Thursday, December 1

The Government approves the Budgets with a social spending record of 266,700 million and a historic level of investment

The Government has approved this Tuesday the project of budgets for the next year. The General State Budgets for 2023 entail a social spending record of 266,719 million euros. It represents an increase compared to the 248,000 million budgeted for this year. Much of this increase stems from the rise in pensions, which the Government puts at 8.5%. In addition, a record investment record of 11,800 million euros is also noted.

The Executive has thus presented its third annual accounts with agreement in the coalition. This is a first step that will have to be followed by parliamentary negotiation once the bill is registered in Congress.

The Minister of Finance, María Jesús Montero, maintains that it is another year of expansive budgets, while a reduction in the deficit and debt is expected for next year. “Six out of every ten euros of the spending budget is social spending,” Montero defended during her presentation after the council of ministers. Montero explained that non-financial income will increase by 6% in 2023 compared to the forecast for the end of 2022, including the increase due to the latest tax reform, although the Minister of Finance justified this increase in income by the good evolution of the economic situation.

With regard to the rest of the spending items, Montero has claimed the increase in issues such as health, education or housing. Health spending increases by 6.7%, with 173 million for primary care or 500 million for infrastructure and mental health. Dependency is reinforced with 620 million euros. Educational spending maintains a growth of 6.6%, up to 5,347 million.

Measures approved for this year and throughout this year are consolidated. This is the case of the rental bonus, with a budget of 200 million euros more. Also the bonuses in transport, with 660 million transfer to Renfe so that the bonuses and free subscriptions are maintained next year in Cercanías and medium distance.

increase in pensions

As for public pensions, the item that represents the most money each year in the Budgets, the Minister of Finance has estimated the increase in spending by “11.4%”. The increase is explained by the increase in the number of pensions, as well as by the annual increase in benefits according to the average inflation of the previous year.

Montero has estimated this revaluation of pensions around “8.5%”. The data will be closed when the inflation for November is known, since it is calculated with the average of the interannual CPI from December 2021 to November 2022, as established by the pension reform.

The head of the Treasury has highlighted that a country is measured by “how it treats its elderly” and the most vulnerable people, for which she has celebrated the commitment of the Executive with the guarantee of the purchasing power of pensioners, as recommended by the Pact of Toledo.

“We are filling the pension piggy bank again”, María Jesús Montero has also announced, recalling that it is “the first time in 13 years that the Government has made a contribution to the Reserve Fund”, which almost entirely emptied the previous mandate of Mariano Rajoy. The person in charge of the Treasury has encrypted “2,957 million” euros destined for the so-called piggy bank of pensions “from the MEI”, the Intergenerational Equity Mechanism that was approved in the pension reform.

The Minister of Finance has pointed out that only two spending items will be reduced next year, which are general services, due to a lower contribution to the regional liquidity fund, the FLA, and the unemployment item, which will be reduced by the improvement of the labor market. With regard to regional and local financing, Montero pointed out that an installment of 125,000 million euros is expected, which increases the resources for the communities by 24% and the funds for the municipalities by 5%. .

In addition to the rise in pensions, the Government has included in these budgets a 6.6% increase in personnel costs. This includes the salary increase agreement for civil servants of 2.5% —with a possible extra of 1%— and the revaluation of 1.5% for this year. Also included is the public job offer that was agreed with the unions in May.

Lower GDP growth in 2023

The First Vice President and Minister of Economic Affairs, Nadia Calviño, detailed the macroeconomic framework on which the new Budgets are based. And she reiterated that “all the indicators show that the Spanish economy is on a path of strong and sustained growth”, thanks to the strength of the labor market due to the labor reform and the investments favored by the Recovery Plan.

The forecast for the increase in GDP (Gross Domestic Product) in 2022 increases one tenth, to 4.4%, as the vice president herself announced this Monday before the Eurogroup meeting, and is reduced to 2.1% in 2023. estimates in line with international institutions such as the OECD and that exceed the average growth expected in the EU as a whole, and also the rest of the large economies of the community club.

Even Calviño stressed that the forecasts that accompany the Budgets are prudent due to the uncertainty caused by the Russian invasion of Ukraine and the energy crisis, but he affirmed that the data known until September “are pointing to even greater growth.”

For example, he pointed out that in the labor market “there are no symptoms of economic slowdown”, and anticipated that in 2023 they will reach “almost 21 million affiliates” and the unemployment rate will be reduced below 12%, “after already falling from threshold of 3 million unemployed”. He also stressed that, despite the damage caused by inflation and the complicated international situation, the tourism sector will approach the 2019 record in 2022.

Looking ahead to next year, he also trusts “strong growth in investment in capital goods and construction” due to the deployment of the Recovery Plan, which he calculates will contribute an average of 2.6 percentage points to GDP per year until 2031. In fact , Calviño admitted that without European funds “there would be a drop in investment.”

According to these premises and taking into account that the rises in reference interest rates in the eurozone will continue -as part of the ECB’s strategy to fight inflation-, that the global economy will continue to endure abnormally high prices for oil and gas and assuming a slowdown in growth in the eurozone as a whole -the OECD forecasts that activity in Germany will contract by 0.7%-, the economic vice-president will be able to meet the objective of reducing the deficit below 3% and 110% debt to GDP ratio by 2025.

Regarding inflation, it is the Government’s priority in the short term. And Calviño defended that it is “imported inflation”, originating in energy prices and exacerbated by the depreciation of the euro, which in Spain has been moderated with the three packages of measures approved so far.

According to his thesis, after the relaxation of 9% of the general CPI in September, the curve will continue to trend downward in the coming months because in our country, although the rise in electricity, gas and fuels has been transferred to food, not it has done so to the costs to the rest of the companies (mainly wages), so the dreaded second-round inflation does not exist.

Information made by Diego Larrouy, Daniel Yebra Y Laura Olias.