The project of the General State Budgets of 2023 has taken the first step for its parliamentary processing, although it was born practically conditioned by the drift of the war in Ukraine and the economic effects that it may cause. The Minister of Finance, María Jesús Montero, delivered this Thursday the new public accounts in the Congress of Deputies. A roadmap based on unprecedented public spending that will be financed with record revenues despite the complex economic scenario for next year, with growth below that of 2022 and an environment marked by inflation and rising of interest rates.
Non-financial income will increase by 6% next year to 307,445 million euros (289,233 million if European funds are not taken into account). A forecast that the Treasury classifies as “extremely prudent”, given the expectation that the settlement of the Budget for this year will ultimately be higher than estimated thanks to the good behavior of tax collection, especially personal income tax and VAT. For its part, spending will exceed 453,000 million, 7.6%. Of this amount, 60% will go to “social” games, a record. Although the reality of the numbers reveals that only between pensions, civil servants’ salaries and interest on the public debt, half of the Budget will go.
The situation of public accounts is so much better than expected by the Treasury before the start of 2023 that the department led by María Jesús Montero claims to have enough “slack and margin” to deal with an economic environment marked by war in Ukraine and inflationary tensions. He doesn’t expect these risks to go away anytime soon. Quite the contrary. He assumes that the conflict will last well into next year, so the measures in his anti-crisis plan that expire on December 31 will also have to do so.
The Executive does not contemplate any of them in the new Budgets, whose effective term ends at the end of the year, except for the free Commuter and Medium Distance tickets, with a cost of 660 million euros planned for the new year. But government sources confirm that, during November or December, a new plan will be approved to extend “most of them.” Among those that are already in force, the reductions in electricity taxes or the 20-cent discount on fuel stand out, for example.
The problem? That these new public accounts detailed in the so-called ‘Yellow Book’ are the most expansive in history in terms of spending. And they are based on the forecast that the national GDP will moderate to 2.1% next year, compared to the 4.4% forecast for this year. An excessively optimistic figure in the opinion of the Bank of Spain, which on Wednesday adjusted its forecast for 2023 compared to that of the Government by seven tenths, up to 1.4%.
Income: 389,927 million euros
Expenses: 455,978 million euros
Despite the doubts generated by the plan, the Executive trusts in the improvement of employment and national demand to support spending a record expenditure of 455,978 million euros in the Budgets, to which must be added the 30,000 million that will be received of European funds (the latter do not count as a deficit) without hindering the objective of reducing the deficit from the 5% forecast for this year to 3.9% in 2023. «We do not aspire to go faster in the consolidation objectives agreed with Brussels », Montero pointed out during his appearance.
Social spending
The task will be complex. According to the agreed roadmap, six out of every ten euros of that figure will go to social spending (266,719 million euros), with special attention to education, housing, dependency and primary care. However, it will be pensions that take the biggest ‘bite’ of this part of the budget, with a revaluation of 8.5% according to the expected CPI.
In total, this item will consume 190,687 million euros of the agreed spending, nearly 20,000 million more than this year and around 40% of total public spending. A figure to which we must add the increase in the salary of civil servants, with a cost in ‘personnel expenses’ estimated at more than 20,500 million euros.
To all this, other announced measures must be added, such as the increase in the Minimum Vital Income (IMV) or the extension of the discount on public transport, as well as the help of 250 euros for rent for young people.
The new public accounts are, in Montero’s opinion, “an antidote to poverty, inequality and hope.” During a long appearance before the media, the minister insisted she insisted on the role that the State plays to achieve this objective in the face of the possibility that each citizen has to assume the cost of the Welfare State.
“Public services are the guarantee for the citizen, the engine of employment and the driver of innovation,” he insisted, recalling the role of these public services provided by public administrations that allow savings of around 11,000 euros per household per year. It is the response to the idea launched by the opposition that the money should not be in the hands of the State but of the citizens so that they manage it according to their convenience.
Another important part of the total expenditure will be that which the State allocates to the payment of the public debt, estimated at 31,200 million euros. The three items together (pensions, public salaries and debt), in fact account for 54% of the total public spending proposed by the Government.
But there is more news. For example, the controversial 25% increase in defense spending or the plan to recover 60% of the regulatory base from six months of benefit, which, according to calculations from the Executive, would benefit some 300,000 people.
What the Budget project does include is the package of energy measures that the public accounts can incorporate and that will remain in force as of January 1: aid for electro-intensive consumers increases, amounting to 65 million euros, as well as the increase of 102 million euros in the endowment that finances the thermal social bond (the single payment received by households covered by the electricity social bond). The suspension of the electricity generation tax, which is paid by electricity generating companies, is also extended, as well as the receipt charges, which will continue to be temporarily reduced.
Income
To finance all this deployment and the extension of anti-crisis measures, the Government will rely on taxes. Of the total income figure, 262,781 would come from tax collection, which will increase by 7.7% thanks mainly to the pull of personal income tax and corporate tax, which will also grow by 7.7% to 113,123 million and the 28,519 million euros, respectively. VAT revenue is also expected to rise 5.9% to 86 billion, despite the fact that the forecast for private consumption has dropped 1.2 points from the July forecast, from 2.5% to 1, 3%.
For its part, collection from special taxes will rise by 8.2%, exceeding 22,000 million.
Tax news
In addition, next year some of the tax innovations will begin to be applied which, although not included in the Budgets, will have an impact on the total collection for the year. Among others, the new Solidarity tax on large fortunes with which the Executive expects to enter 1,500 million next year (and another 1,500 in 2024).
The Budget project does finally include taxes on energy and banking (as a capital contribution) and other measures anticipated by the Treasury, in this case to benefit the lowest incomes. Among them, the increase from 14,000 to 15,000 euros in the limit exempt from declaring. The rise of one point, up to 27%, of the tax for capital income between 200,000 and 300,000 euros is also incorporated. Likewise, the tax for capital income of more than 300,000 euros is raised to 28%.
The plan also includes a reduction of five percentage points in personal income tax for the self-employed by modules and a cut from 25% to 23% in the type of Companies applied to SMEs that invoice up to one million euros. Finally, the drop in VAT is collected at the super-reduced rate for feminine hygiene products, to which are added others such as contraceptives.
With the figures already on the table in Congress, the growth in collection compared to the previous year (the aforementioned 18,710 million euros) will remain below the 26,344 million euros that social spending is expected to grow. In other words, this historic display of spending paints a picture in which, in addition to the Government’s discretionary policies, the smooth running of the cycle will be key to maintaining the deficit adjustment committed to in Brussels.
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