Thursday 10/28/21
ECONOMY

Spanish Government approves the state budget bill for 2022

The bill includes aid to young people to spend on culture and to leave parental home and a controversial Housing Law with which it aims to influence rental prices and which has caused the rejection of real estate companies.
Finance Minister María Jesús Montero, at a press conference after the extraordinary meeting of the Council of Ministers. Photo: La Moncloa.
Finance Minister María Jesús Montero, at a press conference after the extraordinary meeting of the Council of Ministers. Photo: La Moncloa.

The Spanish government approved the State Budget bill for the year 2022 on Thursday in an extraordinary meeting.

The Social Democratic Prime Minister Pedro Sanchez (PSOE) had to work hard to agree on the project with his leftist partners in the government coalition (Podemos) and make several major concessions.

These include aid to young people to spend on culture and to leave parental home and a controversial Housing Law with which it aims to influence rental prices and which has caused the rejection of real estate companies. The bill has also been widely criticized by some small property owners and by the right-wing opposition.

The Minister of Territorial Policy and Government spokesperson, Isabel Rodríguez, was in charge of explaining the master lines of the budget project at the press conference after the meeting of the Council of Ministers. Rodriguez described the proposed draft budget as a tool to achieve a "fair recovery."

Later, the Minister of Finance, María Jesús Montero, went into the details.

Montero highlighted that the budget project - which must still be approved by Parliament for its entry into force - is the "greatest bet" that has ever been made in Spain to support young people, with a total of 12,500 million euros that include direct aid of 250 euros to facilitate access to housing and the youth cultural voucher of 400 euros.

In addition, she assured that a record amount of money is allocated for scholarships 2,199 million euros.

Tax revenue, growth

Another pillar of the draft budget is investment in science and innovation. Specifically, 13,298 million euros are dedicated to research, development, innovation and digitization.

The minister has also stressed that the 2022 budget allocates the highest amount of money to investments in history, 40,000 million euros. She also stressed that six out of every ten euros will be used in social spending and that employment policies, support for industry and SMEs and infrastructures are considerably strengthened.

Montero recalled that EU fiscal rules are still suspended by the European authorities as a result of the Covid-19 crisis, and that there is "considerable consensus" that stimulus policies should be maintained so as not to damage growth.

As the First Vice President and Minister of Economic Affairs, Nadia Calviño, has already advanced, the government estimates that the economy will grow next year at a rate of 7%. This progress, together with the increase in domestic demand and the creation of employment, will make it possible to improve tax collection.

Specifically, tax revenues will increase this year by 10.8%, an evolution that, according to Montero, has been compatible with forceful measures to combat the increase in the price of energy such as the reduction of VAT on electricity. The government forecasts that tax revenues will grow by 8.1% next year.

Corporation tax

The head of the Treasury has explained that the bill contemplates establishing a minimum rate of 15% in Corporation Tax.

The initiative, said the Minister of Finance, once again places Spain "at the forefront of international taxation."

The Government remains committed to passing a comprehensive tax reform.

European funds

The Minister of Finance has detailed that the non-financial spending limit of the PGE for 2022 stands at 196,142 million euros, a figure similar to that of the previous year.

The budget includes 27,633 million of the European Recovery, Transformation and Resilience Plan, 3.8% more than the previous year.

Montero has pointed out that nine out of every ten euros of this Plan are destined to investments and that in 2022 will be when citizens and companies, especially SMEs, will perceive in all its magnitude the positive effects of a "unique opportunity."

All sections of the Expense Budget register increases, except for the one aimed at paying interest on the debt, thanks to the improvement in public finances.

The minister referred in particular to the increase in personnel expenses - due to the 2% rise in the wages of public employees and the greater offer of public employment - as well as the reserve of 1,465 million for Covid-19 vaccines and the rise in public investment and capital transfers by 8.6 and 9.9%, respectively.

Social spending, deficit, debt

The Spanish government highlighted that 240,375 million euros (59.8% of the national budget, that is, without taking into account European funds) is directed to social spending.

The budget line for pensions increases 4.8%

The government will allocate 210 million euros for the new cultural youth bonus, which seeks to bring new generations closer to culture and revitalize the sector. As for the youth rental voucher, an aid to facilitate the emancipation of young wage earners with low salaries, 200 million euros will be allocated.

The head of the Treasury highlighted that the Executive maintains its commitment to reduce the deficit and public debt.

Thus, despite the increase in spending and investment, the government foresees that public debt will fall to 119.5% of Gross Domestic Product (GDP) this year and will stand at 115.1% of GDP in 2022.

The state deficit will fall to 5% of GDP in 2022, which is a reduction of more than a half in two years, the government says.

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