The veto of the General Budgets of the State of 2019 It has more political than economic consequences. To begin with, Spain does not run out of public budgets: those in 2018 will continue to be in force, and they have already been extended until there are new ones. In addition, the large expenditure measures contemplated in the economic project of the Government of Pedro Sánchez (such as the increase in pensions) were already approved by decree, and remain in force. The problem is that the measures of income (taxes to cover part of the new spending) will not see the light and will leave the gap of the deficit without hardly correction this year despite continuing in the wave of economic growth.
Pensions, salaries of officials and minimum wage
The pensioners will continue to receive the pension increase 1.6% and 3% in the minimum, because that increase was approved by decree law on December 28 and was not within the Budget Law; the officials also they will continue to see how their payroll improves 2.25% with respect to the previous year, because it was also a decree law which was validated later in the Congress, on January 22; and the minimum wage is already in effect from January 1. All these measures are ongoing, far from budget processing.
The problem: the public deficit
The main problem is that one year will be lost for the adjustment of the public deficit because the new tax measures can not be approved, the revenues will be lower than expected and the expenses will hardly change.
The lack of Budgets therefore hinders the reduction of the public deficit, as acknowledged yesterday by the Minister of Finance, María Jesús Montero, during her speech in the debate on the amendments to the whole in Congress, which has become a kind of confidence in the Sánchez Executive.
The Minister of Finance, María Jesús Montero, warned that the Budget project entails an indirect rent in the form of public services and benefits equivalent to 4,174 euros per citizen, which could be lost if the new accounts are returned, which could raise the public deficit "to 2.2% or 2.4% of GDP", compared to the current target of 1.3% of GDP. The experts
The big expenses, committed
Last December, the Government took advantage of the political uncertainty – it still did not know if it would present the draft Budget, which it had to have registered in October – to approve a complete bunch of decrees with economic measures that included the increase of the salary of the civil servants (2). , 5% more), an increase in pensions between 1.6% and 3% for minimums, the rise in the minimum inter-professional wage by 22.3% up to 900 euros per month. In addition, it committed transfers of 105,000 million euros for the Autonomous Communities for deliveries on account of the financing system.
That is to say, Sanchez left the big increases of expenses committed: The pensions represent almost half of the cost of the public accounts, more than 153,000 million to the year, almost 9,000 million more than in 2018. The salary of the civil employees is another one of the great ones budget items with more than 23,000 million, an increase of 1,000 million due to the salary increase and the new additions to the ministerial staff for the improvement of the public employment offer.
Another of the major items is public investment, which grows 40%. Some of those projects may be stopped. However, when it comes to large projects, a good part of the new infrastructures planned depend on public companies, such as AENA, Adif, Renfe, which have estimated budgets and can develop their projects without depending on the budget procedure of the Congress. Companies can go ahead with bids.
The new taxes, unemployed
On the other hand, the veto on Sánchez's accounts affects, above all, the income. The Government had planned Tax increases amounting to 5,600 million euros, which can not be carried out to a large extent. These include the increase in the minimum payment for large companies in corporate tax, the increase in income tax for high income; or the rise of diesel. In addition, the Independent Authority of Fiscal Responsibility (AiRef), the Bank of Spain, and the majority of public and private study centers had warned that the income projected by the Executive in the Budgets were inflated. Sanchez had planned to enter more than 227,000 million euros, a record number of collection. But this figure will be difficult to achieve without public accounts seeing the light.
All this leads to a significant deviation from the objective of public deficit. The Executive had set a cap of 1.3% of GDP, but the loss of firepower of revenues and the increase in spending will leave the budget hole in the environment of 2.5% of GDP, only two tenths less than the red numbers recorded last year. And that, despite economic growth, the official estimate is 2.2%, is injecting more power into the economy, which should have contributed to reducing the budget mismatch.