20 abr 2018
Analysis of the General State Budget

THE POLITICAL SITUATION HAS BEEN MORE IMPORTANT IN THE PREPARATION OF THE PUBLIC ACCOUNTS THAT THE NEED TO ANCHOR THE ECONOMIC RECOVERY

The current political environment has been more important in the preparation of the public accounts that the need to anchor the economic recovery, as indicated in the document that analyses the General State Budget for 2018, drafted by CEOE’s Department of Economic and European Affairs and Labour Relations.

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The Employer’s Confederation highlights that at a time in which the Spanish economy is in an upward economic cycle, the budgetary policy acquires a clearly expansive bias, despite the fact that our country is still immersed in the excessive deficit protocol established by the European Union (public deficit below 3% of GDP), and that public debt levels are very high (98.3% of GDP last year).

The document points out that this budget has been designed within a budget consolidation policy, and sets forth a new decrease in the public deficit. The Government estimates that the balance of the all the Public Administrations will be set at -2.2% of GDP in 2018. This goal, in CEOE’s opinion, seems difficult to achieve, given the adjustment that the Central Administration would have to carry out (from -1.9% last year to -0.7% of GDP this year).

The idea of reaching the goal of -2.2% is based on the unrealistic expectation of reaching an equilibrium this year, highly unlikely due to the increase in spending and the overestimation of revenues. In this regard, CEOE underlines that revenues are expected to come in at €210.015 billion, an 8.2% increase in comparison to real revenues in 2017, which were set at €193.95 billion.  However, it is estimated that without taking into account the impact of the Immediate Information Supply (IIS) system, revenues would have reached €198.1 billion. If this last figure were used for comparison purposes, the increase in the collection foreseen for 2018 would amount to 6%.

In any case, this increase seems excessive since it is much higher than the estimated increase in nominal GDP. If the forecasts were met, the level of tax collection would exceed the figure posted in 2007 for the first time, the year in which the historical maximum was recorded.

The entrepreneurs believe that improved revenues, together with the announced decrease in income taxes, should be used to lower those taxes that affect, mostly, the business sector, with the aim of favouring job creation and investment.  This would contribute to strengthening the economic recovery.

 

Lack of Efficiency in the Public Administrations

CEOE believes this Budget is lacking focus on reducing public spending, and more specifically non-productive spending, or in increasing the efficiency of all the Public Administrations.

Thus, the Budget includes an increase in consolidated spending (State Budget, regional bodies, Social Security and other entities of the national public sector) on non-financial operations of 3% in 2018, to €327.955 billion. The ceiling for State expenditures increases by 1.3% and the one available to the ministries by 5%.

The increase in transfers to the Regions, together with the agreed salary increases for civil servants and other groups constitutes additional evidence to support that this budget is clearly expansive in social terms.

Even so, the change in trend is positively valued, as the allocation to economic activities increases by 7.2%. It is an increase that is still far from the pre-crisis levels, which is not the case for the remaining policies.

With regards to pensions, the need to undertake an urgent review and reform of the Public Pension System has and will be insisted upon, simply because it is essential to achieve a viable and sustainable system over time.