Foreseeably, however, spending on unemployment benefits will fall by slightly more than 6% due to the projected stability in unemployment figures and to regulatory amendments to the benefits system. Note, however, that changes in expenditure on social security pensions in 2013 will be affected by the revision that should be made, taking into account the inflation rate recorded to November 2012. Since an increase of 3.5% is projected and the corresponding adjustment payment could be around 2.5%, that would represent an increase in spending of approximately € billion in 2012, which would be consolidated in 2013 and in future years. I should mention that, in the next budget, one of the most important agreements of the so-called Toledo Pact will finally be concluded, in connection with the separation of the system’s sources of financing: on one hand, contributory pensions will be financed exclusively by contributions; and, on the other, the non-contributory top-ups and non-contributory pensions will be financed by taxes. This separation, which began to be applied in 2002, will be completed in 2013: and this is good news for the proper functioning of the system as a whole and for its future. Public debt As I indicated above, from the beginning of the crisis in 2007 until the end of 2012, the ratio of our public debt – as defined in the Excessive Deficit Protocol – to GDP has increased by 50 pp. Undoubtedly, this is the highest increase over the shortest period in this ratio in Spain’s economic history.
In terms of the different agents, a deficit target, in National Accounts terms, of 3.8% of GDP is proposed for central government and the Social Security system, compared with a deficit of 4.5% of GDP projected in 2012, which would represent an improvement of 0.7 pp of GDP, similar to that projected for the regional governments, which should reduce their deficit from 1.5% in 2012 to 0.7% in 2013. The adjustment would be completed with the projected reduction of 0.3 pp in local government to reach a balanced budget in 2013. Revenue On the revenue side, this budget tightens the fiscal pressure both in terms of direct and indirect taxation, with a range of new measures. Furthermore, it should be recalled that, in 2013, the measures approved in 2012 in relation to higher personal income tax rates, the increase in the rate on income from fee-earning activities, changes to corporate income tax and the rise in VAT rates will still have a significant impact. Despite the background of recession, the tax take is projected to increase overall by 3.7%. The net effect of all the tax regulation measures with an impact in 2013 is estimated to be approximately € billion. Net of this impact, revenue would fall by 0.5%. As for the Social Security Budget, the 1 pp reduction planned last July is postponed or ruled out, and a 1.1% fall is projected in 2013 in total social security contributions compared with the initial budget for 2012.