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In a note to anticipate the publication of budget execution figures by the General Directorate of Budgets, Finance wrote this Friday that the worsening of the slippage is due, in particular, to the “joint effect” of the “contraction of income” , decreased 6.6 percent, and “spending growth”, which advanced 4.9.
“The execution highlights the effects of the Covid-19 pandemic on the economy and public services, also reflecting the impact of adopting mitigation policy measures”, it reads in the same text sent to the newsrooms.Public investment increased 37.4 percent in the Central Administration and Social Security.
Tax revenue, which is also highlighted by the Ministry of Finance, fell 7.8 percent, “With the generality of taxes showing decreases that result from the contraction of economic activity, with emphasis on the reduction of 11.2 percent of VAT”, although “this drop has been less pronounced” in the last two months.
“Also worth mentioning is the positive variance from the IRS [202 milhões de euros relativamente ao mês homólogo], result of the 2019 IRS Campaign, whose collection notes were paid until August, as well as the income from installment plans. Excluding these factors, there was a one percent increase in gross IRS income in August, compared to the same period in 2019. ”
Regarding Social Security contributions, they fall 2.1 percent, “Reflecting the slowdown in economic activity and the most intense months of leave simplified ”.
What justifies the growth in spending
Likewise, according to the Ministry of Finance, the growth in spending reflected in the budget execution synthesis is “associated with social benefits, the National Health Service and public investment.”The National Health Service presents a reduction of 300 million euros in delinquencies.
“Primary spending grew 6.4 percent, influenced by the significant evolution of Social Security spending (+ 12.6 percent, + € 2,185 million), of which approximately € 1,299 million are associated with Covid- 19, in addition Expenditure on pensions (3.5 percent) and other social benefits, excluding specific Covid-19 measures (10.1 percent): unemployment benefits (20.5 percent), sickness allowance (17, 0 percent)), Social Benefit for Inclusion aimed at people with disabilities (25.1 percent) and Family Allowance (13.2 percent) ”, details the government statement.
The expenditure of the National Health Service, indicates the Ministry of João Leão, “increased at a very high rate of 6.1 percent, with an extraordinary increase in investment (+165.7 percent) and personnel expenses ( +5.1 percent).
Spending on public service salaries increased 3.3 percent, “adjusted for one-time effects.”
“The increase in personnel costs is also a consequence of the culmination of the thaw of careers, highlighting the 4.9 percent increase in spending on teachers’ salaries.”
“Support for families and companies”
Finance also highlights the impact of “extraordinary political measures to support families and companies that justify a further deterioration of the balance of at least 2,478 million euros.
Such impact is produced, according to the Ministry, “through the fall in income (-581 million euros), reflecting the impacts of the extension of withholdings (IRC and IRS) and payment of VAT, as well as the suspension of executions of income and measures of exemption or reduction of the contribution rate ”. And “due to the increase in spending (1,897 million euros), mainly associated with leave (822 million euros), acquisition of sanitary equipment (374 million euros), other support supported by Social Security (377 million euros) and in the field of the extraordinary incentive for standardization (91 million euros).
