January 23, 2021

The Government diverts most of the increase in spending to Social Security

The Government diverts most of the increase in spending to Social Security


MadridUpdated:

The agreement between the Government and Podemos for the 2019 Budgets contemplates new measures, such as the increase in the minimum wage and the revaluation of pensions, which will trigger public spending by 5,098 million euros. Most of that amount, 1,327 million, more than 26% of the total, will be absorbed by Social Security. Spending on health and education, despite Sanchez and Iglesias selling these accounts as the end of the cuts, will not increase their weight on GDP.

The agreement to revalue pensions to the CPI and compensate the 8.7 million pensioners with pay increase in inflation greater than 1.6% that left agreed the Government of the PP and the PNV will suppose a cost of 704 million Euros that will load to the system.

Paternity permit

The Social Security will also support the increase in paternity leave from the current five weeks to eight weekss, which will cost 300 million, and the recovery of the unemployment benefit for unemployed people over 52 years of age, which will have an impact for the system of 323 million euros only in 2019.

These measures have no impact on the ceiling of expenditure (125,064 million), but they will affect the public deficit. Therefore, all the surplus expected in the municipalities will be allocated to cover the Social Security deficit, in addition to the Executive trusts to reduce the accounting lag of the Administration from 1.2% to 0.4% of GDP, an effort that seems unreal.

The plan also shows that, despite publicizing these Budgets as social, the weight on the GDP of the spending on education (4%) and healthcare (6%) and general public services (down from 5.5% to 5.4%) it remains unchanged. Nor does it increase with respect to the total budgeted expenditure. The accounts do not include, as the businessmen claim, more productive spending. Moreover, a drop in gross fixed capital formation of 900 million or 4% is expected. In addition, interest spending will barely drop by 100 million, to 29,500, 2.3% of GDP.

Yes, different judgments in autonomies will raise spending by 1 billion, which will result in an increase in public investment by this chapter, and the Government maintains its forecast of a cost of 1,800 million for the public coffers by the radial and broken highways.

The rise in the minimum wage to 900 euros it will cost 340 million, and guarantee the Social Security fees of the caregivers 315 million. The new housing policy will imply 173 million more spending, and the energy 400. However, the greatest impact for the State it is derived from the increase in spending on dependence, which will entail 515 million more resources.

5,098 million euros

The 5,098 million euros that will cost the measures of the agreement between the Government and Podemos are in any case a part of the increase in the total expenditure foreseen by the Budgets for 2019. In addition, we must add the 3,238 million in commitments of the previous Government, as the salary increase to civil servants and the revaluation of the pensions, measures assumed in any case by the PSOE.

The accounts contemplate an increase in total spending of 15,711 million, an increase of 3.1%, to more than 515,000 million, half of GDP. The Minister of Finance, María Jesús Montero, defended yesterday that, as a counterpart, the collection will increase by 5.7%. "These figures show the commitment to reduce the deficit," he said. The Minister of Economy, Nadia Calviño, tried to argue that, despite this remarkable increase in spending, the weight of public expenditure of the State in relation to GDP will fall from 41% in 2018 to 40.9% in 2019.

Calviño will be in charge of defending these accounts before the European Commission, which after receiving the budget plan must validate it. The Government has already informed Brussels that will not comply with the path of deficit that the Executive of Rajoy had set, and that the gap will remain in 2019 at 1.8% of GDP. Even so, Montero revealed yesterday that, before the blockade of the PP to its plans in the Senate and the hope of avoiding it taking advantage of some loophole, the Budgets of 2019 will be made with the goal of 1,3% of the previous Government that logically is not will comply

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