Article published in Diario de Avisos by José Alberto León Alonso on 10/6/13.
The Government has presented the draft General State Budget for 2014. The Budget is considered the most important law that a government enacts in a year and determines its policy in most areas. The usual thing every time they are presented, regardless of the government, is that voices are raised describing them as not very credible and difficult to comply with. It doesn't happen like that this time. These Budgets are as credible and realistic as they are uninspiring.
Public accounts will continue to be austere, but they will not reach the degree of severity of other years due to the intensity of the savings measures carried out in recent years and the two-year extension granted by Brussels to achieve the deficit objectives. These are transitional Budgets without great joys or sadness, preparing the ground for the great waste of 2015, the year of local, regional and general elections, where it is likely that everything that has been done will be undone, which will be borne by whoever comes (that is, the taxpayer) with the cost of the splendor.
The Budgets aim to meet the level of public deficit set by Brussels for 2014 (5.8% of GDP) without hindering the incipient economic recovery. It is not yet known how the public deficit will end in 2013, but looking at the degree of execution of income and expenses to date it seems that, once again, we will fail to meet the set objective. It's nothing new. The Budgets, at least in Spain, are just a declaration of intentions that always end up being unfulfilled. The most notable gaps occurred in the previous legislature. In 2009, a projected deficit of 2% of GDP went from ending up above 11%, and in 2011 a gap of 6% was budgeted and the final settlement showed a 9% deficit. But the new Government does not fulfill its own forecasts either. In 2012 it predicted a deficit of 5.3% and 6.8% was exceeded, and in 2013 a deficit of 4.5% was forecast, and we will probably also exceed the new objective agreed later with Brussels (6.5%).
The public accounts of 2014 are heirs of those of previous years, and benefit from the laborious efforts made in them, reducing expenses and increasing taxes to keep the Spanish economy away from the brink of bankruptcy on which it was. Reducing the deficit from 6.5% of GDP in 2013 to 5.8% in 2014 represents barely 7,000 million euros. Nothing comparable with the 40,000 million adjustments of the last two years. The economy's growth estimate (0.7%) is easily accessible. Our own estimates predict GDP growth of 1.0% or higher, depending on how this year ends, which looks good. With growth higher than expected, tax collection should also be higher than expected, which will make it easier to meet the figures even if there are excesses in spending.
Regarding income, the Consolidated Budget provides for a 0.7% reduction in direct taxes, extending the personal income tax tax increases, initially limited to the years 2012 and 2013; a 13.4% drop in indirect taxes and increases in current transfers received and in property income. Without taking into account financial operations, consolidated revenues will fall by around €3 billion (-1.1%). Very prudent and realistic forecasts, then.
Regarding expenses, personnel expenses remain practically stagnant (-0.5%) due to the policies of replacing 10% of sick leave and not revaluating public salaries, while transfers grow by almost 6,000 million euros (2.6%). Real investments fall by 500 million euros (-9.8%), but capital transfers, that is, subsidies from the State to other public organizations or private entities in order to finance the beneficiary's fixed capital investments and operations, grow by 1,750 million euros (20.9%), although 1,232 million are due to the electricity tariff deficit. As a whole, capital operations grew by 9.0%, although if the increase in energy costs is eliminated, they remain stable in practice.
55% of expenses (193,801 million euros) are allocated to the payment of pensions, unemployment benefits and the payment of interest on the public debt. Despite only foreseeing an increase of 0.25% in public pensions, contributory pensions will increase by almost 6,000 million euros in 2014 (5.4%), although the reduction in expenses for sick leave and care for dependency (- 1,000 million euros in each case) and other minor savings will ensure that Social Security expenses increase by “only” 3,600 million euros (3.0%). The Social Security deficit, which will end 2013 at around 18,000 million euros, will rise in 2014 to no less than 25,000 million euros, as a reduction in the collection of social contributions of more than 3,000 million euros and less significant falls in rates and property income are expected. 13,000 million euros of this deficit will be covered by the State (which will borrow from subsequent generations for this purpose) and 12,000 million by the pension “piggy bank,” which continues to decline. There are still those who doubt the unsustainability of our current pension system, but the numbers speak volumes. If there is no substantial reform, and the one proposed by the Government, I fear that it will fall short again, when the "baby boom" generation born between 1960 and 1974, which currently barely supports the pension system with its contributions, intend to access retirement You'll see how they leave you with nothing to worry about. In 2043, 34% of the population will be over 65 years old, compared to 17% today. Double. Pure mathematics.
In short, the traumatic adjustments of 2012 and 2013 have recovered the solvency of the State and achieved supportable financing of our deficit for now. The scenario for the recovery of consumption and investment is recomposed, but these Budgets don't do much to achieve this, but they let themselves go. An older person is missed unproductive spending adjustment in order to achieve a margin to lower taxes and support the incipient recovery, before the electoral expenses of 2015 take away all our efforts.
