The main changes in the State and Social Security Budget for 2016 are, on the revenue side, the application of the second phase of the tax reform designed in 2014 and, on the expenditure side, still in the context of observing the spending ceiling, certain expansionary measures such as the approval of a wage increase of 1% for public employees, payment of the second part of the salary payment eliminated in 2012, and the general increase in the average staff replacement rate to 50%. The 2016 Budget Plan presents an estimate of the impact of these measures on regional and local governments, which are the levels of government that manage the most labour-intensive public services. Noteworthy in the area of Social Security is the revaluation of pensions by 0.25%, in accordance with the application of the new revaluation index. In light of the macroeconomic developments envisaged and the above-mentioned measures, the 2016 Budget Plan anticipates growth of around 4.5% in overall general government revenue, which is slightly higher than projected nominal GDP. This would take the public revenue/GDP ratio to 38% in 2016, compared with 37.8% estimated for 2015. On the expenditure side, the State spending ceiling, the improvement in the economic situation and the application of the above-mentioned measures to overall general government would – according to the estimations of the 2016 Budget Plan – give rise to a decrease of 1.4 pp in the public expenditure/GDP ratio.
BIS central bankers’ speeches  3  The starting point for the 2016 fiscal consolidation strategy is, firstly, the assumption that the government deficit target for 2015 will be met, which requires a reduction of 1.6 pp of GDP with respect to the deficit observed in 2014. The available information on the budget outturn to date in National Accounts terms shows that, on data to May, the consolidated aggregate of central government, regional government and Social Security recorded a deficit of 2.2% of GDP, close to 0.2 pp of GDP lower than the figure recorded in the same period of the previous year. In relation to this information, it should be noted that the Social Security surplus decreased by 0.2 pp of GDP, compared with the required improvement of 0.5 pp, and the regional government deficit narrowed by 0.1 pp of GDP, compared with the reduction of 1 pp envisaged for the whole year. In consequence, in order to meet the general government deficit target for the year, the increase in revenue and/or the containment of spending in the remainder of the year will need to be greater than that observed in the early months of the year.