Government partners have closed in extremis an agreement to approve this week the draft General State Budgets for 2022. The date chosen is this Thursday, October 7, in an extraordinary Council of Ministers, as announced this Tuesday by the Minister of the Presidency, Félix Bolaños. The negotiations have been unlocked after reaching a consensus on the housing law, one of the priority issues for United We Can. Another point of friction on which the two parties have agreed is the revaluation of pensions: the rise in pensions next year will be linked to the increase in average inflation in the previous year, according to different government sources, which they estimate that it will be between 2.2% and 2.3%.
This means that the position defended by the Ministry of Social Security and United We Can has won. Both argued that the revaluation be calculated according to the formula established in the bill that contains the first part of the pension reform, which is being processed in Congress and has not yet entered into force. This establishes that the base to fix the increase is the average inflation of “the previous 12 months until November”. That is, the average CPI between December 2020 and November 2021.
Therefore, the Budgets for 2022 will not include a specific percentage of increase in pensions. This is because, to determine the amount, we will have to wait for the calculation cycle to conclude, that is, until we have the inflation data for November. Minimum and non-contributory pensions will rise more than the rest, as announced by the Minister of Social Security, José Luis Escrivá, last week.
The Ministry of Finance, led by María Jesús Montero, initially held that the current regulations for the revaluation of 2022 should be applied, which uses the inflation forecast for the following year as the basis of the calculation, which would have left the rise in the 1.5%, the inflation forecast for next year. However, this method has finally been discarded, according to government sources, to reflect the rise in prices in the public accounts. Inflation closed in September at 4%.
The revaluation of pensions based on the consumer price index capitalizes on the prominence of the first package of measures agreed by the Government and social agents for the reform of pensions. With the sustainability factor repealed, which will be replaced by the so-called Intergenerational Equity Mechanism (MEI), still under discussion both in form and substance, the tie of pensions with the increase in cost of life focused the negotiations of social dialogue. Both the Minister of Labor, Yolanda Díaz, and the Minister of Social Security, José Luis Escrivá, distanced in other matters, jointly celebrated the measure, which will begin to be applied automatically on January 1.
However, until that time comes, and due to the unexpected growth in inflation ―that is, the CPI―, the Government will have to complement the 0.9% increase that it determined for the group of pensioners for this year to avoid that the retirees lose purchasing power because inflation will close the year close to 4%. To do this, you must enter what is known as extra pay, which is nothing more than the additional amount necessary to reach the final percentage determined by the average CPI of the previous year. Taking into account how far the Government’s initial forecasts will be, the main analysis houses quantify that this paguilla it will cost the state coffers a little more than 2,000 million euros, which will be entered at the beginning of next year.
The Ministry of Finance and Public Function has also transferred to the unions this Tuesday its proposal for a salary increase for civil servants in 2022: 2%. The social agents consider that this percentage is insufficient given the rise in prices in recent months, which in September experienced their biggest rebound since 2008, driven by the unstoppable rise in electricity and energy products.
Unlike pensioners, civil servants do not have the right to a paguilla that compensates for the loss of purchasing power in the event that inflation rises above what is expected, as established by current regulations ―with the pension reform, this compensation will no longer apply, as the average rise in prices of the last year-. The unions insist that a multi-year salary increase plan be redesigned, like the one approved by the previous PP Government for the 2018-2020 period and that the Pedro Sánchez Executive maintained when he arrived in La Moncloa.