Despite the various containment measures announced and implemented, the government failed in 2013 to maintain a trend of reducing spending in the Social Security system, which is explained with the “precariousness of the measures applied” and the vision of short term Executive, argues the Court of Auditors.
In the report, published on Tuesday, in which he analyzes the implementation of the Social Security budget during the past year, led by Guilherme d’Oliveira Martins entity indicates its criticism of the fact that the Government have, after a sharp decline in spending in 2012 have not been able to avoid, in 2013, a further rise. This result is mainly due to the fact that it was last year that the Executive was forced by the Constitutional Court to reinstate the payment of allowances of 13 and 14 months to pensioners and is seen by the Court as a sign that the measures taken have a “precarious” nature that makes the process of reducing spending is not “consistent”.
The Court begins by noting that, during the period of the program the troika , the “expenditure on pensions and Social Security supplements, was the subject of a set of measures regressive nature in order to place and keep this expense in a sustainable structural context”. However, the report notes that the expenditure in 2012 after having fallen by 0.1% over the previous year, in 2013 presented “a trend of rapid growth.” “Between 2012 and 2013, spending on pensions reversed its downward trend, showing an increase of 5.7%”
The Court points to two main causes for this has happened:. Firstly, “rigidity of the system and the social structure that supports it, with a relevant population aged layer”; then “the precariousness of the implemented measures focused more on short-term objective.”
This means that, as the report says, the expense of the Social Security system does not return “consistent and continuing “failing to existing measures” curb the effects of the action of automatic stabilizers in social benefits. “
The problem highlighted by the Court of Auditors is the fact that the measures applied by the Government does not have a character permanent and are quite precarious. The prime example of this is the precariousness cut made in 2012 subsidies for pensioners, a measure that had to be reversed because of the lead by the Constitutional Court.
The Court says that the problem lies in the fact the government has been unable to find permanent alternatives that offset the budgetary impact. The increase in expenditure of 5.7% occurred in a scenario in which the accounts were “pressured by the replacement of the payment of holiday pay and Christmas and for updating the value of the minimum pension at 1.1%, having no containment measures applied with permanence in time been sufficient to maintain the expected downward trend “(suspension of allocation of pension provisions and constraints in the formulas of calculation).
The alert the Court of Auditors happens in a week when another court, the Constitutional, will announce its latest decision on the extent of reduction in pension expenditure presented by the Government. On Thursday, will get to know whether the judges of the Constitutional Court Sustainability Contribution to accept that the Government intends to replace permanently the Extraordinary Solidarity Contribution (CES). The new contribution is less heavy than the CES, but it is not announced by the Government as being related to the current financial crisis of the state, before being characterized as a solution to the problem of sustainability of the system over time.
It will, moreover, the issue that is at the center of the decision taken by the Constitutional Court. In previous rulings, the judges made it clear that, for a Permanent Court of pensions can be considered constitutional, it must be part of a structural reform of the Social Security system, not limited to reduce the yield of all or part of pensioners.
When presented the contribution of sustainability, the Government announced at the same time that the system would also expect an increase in funding from the worsening of the contributions paid by active workers and rising social VAT . However, it has also been assumed that this is not the reform of the Social Security system that the Government intends to do.
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