General State Budget for 2017 guarantees economic growth and job creation

The PGE for 2017, which begins its passage through Parliament on Tuesday, validates, more than ever, what has been carried out in previous years - the combination of fiscal consolidation geared towards economic growth and a series of structural reforms that have enabled internal and external imbalances to be corrected and much sounder and more resilient bases for the Spanish economy to be built, thus guaranteeing the sustainability of the public accounts such that the risk of suffering a future crisis of the magnitude of the recent years is averted.

In 2016, the deficit fell to 4.3% of GDP - excluding financial aid, of 0.2 points of GDP - below the target set of 4.6%. This result is a good starting point for achieving the fiscal adjustment required in 2017, with the aim of reducing the public deficit to 3.1% of GDP. Spain is thus continuing on its path of fiscal consolidation which will allow it to exit the Excessive Deficit Procedure in 2018.

The design of the General State Budget for 2017 will assuredly make this target more viable, and will drive growth and job creation - the main goals- while guaranteeing social spending which, once again this year, has grown to amount to 55.8% of all spending.

Noteworthy among the new features are the increase in paternity leave from 13 days to four weeks and the 1% update in the Public Index of Multiple Purpose Income (Spanish acronym: IPREM), an index used as a reference for granting aid, grants, subsidies and unemployment benefit, among others.

Revenue

Tax revenue is proving to be highly dynamic, standing at levels enjoyed prior to the economic crisis. Total revenue is expected to amount to 200.96 billion euros. In comparison with the performance data for 2016, total tax revenue will experience growth of 7.9%. Broken down by individual taxes, Personal Income Tax, which represents 38.8% of total revenue, will rise by 7.7%. The next category by relative weighting is Value Added Tax, representing 33.6%, which will rise by 7.3%, despite the 10% VAT tax reduction on live performances. In turn, Corporate Income Tax will rise by 12.6% as a result of more dynamic business activity.

This highly positive trend will once again be complemented by the contribution expected from the results of the fight against fraud, which will help consolidate the trend of previous years, with record growth that will improve the results in 2016, a historic year which, in homogenous terms, saw a 14.9% increase on the previous year, with a rise of more than 2.5 billion euros (up 20.8%) on 2014.

Expenditure

Overall non-financial expenditure of the ministerial departments amounts to 54.67 billion euros, in line with the budget performance in 2016. Notwithstanding, public servants will receive a 1% pay rise and, furthermore, there will be an increased Public Employment Offer which could amount to 67,000 posts throughout the public administration services.

The regional governments will receive 99.82 billion euros in regional funding, 5.39 billion up on 2016, while local authorities will receive 17.97 billion. In addition to these resources received from their funding systems, allocations have also been included in the PGE to finance agreements, subsidies and other expenses in which the State participates in funding goods and services provided by the regional governments. This will also be complemented by provisions to fund financial support mechanisms for the regional governments and local authorities that guarantee improved financing conditions in the markets, amounting to 16.5 billion euros for regional governments and 1 billion for local authorities in 2017.

Expenditure. Main headings

Social spending is increased by 1.7% on 2016, and amounts to almost 56% of spending under the PGE for 2017, compared with 53.5% last year.

• Pensions: 139.65 billion euros are assigned to pensions, 4.2 billion up on the figure for 2016, which represents more than 40% of total spending under the consolidated Budget. The increasing rise of pensions is due to the 0.25% annual update, the increase in the number of pensioners and the increase in the average pension received by new beneficiaries.
• Healthcare: Healthcare will receive an allocation of 4.09 billion euros, 2.3% up on 2016.
• Culture: 801 million euros will be assigned to boost the quality of culture, its extension and help drive creative activity. The budget of the bodies under the umbrella of the Ministry of Culture amounts to 554 million euros, 2.9% up on 2016, and represents 69.2% of the total allocation. Music and dance programmes are allocated a provision of 100 million euros, the theatre programme 51 million and the film industry 85 million, with a noteworthy provision to the Film-making Protection Fund of 70 million euros, 16.7% up on 2016. Sport and encouraging sporting activity will receive an allocation of 171 million euros.
• Education: Education will receive 2.53 billion euros, an increase of 1.7%. The programme of grants and subsidies for students stands out for its qualitative and quantitative importance, which represents 60.3% of the total policy and an allocation of 1.52 billion euros. Under this programme, the provision for study grants and subsidies of a general nature will receive 1.42 billion euros, thus consolidating the effort made in recent years, an increase of 252 million euros on the figure for 2011, and an all-time record in 2017. 50 million euros have been assigned to finance school textbooks and learning materials, twice the amount of 2016. An allocation of 10 million euros has also been made to finance a new Special Employment Plan to develop education infrastructures in the Autonomous Region of the Canary Islands.
• Boost to employment: This heading receives an allocation of 5.5 billion euros, a 5.5% increase, representing 284 million euros more than last year. Of the allocation assigned to active employment policies, 3.25 billion euros correspond to job placements and incentivising recruitment, of which 1.87 billion will be allocated to discounts for the recruitment of unemployed workers and 130 million euros to the professional re-training of those people whose unemployment benefits are exhausted (PREPARA Plan), while 2.15 billion euros are for training activities, among others. Discounts for hiring will be allocated 233 million euros more in 2017 and the Joint Action Programme to Improve Attention for the Long-Term Unemployed will be strengthened.
• Family protection and the fight against infant poverty: This heading will receive 2.41 billion euros, a 4.9% increase on 2016, for programmes and services designed to improve the levels of protection for the most vulnerable and needy social groups and individuals. A specific provision of 342 million euros will be allocated to Family protection and cover for infant poverty, a priority action for the government in 2017. The amount allocated to Long-Term Care amounts to 1.36 billion euros, 8.2% up on 2016. There is a noteworthy allocation of 1.26 billion euros for the Minimum Level of Dependence, 100 million of which is due to the sustained and progressive increase in the number of beneficiaries. 313 million euros are allocated to help immigrants and given the increase in the number of asylum seekers - the majority from Syria and Ukraine - 24 million and 11 million euros have been allocated for humanitarian attention for those arriving on the Mediterranean coast.
• Gender-based violence: The allocation has been increased under this heading for the comprehensive prevention of gender-based violence to 28 million euros, 9.9% higher than in 2016.
• Research, development and civil innovation: The provision for this heading under the PGE for 2017 includes an allocation for the sum of 6.03 billion euros, 4.1% more than in 2016. Noteworthy is the public works programme and the provision to coordinate scientific and technical research, 56.2% of the total allocation and amounting to 3.4 billion euros, up 110.5% on the previous year, which is due, to a great extent, to the preparation, for the first time, of a specific budget for the State Research Agency.
• Competitiveness: The PGE includes an allocation for the sum of 50 million euros to boost efficient vehicles, as well as 150 million euros for the competitiveness of electro-intensive industries.