budget plan will be sent to Brussels days after the government sends the project to the Congress of Deputies, which will begin its parliamentary process expected to last until the end of the year, so that the new public accounts can come into effect on January 1.
In the document, the government says the economy will grow by 4.4% this year, with a deterioration of six-tenths in its estimate for next year, from 2.7% to 2.1%. It is on the basis of this figure that some budgets of a remarkably expansionary nature have been drawn up with remarkable growth in public expenditure and investment coming from European funds.
In concrete terms, six out of ten euros go to social spending, to a record amount of 266,719 million euros, which rises to 274,445 million if European funds are included.
The government is defending that this historic spending figure will not jeopardize its target of reducing the deficit to 3.9% by 2023 (of the 5% expected to close this year). He is confident that improving the economy and employment will continue to boost tax revenues, forecasting it to rise 7.7% next year to €262.781 million to balance higher expected spending.
Especially given that the foreseeable extension of the current anti-crisis measures will mean that other ‘extraordinary’ will have to be tackled. Also through the approval of new plans, like the one expected to go to the Council of Ministers next Tuesday, on improving the conditions of the thermal social bond or aid for neighborhood communities with central heating. A plan that entails an amount of about 3,000 million euros that has not been budgeted.
In fact, the Brussels Executive has sent an “alternative” income scenario expecting the extension and adoption of new measures to fight inflation and reduce its impact on the country’s social majority. In this scenario, a better-than-expected starting point for revenues in 2022 is being considered based on the good results of the IRPF and Corporations settlement, although there would be a slowdown in tax collection in 2023 compared to current projections.
The government claims it has enough margin to implement its plans without hurting the deficit, and once again trusts that the revenue projections will come true without a hitch. It is also important that the current reactivation of the labor market also persists.
But there is another related factor that will be decisive in keeping the structural deficit at bay, one that is directly related to the government’s discretionary policies, without taking into account the effects of the economic cycle. And it is that in the program sent to Brussels, the Executive includes a new analysis of the positive impact that the improvement of employment data has on the evolution of that structural hole in public accounts due to the emergence of sunken employment after the pandemic.
According to the Executive’s estimates, of the 850,000 new social security members since 2019, some 285,000 between salaried and self-employed people would come from the sunken economy. About 33.5% of the total.
The government is defending this situation through the use of measures such as the ERTE and the cessation of self-employment, which has led many employers to register employees who were previously unable to take advantage of these figures, or to continue doing so if they are in be given incorrectly in the coming months.
At the same time, they indicate that the implementation of the Recovery Plan – especially in the field of digitization – “will make it possible to reduce structural unemployment by 510,000 people since 2019”.
The combination of both factors has in turn led to an increase in social contribution revenues estimated by the government at about 0.2 point of GDP, contributing to the reduction of the structural deficit. In concrete terms, on the basis of lower benefit costs and higher premium income, a reduction of the structural deficit of over 9,000 million (0.7% of GDP) to 3.3% is expected.
The figure is much more optimistic than the 4% estimated by organizations such as the Bank of Spain or the Tax Office (AIREF), who see more risks than the government in the huge disbursement of more than 190,000 million euros, which will have to face in 2023. to pay the revaluation of pensions according to the CPI (after an expected increase of 8.5% in anticipation of the inflation rate in November) or the higher interest burden to be assumed, some 30,000 million, in an environment of rising rates of the European Central Bank (ECB).
Source: La Verdad
I’m Wayne Wickman, a professional journalist and author for Today Times Live. My specialty is covering global news and current events, offering readers a unique perspective on the world’s most pressing issues. I’m passionate about storytelling and helping people stay informed on the goings-on of our planet.
