The Public Finance Council (CFP) considers that the Government should consider “permanently modifying” the rule of extraordinary pension updating, which has been applied since 2017, although it is not required by law. For the entity led by Nazaré Costa Cabral, it is “always preferable” for the management and sustainability of Social Security to have a “stable legislative framework” than to depend on the will of the Executive each year. In addition, the surcharge may “remove the inherent logic” to the rule of automatic increases, already provided for in the law.
Since 2017, the Government has applied an extraordinary increase in the lowest pensions (initially, only for those pensions that had not been updated during the troika, but from 2021, applying to all those of lower amounts). However, the law does not oblige the Government to make this extra increase (only to increase it automatically, based on inflation and economic growth), which leaves the decision to raise or not extraordinarily the lowest pensions at the mercy of the Executive.
This lack of predictability, with “discretionary and case-by-case interventions by the political decision-maker” is, for the CFP, detrimental to the financial management of the Social Security system. For this reason, it suggests that the Government consider “to what extent it would not make sense to permanently change the rule for updating these smaller pensions (up to 1.5 IAS)”.
“In 2021, the value of the part of the extraordinary update of pensions of the Welfare Distribution System amounted to €504.6 million, focusing on smaller pensions (up to 1.5 IAS or €658.20),” he says. the CFP, in a report on the Budgetary Evolution of Social Security and Caixa Geral de Aposentações in 2021, which adds: “This extraordinary update has been applied on a recurring basis since 2017, which cannot fail to raise the question of knowing to what extent it would not make sense to permanently change the update rule of these smaller amount pensions (up to 1.5 IAS)”.
“In fact, for reasons of predictability in the financial management of the Social Security system, even as a safeguard of its sustainability, it will always be preferable to have a stable legislative framework, with objective and automatic application rules, than discretionary and casuistic ones”. -interventions on a case-by-case basis by the political decision-maker who, in the limit, may jeopardize the philosophy and ultimate goals of the existing legal framework“, indicates.
In a footnote, the CFP even says that the extraordinary update can no longer justify an automatic update, based on inflation and economic growth. “This extraordinary update, having a relevant social character, by benefiting the lowest pensions, can subtract the logic inherent in the creation of the rule of periodic updating of pensions. The latter aims to link the evolution of pensions to economic contingencies (for example, real GDP growth and inflation), with a difference in the value of the update based on its amount,” it reads.
The CFP also points out that there is a discrepancy between what was planned and what was actually spent with the additional increase in pensions. “The extraordinary update of pensions and supplements has been increasing its weight in effective spending: in 2017, the first year of execution, it amounted to €77 million; in 2018 it more than doubled, reaching €207 million; and in 2019 and 2020 it stood at €338 million and €449 million, respectively”, he begins by saying. In 2021, “the largest increase was recorded, with a growth of €298 million (+66.4%), which represents €747m“, in the total accumulated value. But in the Social Security Budget for 2021 “the value of €547mwhich would translate into an increase of €99 million (+21.9%) compared to 2020″.
In addition, the CFP indicates, the Government did not transfer to Social Security everything that should have been transferred due to the loss of income with the exemption from the Single Social Tax (TSU) applied in 2021 to deal with the pandemic.
In the report he writes that, in 2021, as in 2020, there was a “loss of tax revenue derived from the exemption from payment of the Single Social Tax (TSU)”, which reached 226 million euros last year (they had been 549 million in 2020).
The law defines that this loss of income, as well as any additional expense resulting from the support granted in the context of the pandemic, must be financed with an extraordinary transfer from the General State Budget, so as not to endanger the sustainability of the Security. Social. . But, “despite this loss of €226 million, only one transfer from the EO to Social Security was made for an amount of €71 million,” says the CFP.
Source: Observadora
