The Government will have to decide in the next two weeks if the 2021 Budgets include a freeze on the salary of civil servants or approve a similar rise to the evolution of prices that allows public employees not to lose purchasing power. Sources from the Ministry of Public Function , headed by Minister Carolina Darias, assure that they have not yet made any decision and that we will have to wait for the presentation of the Budget project. Low inflation as a result of the serious crisis caused by the pandemic – the CPI closed July at -0.5% – would allow the almost three million public employees to keep their purchasing power almost intact if they do not receive a salary increase.
The clock is ticking and the Government has not yet ready the draft General State Budgets that it should present before September 30, according to the Spanish Constitution. Other years at this time, the Executive had already convened the civil service negotiation table to discuss the increase in the salary of civil servants, but this year it has not yet entered into conversations with the representatives of public employees to address this issue, as confirmed all parties involved.
However, in the rest of the economic ministries, numbers are already being made to balance the 2021 Budgets, essential accounts for the legislature. “It would not be unreasonable if the salaries of civil servants were frozen or raised very little,” concedes a senior official, who admits that despite European aid, public accounts are very stressed. Another ministerial source does not deny that it is a possibility, but they avoid giving anything for closed.
Personnel expenditure, which includes salaries for public employees, is one of the largest items in the Budgets. In the 2018 accounts, which are still valid because they have been extended for two years, that item amounted to more than 32,000 million if the credits for passive classes are included to finance the pensions of civil servants.
In favor of the Government, it plays that prices are very contained due to the slowdown in economic activity and the subsequent crisis. Until July, the CPI was in negative territory (-0.5%) and the consensus of analysts is that the evolution of prices ends the year without any variation. This would allow the Executive to freeze the salary of public employees or link it to the CPI so that they do not lose purchasing power as already happened in the previous crisis.
In 2010, the previous Zapatero government reduced the salary of civil servants between 5% and 7%. During the following years and until 2016, already under the mandate of Rajoy, they saw how their remuneration did not improve. Even at the height of the crisis, in 2012, the PP Government withdrew their extraordinary December pay, which it returned years later, and limited the workforce, which led to a reduction in public personnel that have not yet recovered today. .
It wasn’t until 2018 that officials were able to begin to improve their conditions. Already in full recovery, the former Minister of Finance of Rajoy, Cristóbal Montoro, agreed with the union representatives of public employees (UGT, CC OO and CSIF) a path of salary increases until 2020. The pact, which included other improvements such as the reduction of public temporality, it included increases of between 6.1% and 8.8% during those three years, which would allow to recover part of the purchasing power lost during the previous financial crisis. The salary increases, yes, were linked to economic growth and the fulfillment of the public deficit objectives, and not to the CPI, something that had not happened before.
As all parties agreed then, the rise for 2020 included an increase of 2%, plus a variable of 1% based on GDP, plus 0.3% of additional funds. An execution that would cost 3,264 million euros, since the salary equalization of the State Security Forces and Bodies would also be carried out. But that pact expires this year and will not continue in 2021. The Coalition Executive chaired by Pedro Sánchez wanted to sign a similar agreement before the pandemic broke out, but the coronavirus has disrupted all plans.
The decision that the State adopts on the salary of public employees is important because when it is agreed at the negotiation table of the public function, it is extended to all the autonomous communities. Although some territories have exceptions. Extremadura and the Balearic Islands announced this summer that the 2% rise was suspended “indefinitely” for their public workers.
This summer, CC OO denounced that the Ministry of Finance does not plan to apply this year the additional salary improvement promised for some 40,000 public employees who are labor personnel of the General State Administration (AGE). The union then assured that the Treasury had informed it that it would apply this improvement in the General State Budgets (PGE) of 2021.
Spending on pensions is the largest item in the State Budget. Last year 135,163 million euros were necessary to pay retiree benefits, 6.11% more than the previous year and the largest increase in a decade. Next year the item will increase again even if the Executive decides not to apply large increases to pensioners due to the crisis. The reason is that retirees will join the system with increasingly higher benefits.
In addition, in the investiture agreement between the PSOE and Unidas Podemos, the “shielding of the pensions of our elders: ensuring the sustainability of the public pension system and its revaluation according to the cost of living” was agreed. The document that marks the Government’s roadmap says: “We will update pensions in accordance with the real CPI by law permanently, and we will raise the purchasing power of minimum and non-contributory pensions.” The rise in the CPI this year will be null or testimonial, which suggests that the revaluation will be Pyrrhic.