Electoral budget, the temptation that Costa will try to resist – The Economic Journal

Electoral budget, the temptation that Costa will try to resist - The Economic Journal

In years of legislative elections, however, the Governments in office have not resisted this temptation. The Jornal_Económico recalls some examples of budgets full of "good news".

OE2015: Reversal of wages cuts and return of IRS surcharge

In October 2014, Prime Minister Pedro Passos Coelho announced that the reversal of wage cuts in public administration "will be 20% in 2015 and full in the following year," a measure that was reflected in the State Budget for 2015, the year of elections. The Government of Passos Coelho had planned a gradual replacement of wages until 2019, but eventually accelerated the process, to which the lead of the Constitutional Court to cut wages beyond 2015 was not alien.

In that same State Budget for 2015 it was stipulated that the IRS surcharge could be returned in 2016 to taxpayers depending on the growth of tax revenue. Throughout 2015, especially until the October legislative elections, several members of the Government repeated the promise of a refund of the surcharge, presenting partial tax revenue data that indicated a substantial (or even full) return. At the end of the year, however, tax revenue growth in VAT and IRS was insufficient, with the surtax refund culminating at 0%.

OE2009: The highest increase in civil service salaries in the last two decades

The context was one of global financial crisis, scarce months after the collapse of Lehman Brothers bank. The repercussions of the subprime crisis had not yet fully reached the Portuguese economy, as it turned out in the two years that followed, until the request for financial assistance from the Portuguese State to the troika in 2011, but the signs were in cash. Nothing that would prevent the government then led by Jose Socrates to announce an update of the salaries of civil servants by 2.9%, the biggest increase since 2001.

In October 2008, then Finance Minister Fernando Teixeira dos Santos presented the general guidelines of the State Budget for 2009, highlighting the increase in the salaries of public employees. On that occasion, Teixeira dos Santos stressed that the salary increase in the year of elections was a "mere coincidence" that "has nothing to do with the fact that it is a year with three electoral acts." The explanation, according to the minister, was "fiscal consolidation, which translated into a government deficit of 2.2% in 2008" (which would later be corrected to 3.8%).

About a month later, the State Budget for 2009 was approved in Parliament, confirming the 2.9% salary increase (the highest of the last two decades), well above the inflation rate that in 2009 was even negative ( -0.8%). In the 2009 legislative elections, the PS of José Sócrates triumphed and returned to form Government, although it lost the absolute majority. And it was eventually knocked out mid-term.

OE1999: More civil servants and increases in wages and social benefits

At the end of 1998, on the way to the legislative elections of the following year, the Government led by António Guterres, of the PS, decided to raise the salaries of civil servants and also several social benefits and subsidies. In the State Budget for 1999 an increase of the current expenditure of the State in 0.7 points of GDP was stipulated, going from 32.5% to 33.2%. In addition to salary increases, the Government of Guterres also decided to hire more civil servants, totaling around 702,000 in 1999 (in 1996 they were about 614,000).

In spite of all these measures, which were pointed out at the time as electoralists by the opposition parties on the right, Guterres would fail to achieve the objective of an absolute parliamentary majority by only one deputy in the legislative elections of 1999. And the new Government was soon weakened, half of the legislature in 2001, when Guterres called for his resignation following a defeat of the PS in the local elections. In the middle, he had to negotiate two budgets with a dissident member of the CDS, Daniel Campelo. Meanwhile, public accounts have slipped and the deficit has risen from 1.7% of GDP in 1999 to 3.3% in 2001 and 4.1% in the following year.

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