2024-02-03 18:55:24
Saturday, February 3, 2024, 7:55 p.m.
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The Government is immersed in the preparation of the General Budgets for this year, where the greatest difficulty will be achieving sufficient parliamentary support to approve them, with Junts asserting each of their votes at the price of amnesty. If the new Budgets are not approved in Parliament, the Government will operate with the 2023 accounts extended, as it did in 2019 and 2020.
In reality, the Budgets are like an ocean liner, which weighs too much, which is difficult to change course suddenly because it maintains it even if only by inertia. Exceptional causes, such as the coronavirus pandemic, force extraordinary measures to be taken and the European ‘Next Generation’ funds have made it possible to give a boost to investment that would otherwise have been impossible.
The Government’s Budget Plan contemplates reaching 694,268 million in public spending this year, 45% of GDP, 8% more than what was budgeted for 2023, although eight tenths lower as a percentage of GDP. But the last fiscal year certified by the General Intervention of the State and that allows analyzing the details of the budget execution is 2022. The 637.5 billion euros were exceeded and only with the spending committed to pensions and remuneration of the nearly three million employees. publics decide almost 70% of the total.
In the distribution by items, social benefits (where 80% are pensions) accounted for 45.6% of the total expenditure; remuneration of employees, 24.3%; intermediate consumption (such as beds for a hospital, desks or screens for schools, tables and paper in ministries, etc.) absorbed 12.4% of the expense; 6% remained for investment and 11.7% for the catch-all of ‘rest’.
Spain shows a relatively high weight, from a European perspective, in items such as social benefits and debt payments, but a relatively lower weight in education and public investment. Public spending with a lower weight on investment and education is usually associated with less potential growth of the economy and with a lower capacity to reduce inequality, according to the Bank of Spain.
«There is never much room to decide where to spend, unless structural changes are introduced»
Maria Jesus Fernandez
Senior economist from Funcas
“There is never much room” to decide where to spend, says María Jesús Fernández, senior economist at Funcas, “unless structural changes are introduced.” The percentage of the expense on which there is the ability to decide can be between 10% and 20% of the total. There are expenses that cannot be touched: the first, the payment of interest on the public debt or subsidies and unemployment benefits, but also pensions that by law must be revalued with the CPI each year.
More than ten years ago, social protection represented 36% of total government spending, now it is more than 40%. If we add to this the health and education items, which are the responsibility of the autonomous communities, they justify two thirds of the public budgets. The remaining third is divided between defense, public order, general services, economic affairs, housing, environmental protection and culture.
In the end, how tax money is spent is a societal decision that governments interpret. The priority given to each of these spending policies has changed little over the years and with the different Executives. In fact, the greatest variation has occurred in social protection, which has grown by 69,000 million euros in ten years, where the lion’s share is accounted for by pensions, which is due on the one hand to the aging of the population and, on the other hand, another, to the structural change brought about by the law that shields the revaluation with the CPI of pensions.
Health
More spending but still having problems
One of the main powers of the autonomous communities is health. It is a highly stressed public service, with growing demand, problems of cohesion and equity in access to health services and the flight of professionals who go to other countries with better salary and working conditions.
The health item has gone from representing 12.7% of total spending in 2012 to 14.6% in 2022, with a peak of 14.7% in the year of the pandemic. Despite this increase of 28,000 million in ten years, there is a lack of personnel (pediatricians, psychologists, nurses…) and waiting lists for specialists remain at high levels (112 days on average for non-urgent surgical interventions, although it varies according to the community and the specialty).
Within the sections of the health budget, hospital services take up four out of every ten euros and their spending has grown by 30% in five years; more than three out of every ten euros are allocated to health centers and outpatient services, with an increase of 27% in five years; and 15% is used for medicines, with an increase of 18%.
Education
Receive less than one in ten euros
Another basic item is Education, also the responsibility of the autonomous communities. It represents just over 9% of total public spending. Its weight has increased by seven tenths of a percentage point compared to 2012, but it has decreased compared to 2017. In any case, it has not reached even one in ten euros of expenditure. In the latest PISA Report – an international assessment in OECD countries that measures the performance of 15-year-old students in reading, mathematics and science – Spain had the worst results since this study was published (2000), although the collapse was widespread in all European countries. The pandemic explains part of the worsening, but not all.
Within the Education heading, 38% is allocated to preschool and primary education; another 38% go to secondary education and 14% to university education.
living place
The poor sister of the Budgets
The poor sister of budgets is Housing. So many years of abandonment have ended up making it one of the main concerns of citizens, especially if they are young and want to emancipate themselves in cities with skyrocketing sales or rental prices. Housing, a policy that also depends largely on the autonomous communities and city councils, has barely been allocated 1% annually of the total expenditure of public administrations in the last ten years.
According to the latest barometer from the Center for Sociological Research (CIS), from January of this year, housing has become a concern for 7.3% of citizens, when in 2018 only 2.7% expressed some concern about this issue. Young people become emancipated on average at 30.3 years of age in Spain, and the main obstacle is housing because it is not enough to have a job to be able to emancipate. According to the Youth Council Observatory, a young person would have to dedicate 83.7% of his salary to paying the rent for an apartment.
Efficiency
Review inefficient expenses
What must be examined is the efficiency of public spending. For José Emilio Boscá, professor of Fundamentals of Economic Analysis at the University of Valencia and researcher at FEDEA, human resources management in administrations could be improved and officials could be brought to where they are most needed and the quality of public services improved.
“The Government must present a clear path to adjust spending or increase fiscal pressure to eliminate uncertainties”
José Emilio Boscá
Professor of Economic Analysis and researcher at Fedea
In addition, he demands from the Government “a multi-year path to adjust spending or increase fiscal pressure that is clear and announced because that eliminates uncertainties.” Boscá warns that increasing the tax pressure with the tax structure that Spain has “can distort economic activity.”
For María Jesús Fernández, senior economist at Funcas, “we must find a way to reduce the size of the State, with a rethinking of many spending policies and analyze whether they are necessary or not or if their cut does not damage the quality of public services. ».
Who spends
The autonomies, responsible for a third of the expenditure
If we look at which administration is responsible for spending, we see that the first actor is Social Security, responsible for 34.3% of public spending; followed by the Autonomous Communities, with 32.9% of the total; Next comes the State, with 22.2% and, finally, the town councils, with 10.6%.
Pensions
Unstoppable growth
More than half of the increase in State spending each year goes to cover the increase in pension spending. In 2023, when the revaluation of benefits with the CPI implied an average increase of 8.5%, these absorbed 70% of the increase in the consolidated State Budget. Because pension disbursement continues to increase: This year it will exceed 200,000 million euros of non-financial spending. Between 2016 and 2023 it has grown more than 40% and the upcoming retirement of the ‘baby boom’ generation will put more pressure on the Social Security system.
The State has been increasing its transfers to the system and loans to Social Security. Furthermore, since 2010, the system has had to draw on the Reserve Fund – which reached a maximum of 67,587 million euros in that year – until it was only around five billion in 2023 (just over 4,400 million budgeted).
Precisely to try to recover the cushion in that ‘piggy bank’ of pensions, the previous Minister of Social Security, José Luis Escrivá, introduced the Intergenerational Equity Mechanism (MEI) by which a supplement was incorporated into social contributions, which will go away progressively increasing, thanks to which, the Reserve Fund is expected to reach 9,000 million euros this year.
Budgets
45% of GDP public spending
The 2024 Budget Plan contemplates that the income of all Public Administrations represents 42% of GDP compared to 41.9% in 2023, reaching 648,660 million euros in national accounting terms.
Regarding spending, this year it is expected to reach 694,268 million, 45% of GDP, which includes the revaluation of pensions with the CPI (3.5% on average), as well as the increase of 2.5% of the salaries of all public employees. Is public spending high? There is a difference of opinion, but the most important thing, in the end, is that it is spent well.
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