The Government of Spain presents the 2023 Budget to Congress, which benefits the social majority and boosts economic efficiency

News - 2022.10.6

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The Government of Spain has presented the 2023 General State Budget Bill in the Lower House of Parliament. Public accounts focused on social justice and economic efficiency which strengthen the Welfare State as a guarantor of quality public services through record resources for social policies in a context of uncertainty due to the Russian invasion of Ukraine. At the same time, they consolidate growth and job creation through the change of productive model promoted by the European funds.

In the institutional act held this Thursday, the Minister for Finance and Public Function, María Jesús Montero, handed over the 2023 Budget Bill to the President of Lower House, Meritxell Batet. The presentation was also attended by the Secretary of State for Budgets and Expenditure, María José Gualda; the Secretary of State for Finance, Jesús Gascón; the Secretary of State for the Civil Service, Lidia Sánchez Milán; and the Undersecretary of Finance and the Civil Service, Pilar Paneque.

To this effect, the 2023 budget begins its parliamentary procedure with the aim of being approved in time and form for the third consecutive year, something that has not happened since the middle of the last decade. In this regard, the finance minister stressed that the presentation of the third budget of the legislature is a sign of stability and security for citizens at a time of great international volatility. In fact, Minister Montero went as far as to say that these accounts are the best "antidote" against poverty, inequality and despair.

Furthermore, the Minister for Finance and the Civil Service explained that presenting the budgets for yet another year means that a message of confidence is being sent to investors and a message of fiscal responsibility to the European authorities.

Minister Montero also indicated that she hopes to engage in a "frank and constructive dialogue" with the different parliamentary groups over the coming weeks, in which a sense of state and loyalty to the citizens will prevail to approve public accounts that are essential to mitigate the impact of the war-related price rises on the middle and working classes, on vulnerable groups and on the productive fabric.

In this regard, the Minister for Finance explained that the Government is committed to a fair distribution of the burden of the crisis to avoid applying the recipes of the past that only caused more inequality. For this reason, the government's fiscal policy is based on asking for a greater contribution from those who have the most, while adopting measures to help the country's social majority with record social spending of €267 billion, not including European funds. The figure rises to €274.5 billion with EU resources.

Sustainability of pensions

This objective of mitigating the impact of inflation includes the revaluation of pensions in line with the CPI, as recommended in the Toledo Pact. This measure will benefit more than 10 million pensioners, who will see their income increase by around 8.5%.

Specifically, the budget envisages an allocation of €191 billion, an increase of 11.4%. Nonetheless, the minister stressed that the sustainability of the pension system is guaranteed. In fact, one of the novelties for the coming year is that for the first time in 13 years the so-called 'pension piggy bank' will be increased with a state contribution to the Reserve Fund of almost €3 billion from the Intergenerational Equity Mechanism.

Accounts for the social majority and the most vulnerable

The minister also outlined the measures included in the 2023 Budget to strengthen the protection of the most vulnerable sectors. To this effect, the Minimum Basic Income will also be revalued by around 8.5%, which will benefit 1.2 million people. For its part, the IPREM, the reference index used for granting many subsidies, increases by 3.6% and will stand at €600.

The dependency item reaches a record €3.5 billion by increasing its allocation by 600 million. This amount is in addition to almost 20 million in social contributions for non-professional carers. Another item that aims to mitigate the rise in prices is the 65% increase in the social thermal bonus, which amounts to 259 million.

Furthermore, the public accounts show the government's commitment to equality and reconciliation policies. In fact, €201 million are earmarked for the Corresponsables Plan, of which €190 million will be transferred to the Regional Governments. The budget for combating gender-based violence is also increased by 51 million.

These budgets also include a reinforcement for the unemployed by increasing the amount of unemployment benefit from 50% to 60% of the regulatory base from 6 months onwards. This will mean that some 300,000 unemployed people in this situation will be able to receive an average of €100 more per month.

To this effect, these accounts contemplate an increase in the items destined to the promotion of employment, which are increased by 5% to just over €8 billion. Notable in this regard is the €124 million increase in the budget for Vocational Training for employment and the more than €4 billion allocated to insertion and incentives for recruitment.

In terms of employment, €130 million will be earmarked to subsidise social security contributions for domestic workers.

Youth as a priority

Another of the priorities of the budget are young people, whose policies are increased by 13.2% to reach €12.7 billion. Among the specific measures for this group is the extension of the youth rental voucher. This direct aid of €250 for the emancipation of low-income 18 to 35-year-olds is endowed with €200 million. To facilitate access to housing, the budget also includes €260 million for affordable rents.

In addition, the young cultural voucher is extended to 2023, which will allow those who turn 18 during the next academic year to enjoy €400 to invest in the cultural sphere. In fact, the budget includes a 13.5% increase for culture to over 1.8 billion.

Education, health and housing

Other pillars of the Welfare State are also strengthened, including education, whose allocation marks a new record with an increase of 6.6% to €5.4 billion. Once again, the allocation for study grants is increased by €400 million to €2.5 billion, the highest ever amount. €300 million is also earmarked for the Code School 4.0 programme for robotics and new technologies. In addition, €20 million is included to combat bullying.

Health is another of the policies that are strengthened in these accounts with an increase of 6.7% to over €7 billion. This includes the government's commitment to strengthening primary care with a transfer of €500 million to the Regional Governments for this area. The €44 million for the expansion of oral health services and another €24 million for the agreement to implement proton therapy in the National Health System are also consolidated.

The accounts also strengthen housing policy with an increase of 5.4%. One of the most important allocations is the €260 million for the Public Land Company (SEPES) to promote the development of affordable rental housing.

In line with the government's aim to mitigate the impact of high inflation, the budget includes a 25.7% increase in transport subsidies to €3.4 billion. This increase is largely justified by the extension of free public transport on local, commuter and medium-distance trains, a measure that benefits above all the middle and working classes.

Wage increase for public employees

During her speech, the minister stressed the importance of having stable, quality employment in the Administration. In this regard, the 2023 budget includes a 2.5% wage increase for the next financial year, which could increase by up to one additional point depending on the fulfilment of various variables linked to inflation and the increase in nominal GDP. It should be noted that this increase is based on the consolidated remuneration for 2022, which includes an additional increase of 1.5% on top of the 2% increase already approved.

This government is confident that the improvement in public employment salaries will serve to boost the incomes pact, to consolidate stable and quality employment.

Towards a new production model boosted by the PRTR

While these accounts are aimed at social justice and consolidating the Welfare State, the budgets seek to advance towards a new productive model focused on efficiency, research and territorial cohesion. To this end, it has two essential levers, namely real investments and the investments included in the Recovery, Transformation and Resilience Plan (PRTR).

Specifically, real investment rose by 33.1% to €11.9 billion. It is the fastest growing item in the entire economic classification. In this respect, the special effort is made in the national budget, which accounts for 73% of the increase.

As for the investments foreseen in the Recovery Plan, it incorporates €25.2 billion between the annual instalments of the Recovery Mechanism, the REACT-EU and the addendum, once the final amounts allocated by the EU for the European funds are known.

Energy transition and the demographic challenge

Another focus of the budget is the green transformation and energy transition. To this end, Industry and Energy policies are up by 2.6% to €11.6 billion. Here the €65 million increase in aid to electro-intensive consumers stands out, along with the €455 million for the incentive plan for the installation of recharging points and the purchase of electric vehicles. In addition, €525 million is earmarked for the energy rehabilitation programme for buildings and there is an increase of €118 million for renewable hydrogen projects.

The public accounts also reflect the government's commitment to the fight against depopulation. Specifically, €4.439 billion is earmarked to address the demographic challenge. The increase of €14 million for forestry policy and fire-fighting also stands out.

To advance territorial cohesion policy, the infrastructure budget rises to €11.8 billion, taking into account investments by the public business sector.

The 2023 Budget also pays special attention to policies aimed at trade, tourism and SMEs, which grow by 5.5% to over €3 billion. On this point, the contribution of European funds to the development of small and medium-sized enterprises stands out, providing over €1 billion for the internationalisation of these smaller companies, which are fundamental to the economic structure of our country.

Agriculture, Fisheries and Food policies will be allocated €8.9 billion, with priorities including the modernisation of irrigation systems, the management of water resources for irrigation, nature trails and other rural infrastructures, and improving the profitability of livestock farms.

Commitment to science

An essential factor that will contribute to this change in the production model and that constitutes a decisive pillar for economic growth are Research, Development and Innovation policies, together with Digitalisation. These policies are expected to grow by 22.8% to €16.3 billion by 2023.

This commitment to R&D and innovation has been strengthened by the approval of the Science Law, which includes some important measures, such as the creation of the National Centre for Volcanology and the Spanish Space Agency. The accounts will pay particular attention to improving the working conditions of research staff.

Spanish Presidency of the EU

The budget will include an allocation of €145 million to cover the costs of the rotating EU presidency in the second half of 2023.

Justice policies will grow by 7.7%, excluding recovery funds, and will be directed, among other things, to the creation of 70 new judicial units and the expansion of the prosecutorial staff. Doubling the allocations of the scholarship system for access to the judicial career is also envisaged. Furthermore, the public security policy will be increased by 570 million and the allocations for the various public employment offers stand out.

The minister recalled that the increase in defence policy is aimed primarily at modernising the Armed Forces, through the Special Modernisation Programmes. To this effect, he insisted that these programmes will not be included in the non-financial spending limit, so they do not compete with other social policies such as health, education or dependency.

Regional and local funding

One of defining characteristics of the government is its commitment to the financing of public administrations. It did so during the pandemic by providing extraordinary resources to the Regional Governments to guarantee the provision of essential public services to citizens. And in the 2023 Budget, funding for territories and local authorities is again increased.

Specifically, the communities will receive over €135 billion in payments on account and for the 2021 settlement. This is an unprecedented figure and represents an increase in funding of 24% over this year.

In the case of the municipalities, the payments on account and positive settlement in 2021 will amount to over €23 billion, 5% more than in the previous year.

Improved revenues

On the revenue side, the General State Budget for 2023 moves forward towards achieving resources that enable the Welfare State and public policies to be strengthened.

Thus, the accounts envisage an increase in non-interest income of 6% compared to the forecast for the end of 2022, to €307.5 billion. This improvement is largely due to economic growth, job creation and the tax changes presented last week, based on the principle of a fair distribution of the crisis based on the principle of a fair distribution of the crisis and of claiming a greater contribution from those who have the most.

Looking at taxes, income tax revenues are expected to increase by 7.7% to over €113 billion. Corporate income tax will register a similar increase of 7.7% to €28,5 billion, while excise taxes are expected to grow by 8.2% to €22.3 billion. In the case of VAT, the collection forecast is quantified at over €86, which is 5.9% more in relation to the advance settlement of 2022.

During her speech, the minister highlighted the good pace of implementation of the Recovery Plan. At the end of September, a total of 43.686 billion had already been authorised, €37.213 billion had been committed and €32.989 billion in obligations had been recognised. María Jesús Montero pointed out that a large part of these funds have been allocated to the Regional Governments to a total value of €19, of which €14.7 billion were allocated through sectoral conferences and over €4 billion through other instruments, such as subsidies and agreements.

Supplementary reports

Last, Minister Montero referred to the series of complementary reports accompanying the Draft General State Budget for 2023.

It is a series of documents that analyse how these accounts are aligned from different perspectives, such as gender, children, youth and family, and the Sustainable Development Goals of the 2030 Agenda. He highlighted that a new report on alignment with the ecological transition has been incorporated this year.

In short, the Minister for Finance stressed that the draft General State Budget for 2023 is a "transformative and necessary" set of accounts, which are designed to attend to the social majority, the most vulnerable people and the productive fabric. They are accounts that advance economic efficiency while strengthening the welfare state.

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