State increases investment in Catalonia to 17.2%, still below its weight in Spanish GDP

Catalonia will receive 17.2% of the Spanish government's regional investment. In total, the figure is equivalent to €2.23bn, according to the draft general state budget for 2022 presented this Wednesday in the Spanish Parliament. Once again, this figure is below Catalonia's weight in the Spanish economy (19%). Regional governments will receive €13bn (last year they received €12.1bn) if the budget for 2022 is met, that is, if all the budgeted investment is executed.

Even so, the investment budgeted for Catalonia for 2022 grows compared to 2021. Last year, Catalonia was allotted 16.5% of the Spanish government's regional investment, 0.7 percentage points less than the investment budgeted for 2022. In total, the figure was equivalent to just under €2bn, according to the draft general state budget for 2021. In addition, the 2022 public accounts include €200m for infrastructures which were budgeted and not executed in 2008, following a 2017 Supreme Court ruling.

"It is necessary that the Catalan parties look at these budgets very closely," Finance Minister María Jesús Montero said during the presentation. She is convinced that there will be "aspirations" when negotiating the budget but stressed that "they moved first by including investment and respecting the third additional provision". "In the last 4 years of Pedro Sánchez's government, Catalonia has received 37.6% more compared to Rajoy's years," Montero said.

With fiscal rules suspended both in Spain and in Europe at least until the end of next year, the budget is once again expansive, with spending totalling €240bn (without taking into account European funds), 60% of which will be allocated to welfare, in addition to an investment of up to €40bn. One of the substantial changes this year is what the funds will be spent on. At a time when the coronavirus pandemic is under control, the public accounts for 2022 transfer part of the resources spent on health (the Ministry of Health's budget falls by 17.3%), unemployment benefits and furlough, to other areas such as science and innovation.

In this sense, science and youth policies stand out. "These budgets want to give hope to young people, to cope with the impact of the pandemic," said Montero, who added that specific policies for housing aimed at this group to help them become independent from their families.

Taxation

The general state budgets for next year also include a forecast of 8.1% growth in tax revenue (personal income tax, VAT and companies), as a result of the "economic recovery", Montero continued. The Spanish government expects an increase in revenue from all three taxes: personal income tax by 6.7%, VAT by 9.5% and corporate tax by 11.8%. In terms of taxation, the 2022 budgets will include few changes, and highlights only the "small adjustment" on corporate tax (the incorporation of 15% minimum tax for companies with a turnover of over €20m a year or form "composite groups", i.e. large companies), which will raise €400m and will have an impact on 1,070 companies.

Pensions and civil servants

"The accounts include support of the public sector," the Minister said. The general budgets will include a wage increase for civil servants of 2%, despite the main unions' rejection. They also include the revaluation of pensions in line with the consumer price index. It is estimated that pensions will increase by between 2.2% and 2.3% next year. In turn, minimum and non-contributory pensions will increase by 3% in 2022, as will minimum living income. In total, €171bn will be allocated to pensions (4.8% more compared to last year).

This year the State's public accounts will also include the European anti-pandemic funds. Specifically, the budgets will incorporate €27.6bn of European anti-pandemic funds (3.8% more than last year), 90% of which will be allocated to investments: a large part will go to industry and energy (19.8%), R+D and digitisation, and infrastructure and resilient ecosystems (17.4%). Regional governments will directly manage €8.7bn.

For the second consecutive year, the Spanish government has presented a state budget in Parliament in order to start next year with a new budget. But for these budgets to be approved "within the deadline and in the appropriate manner", as the central executive defends, it is necessary to find support of other parties. The Spanish government's preferred partners remain Republican Left of Catalonia (ERC) and the Basque Nationalist Party (PNV).