There is no way back. Pensions and salaries of civil servants will rise in 2024 and will benefit more than twelve million Spaniards no matter what, even if another economic crisis breaks out or a new Government remains unformed. They are the only two measures that the current acting Executive has included in the Budget Plan that has been sent to the European Commission, in which, however, it has not incorporated any of the aid implemented to alleviate the escalation of inflation and the effects of the war in Ukraine.
The acting Government assumes, therefore, the “commitment” acquired in the pension reform that retirees do not lose purchasing power and, in turn, the agreement reached at the Public Administration table to raise the salaries of all public officials by at least 2% in 2024, a percentage that could increase by an additional 0.5% depending on the CPI. And this is what they have communicated to Brussels: “There are certain spending commitments that must be met with the 2024 budget,” since they consider that “they will be adopted in any scenario.”
What the Executive does not specify is what the final increase in pensions will be, beyond the fact that they will be revalued according to the average CPI of the twelve months prior to December of the previous year. However, recently the Ministry of Social Security already placed the increase at around 4%, although it established a range of between 3.5% and 4.5%. It will, therefore, be another historic increase, the second largest in the last fifteen years after the 8.5% increase they have already experienced this year.
These two measures will have a high impact on public accounts. The new revaluation of pensions will further trigger Social Security spending, in deficit since 2012, and the rise of civil servants will also mean an extra 4,746 million euros next year, according to estimates made in Brussels.
New price increases
On the other side of the coin, on the income side, the Executive also expects that the measures adopted within the framework of the pension reform that will come into force next year will generate extra income. Thus, the increase in the maximum bases in addition to inflation that will begin to be applied in January will imply income of more than 308.5 million in 2024, according to the budget plan.
Specifically, the last phase of the pension reform established that maximum contributions will rise each year by the same percentage as pensions – that is, in line with average inflation – and by an additional 1.2 percentage points from 2024 to 2050, which which will mean a cumulative increase of 38% in the coming decades.
In addition, the intergenerational equity mechanism (MEI) will increase in January to represent 0.7% of the contribution of all workers, which will imply income of 3,702 million in 2024, which will fill the pension piggy bank.