The Executive sends its budget plan to the Commission and estimates that measures such as the ERTE have served to bring out 285,000 jobs in the underground economy that will help reduce the structural deficit to 3.3%
Historic spending, record tax revenue, and commitment to deficit reduction despite the uncertain economic environment around us. The Government sent this Saturday to Brussels, almost in discount time, the budget plan that includes 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 withstand the current onslaught of inflationary tensions and the energy crisis and that, in turn, this will allow the good evolution to be maintained and the resilience that the labor market has shown so far.
The budget plan is sent to Brussels days after the Government sent the project to the Congress of Deputies, which begins its parliamentary process that will presumably last until the end of the year, so that the new public accounts can come into force on January 1
In the document, the Government maintains that the economy will grow at 4.4% this year, with a worsening of six tenths in its estimate for the next, going from 2.7% to 2.1%. It is on this figure that some Budgets of a markedly expansive nature have been drawn up with a notable growth in public spending and investment derived from European funds.
Specifically, six out of every 10 euros will go to social spending, up to a record 266,719 million euros, which rises to 274,445 million if European funds are included.
The Government defends that this historic spending figure will not jeopardize its objective of reducing the deficit to 3.9% in 2023 (from the 5% expected to close this year). He is confident that the improvement in the economy and employment will continue to boost tax revenues, with the forecast that they will rise by 7.7% next year to 262,781 million euros to balance the fiscal hole.
At the moment, the Government calculates that the set of measures adopted to date exceeds 30,000 million euros, 10,000 of them from the tax reduction on energy adopted since June 2021.
But in the document sent to Brussels, the Executive recognizes that much more will be needed. Above all due to the foreseeable need not only to extend the current measures, but also due to the possible approval of new plans, such as the one that is expected to be taken to the Council of Ministers next Tuesday with the improvement of the conditions of the thermal social bonus or the aid for neighboring communities with central heating. A plan that will entail a cost of some 3,000 million euros not budgeted.
Under this premise, the forecasts sent to the European Commission propose an "alternative" scenario in which the extension and adoption of new measures to combat inflation and mitigate its impact on the country's social majority are expected. In this scenario, a better-than-expected starting point for income in 2022 is contemplated 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 forecasts.
The Government claims to have sufficient margin to execute its plans without damaging the deficit, trusting, once again, that the revenue forecasts materialize without problem. For this, it is key that the current reactivation of the labor market also lasts.
But there is another related factor that will be decisive in keeping the structural deficit at bay, one that is directly linked to the discretionary policies adopted by the Government, without taking into account the impact of the economic cycle. And it is that in the program sent to Brussels, the Executive includes a novel analysis of the positive impact that the improvement in employment data is having on the evolution of that structural hole in public accounts due to the emergence of submerged employment after the pandemic .
According to the estimates of the Executive, of the 850,000 new Social Security affiliates since 2019, some 285,000 between salaried and self-employed would come from the submerged economy. Around 33.5% of the total.
The Government defends this situation by the use of measures such as the ERTE and the cessation of activity of the self-employed, which has caused many employers to begin to register employees who were not previously in order to benefit from these figures, or to continue doing so if they come wrong given in the coming months.
At the same time, they indicate that the execution of the Recovery Plan -especially in terms of digitization- «is allowing the reduction of structural unemployment by 510,000 people since 2019».
The combination of both factors has caused, in turn, an increase in income from social contributions that the Government estimates at about 0.2 points of GDP, which helps to reduce the structural deficit. Specifically, and based on this base of lower expenses for benefits and higher income from contributions, a reduction in the structural deficit of more than 9,000 million (0.7% of GDP) is expected, down to 3.3%.
The figure is much more optimistic than the 4% estimated by organizations such as the Bank of Spain or the Tax Authority (Airef), which observe more risks than the Government in the enormous disbursement, of more than 190,000 million euros, which will have to be face in 2023 to pay the revaluation of pensions according to the CPI (after an expected rise of 8.5% pending the inflation data for November) or the higher interest burden that will have to be assumed, some 30,000 million, in a environment of rising rates by the European Central Bank (ECB).