The Government’s economic policies have been condemned to be slower and less efficient in 2024. The refusal to continue with the negotiations to approve the General State Budgets (PGE) this year after the electoral call in Catalonia forces the ministries to seek ways to comply with some of the commitments of the coalition Executive that were going to be included in the same Budget Law, and that are not incorporated into the extended PGE of 2023.

The Council of Ministers will have to approve Royal Decree-Laws or the parliamentary groups will have to make amendments to others that are pending validation in the Congress of Deputies to adjust the Personal Income Tax to the new Minimum Interprofessional Wage (SMI); to raise the reference index for public aid and benefits (the IPREM); or to increase the remuneration of officials.

The adjustment of personal income tax is crucial so that the last increase in the minimum wage is not eaten up by the tax itself, as these salaries jump to the next section of personal income tax and are subject to a higher percentage. Without General State Budgets, sources from the Ministry of Finance of the first vice president, María Jesús Montero, assure that “the reduction in personal income tax that was planned will be applied,” but they confess that “it is necessary to evaluate how it is done.” This represents a delay that can be suffocating for a family that depends on the SMI.

The Ministry of Digital Transformation and Public Function of José Luis Escrivá already announced last week that it would use an amendment to the Royal Decree-Law on anti-crisis measures that was partially renewed at the end of last year to introduce the 2% salary increase of the officials that should have gone into the Budgets. This decision was made one day before María Jesús Montero admitted that the call for elections in May in Catalonia prevented her from seeking support from Junts and ERC, whose votes in Congress are crucial for the coalition government.

The electoral calendar was already complicated with the call in Euskadi for April, which, in the same way, made negotiations with PNV and Bildu difficult due to the risk of making a mistake with their electorates. As a consequence, the delay in improving salaries for civil servants forced the Public Service portfolio to make a move, although in the end it will be the only way for this and other measures.

“The Budgets have been extended since January 1 and what we have to do now is take advantage of the pre-agreements already reached with some of the Executive’s partners to work on the 2025 Budgets. It is the sensible thing to do,” Montero said a week ago.

The “sensible” keeps the IPREM frozen. The reference index for social benefits or rents has been detached from the SMI and this means that the most vulnerable families, who receive this minimum, may lose the right to aid. “The Ministry of Labor was in negotiations with the PSOE for the corresponding increase this year. The same afternoon that Pedro Sánchez unilaterally announced that the Budgets would no longer be worked on until 2025, we were in it. “They want to freeze it, we want to increase it,” say sources from the second vice president’s team, Yolanda Díaz.

“For this reason, among other things, we have already said at Sumar that abandoning the Budget negotiation is not good news. Even so, and already assuming this, we are studying all avenues because people cannot ultimately be the ones who lose out from the PSOE’s decision,” they continue from the Ministry of Labor and Social Economy.

The same position is defended by the Ministry of Social Rights, Consumption and Agenda 2030. “The decision to renounce the General Budgets of 2024 has been taken by the PSOE, so for this Ministry it is an unexpected situation,” they say from the portfolio. by Pablo Bustunduy. “The formulas will be studied to move forward with the matters that are the responsibility of this Ministry (for example, the improvement of paternity and care leave in the Family Law),” they continue.

23,000 million less public spending

In estimated figures, according to what is currently known, the extension of the 2023 Budget reduces the public spending of the Administrations by 23,000 million net. Most of it is lost due to the impossibility of raising the spending ceiling, as provided for in the Budget Plan that the Executive sent to the European Commission in the fall. This spending ceiling does not include the revaluation of pensions, which is charged to Social Security and which the Collation Government guaranteed before the end of 2023.

Similarly, the Royal Decree-Law with the partial renewal of anti-crisis measures (the reduction of VAT on food, discounts on transport… and also the extension of partial taxes on banking and energy companies), that the Council of Ministers issued at that same moment, managed to increase net public spending by nearly 3,000 million compared to last year’s accounts. The extension of the 2023 General Budgets also included 9,000 million investments from the Recovery Plan, which is financed with European funds.

“But up to 23,000 million are lost that could boost economic growth: investments, measures to promote access to housing, to improve education or health or for the green and digital transition,” warns Carlos Martín Urriza, spokesperson for the Economy. and Treasury of the Sumar parliamentary group.

Some expenses have to do with specific investments with municipalities or regional governments. While the absorption by the Central Administration of the debt of the autonomous communities that was going to be articulated via Budgets also remains up in the air.

This Tuesday, the president of the CEOE, Antonio Garamendi, indicated that it is a “problem” that the General State Budgets for this year have not gone ahead. “It is worrying, because investment will stop,” he warned.

Furthermore, this scenario does not in itself imply that fiscal policy is more restrictive. That is, it does not mean that the reduction of the public deficit is favored. In the Budget Plan, the objective was to reduce the imbalance between public income and expenditure, from 3.9% in 2023 to 3% in 2024.

“Deficit reduction path approved”

“There was a budget extension in 2019 and 2020 and a more contractionary fiscal policy was applied in those years,” they recall from the Ministry of Finance. “There is an approved deficit reduction path and we stick to that. That is compatible, as we have done these years (including some that had budget extensions) with reinforcing the Welfare State,” they add.

“The reduction in the deficit since the outbreak of the pandemic has been produced by economic growth, where Spain is growing above the EU average, the boost from European funds, where Spain is one of the most advanced countries in their application.” , and in the dynamism of the labor market, where we have a record number of Social Security affiliates,” they conclude from the Ministry of the first vice president.

For his part, in an interview in, the Minister of Economy, Commerce and Business, Carlos Body, insisted that, “in practical terms, the space generated by the extension of the 2023 PGE is sufficient to continue advancing with the political priorities for this year 2024, and now concentrate the effort on the Budgets for the year 2025, including everything that has to do with the investments and commitments of the Recovery Plan.”

Regarding public income, the coalition Government was considering including in the 2024 Budget the transformation of temporary levies on banking and energy companies into permanent taxes, due to their extraordinary benefits in recent years.

“The measures that we introduced at the initial stage of the response to the inflation shock have been effective in that they have helped to have a fairer contribution from these two sectors, with a collection of around 3,000 million euros annually. . Furthermore, they have been balanced because they have not gone against the results or the solvency of the companies in the energy or financial sectors. It is the way when it comes to proposing any element, at least on our part, of reform in the tax system. Right now we are in an extension situation. This year we will have to decide if they finally become permanent or not, and what the final configuration is,” explained Body.

The agreement of the coalition government states that “we will review the taxes with the aim of readjusting and maintaining them,” points out, in contrast, Carlos Martín Urriza, from Sumar.


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