The rise in diesel, the currency of some Budgets with an uncertain base

The State Budget for 2021 is a record in everything: in expenses, in income, but also in inconsistency and uncertainty. In fact, one of the star tax measures, the diesel tax hike hasn’t even lasted 24 hours. The day after it was approved by the Council of Ministers and a few hours before the Budgets entered Congress, Citizens announced their support for the parliamentary processing of the Budget project – it will not present an amendment to the entirety – because the Government has committed to eliminate the rise in diesel in the amendment process, says the orange party.

The Executive had also promised the PNV not to increase the tax burden on diesel, although the Council of Ministers an increase of almost 4 cents per liter came out with which they calculate to enter 450 million euros more in 2021, an income that they will have to get from another part if they finally suppress the rise.

In fact, the Minister of Finance. Maria Jesus MonteroAlthough he indicated in the presentation of the project in Congress that he had not had this contact with C’s in the negotiation of the political groups, he next stated: “We will be delighted to sit down to talk and evaluate proposals” and he declared himself well aware that in the amendment process “agreements must be reached with the parliamentary groups”.

With the support of Ciudadanos, the Government ensures the parliamentary processing of the Accounts because it will not be blocked in the amendments to the whole, but it also opens fissures with ERC and EH Bildu, even with Podemos, who see it incompatible to approve the Budgets in the company of the party led by Arrimadas.

In view of the need to negotiate on various sides, the parliamentary process may introduce significant changes in the Budgets, but it will continue to be based on overly optimistic and uncertain forecasts when we enter a state of alarm lasting several months and confinements each stricter to curb the uncontrolled spread of the coronavirus.

Tax collection

Government plans to raise € 222 billion next year between direct and indirect taxes, which is almost 26,000 million more than this year, according to the liquidation forecast. Of these, less than 6,000 would come from tax increases and new taxes, another 6,000 from EU income, while the rest would come, according to the Treasury, simply from the improvement of economic activity.

Specifically, it predicts that business profits will grow by 11% and workers’ incomes by 3% for the improvement of employment. However, although these increases are due to rebound after this year’s debacle, with the worsening of the pandemic and the increasing number of company closures and rising unemployment, it is doubtful that corporate income will grow by 20% or 14% VAT collection, well above what the GDP will grow. The Ministry of Economy anticipates an increase in GDP next year of 9.8% -including the estimated impact of European funds-, but organizations such as Airef reduce it to 5.8%, the Bank of Spain believes that it will be between 4.1% and 7.3% and the European Commission itself does not give more than 7.1%, and that was before restrictions were tightened by covid-19.

If the collection forecasts are not finally met, the public deficit will rise above the 7.7% forecast, which already represents a reduction effort of more than 30,000 million euros. Failure to comply would have an impact on the markets, in a year in which the outstanding government debt will reach 1.25 trillion euros (112,000 million euros more than this year) and the interest expense on the debt will remain at 31,675 million euros, 0.4% more than this year.

State shock plan and European funds for care for the elderly

Cristina Vallejo | Madrid

The pandemic has called into question the model of residences for the elderly in Spain. And the Budgets, in a double way, propose to remedy it. On the one hand, the vice-presidency for Social Rights has a Dependency shock plan worth 636 million euros, which represents a 50% increase in the resources allocated by the General State Administration to these policies. If right now the central State contributes 19% of the resources used in the so-called fourth pillar of the Welfare State, the Government wants that percentage to reach 34% at the end of the legislature.

To this must be added that, of the European funds, 708 million will be allocated to plans linked to the paradigm shift of care and care for the elderly. Social Rights wants to start up smaller or sectorializable residences and connected to primary care, in addition to seeking to promote proximity care, day centers, telecare and home care. It is a “menu of services” that the Spanish Government is negotiating with the autonomous communities. In this context, the Executive wants to promote a framework law on social services that will include an accreditation mechanism for residences that certifies a minimum level of quality throughout Spain.

The public accounts also include the elimination of the pharmaceutical co-payment for pensions with incomes lower than 5,635 euros per year or 11,200 euros if they are not required to file the declaration.


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