State budget presented for 2021
Increase in funding for frontline services proposed in next year's spending plan
A NATIONAL budget to ‘ reconstruct the country and modernise the economy’ has been presented by Prime Minister Pedro Sánchez and deputy PM Pablo Iglesias.
The 2021 national spending plan has been approved by the Cabinet and is set to begin its procedure through Parliament.
Sr Sánchez described it as ‘ the progressive and nationwide budget that Spain needs’, one that ‘ cannot be delayed’ and is ‘ absolutely exceptional given the context’.
He explained that its three principal objectives are reconstruction after the health, economic and social crisis caused by Covid19; modernisation of the country’s production model in order to guarantee more solid growth; and reinforcement of the welfare state in areas such as health, pensions and the minimum living income ( Ingreso Mínimo Vital – IMV).
“After the very harsh blow of the pandemic, we could return to austerity and cutbacks or rather we could pick ourselves up and move forward with energy,” said the PM.
In this respect, the 2021 budget proposes making the largest social investment in the country’s history – a total of € 239,765 million – which is 10% more than last year and includes the € 27 billion advance from EU funds.
The ‘ big changes’ highlighted by Sr Sánchez include an increase in education
spending of 70.2%; an injection of € 5 billion for civil research, development and innovation; almost € 12 billion to implement ‘ green policies’, and increasing spending on infrastructure by 114%.
Other significant increases include the funding allocated for industry and energy; aid for the retail, tourism, small business, housing, agriculture and fishing sectors; culture; healthcare ( largely to buy vaccines and reinforce primary attention); and for the fight against poverty, amongst others.
The PM also pointed out that public sector salaries and pensions would increase
by 0.9% ( in line with the expected consumer price index increase), while noncontributory pensions would increase by 1.8%, and over € 3 million will be allocated for the IMV – which would benefit 850,000 households.
Also to help the most vulnerable, the maximum income to receive aid and benefits ( IPREM) would be increased by 5%.
Tax rise for high earners
Treasury minister María Jesús Montero offered more detail, explaining that income tax ( IRPF) would increase by 2% for annual earnings above € 300,000, which she said will only affect 0.7% of taxpayers
Similarly, businesses with a turnover of below € 40 million would continue to enjoy a 100% exemption from corporation tax, while it would be limited to 95% for larger firms.
Wealth tax would be increased by 1% to 3.5% for sums in the highest bracket, which is over € 10 million.
Sra Montoro noted that the government plans to harmonise this tax across the different regions to prevent unfair competition and ‘ fiscal dumping’ ( wealthier regions setting exceptionally low taxes).
The limits for the modular tax regime for selfemployed people would be extended next year because they have been so badly affected by the crisis. Regarding pensions, the maximum contribution would be reduced from € 8,000 to € 2,000, in line with European Commission recommendations, which she said would affect very few people.
Other plans include equalising maternity and paternity leave at 16 weeks, increasing spending against gender violence to € 180 million, and increasing IVA ( VAT) on sugary and sweetened drinks to 21% ( except for hostelry establishments).
Another proposal was to reduce the tax exemption on diesel, which would increase the price of a 50litre tank by € 2.30, but would not apply to professional use.
Sra Montero said that nonfinancial public expenditures would rise to € 194,456 million, slightly lower than the recently approved ceiling.
The government nevertheless plans to reduce the public deficit from the 11.3% expected at the end of this year to 7.7%.
New taxes on digital services, financial transactions and nonrecyclable plastic containers would bring in extra income, she said.
Since the Socialist ( PSOE) Podemos Unidas coalition government does not have a majority, it is more than likely it will have to make some concessions in order to get the budget passed by Parliament.