Miguel Cadilhe criticizes “serious sophistry regarding the composition” of the budget surplus

The former Minister of Finance and current State Councilor, Miguel Cadilhe, criticizes the “serious sophistry of the composition” of the 2023 budget surplus, highlighting the lack of quality in public services, a recurring criticism of the budget execution of the resigning Government. Despite the “remarkable” result of the 1.2% surplus, he points out to the JE, “excess taxes and less quality in public services”, warning that “with this combination we cannot have good public finances”. The lack of investment and the recurring gap between budgeted and executed amounts also take away credibility from the exercise, making it difficult to assess what would be an “excessive” surplus, as stated by Carlos César, president of the PS.

“With all due respect to Minister Medina, for whom I have held in high regard for many years, I see a formidable budget surplus in 2023 but unfortunately I also see a serious sophistry in the composition. We have too many taxes, we have too little quality in public services, with this combination we cannot have good public finances”, Miguel Cadilhe told JE.

The historic surplus, the highest in 49 years of democracy, represents an absolute value of 3,194 million euros, reversing the slight deficit with which it closed the previous year, of 779 million euros. This was achieved at the expense, above all, of a higher than expected increase in revenue caused, on the one hand, by the high inflation that was recorded and, on the other, by the strong labor market.

State revenue thus grew by 9.5 billion euros in absolute terms, an increase of 9% compared to the previous year. It is worth noting the 10.4% jump in social contributions and 10.7% in income and wealth taxes, in addition to the remarkable 68.9% growth in capital revenues, as a result of the Recovery and Resilience Plan. Still, there are other factors to take into account, highlights economist Pedro Brinca.

“Behind this surplus that was not budgeted is mainly tax and contributory revenues much higher than expected, expenditure below what was budgeted and, in particular, the non-execution of the planned investment, which reached only 75% of the budgeted value”, he points out.

“Execution rates were particularly low in health and education – two areas in which public investment has not been sufficient to even maintain existing infrastructure. Of all areas, only Science, Innovation, Technology and Higher Education performed better than expected, with all others falling short”, he continues.

Overbudgeting kills credibility

This trend in Portuguese investment leads Pedro Brinca to question “the relevance of a debate on the headings of a State Budget whose execution ends up dictating a very different reality”, given the recurring gap between the budgeted and executed amounts.

“It was important for the credibility of policies and politicians that the objectives of the state budgets approved by the republic’s assembly could be fulfilled. Only in this context do I conceive a discussion about the characterization of this surplus as excessive”, he considers, visiting the words of socialist leader Carlos César during the weekend.

It is worth remembering that the PS president classified the clear accounts policy as “extraordinarily positive” for the country, but admitted that he feared that the budget balance would prove to be “an excess” given the demands of various sectors.

“The positive balance is the result of good public policies, which promoted economic growth, employment and improved income; and good budget management, which always took into account the context of high economic and geopolitical uncertainty”, says the Ministry of Finance in reaction to these numbers, which “increase our protection in the face of international instability and uncertainty and expand policy options public services available to the Portuguese”.

Looking by public administration sectors, the budget surplus is due to the evolution of Social Security funds, which more than fully compensated for the deficits recorded in the central, regional and local administration. The balance of these funds soared by 33.2%, reaching 5,670 million euros, that is, more than the 2,329 million deficits in the two other accounts combined.

Left in unison

On the left, obtaining a positive balance is compared with its cost, that is, public services. In reaction to the numbers known this Monday, the leaders of BE and PCP, who were meeting, criticized the preference for certain accounts instead of more public investment in sectors that, they argue, needed the same.

Mariana Mortágua, bloc leader, began by arguing that the historic balance is due to the “degradation of social conditions”, namely the lack of investment in important sectors for the country. For the BE coordinator, “while the PS presented increasing surpluses, it was denying the response” in areas such as education, health or security.

Paulo Raimundo, communist general secretary, also opted for the same line of criticism, arguing that “there was a clear option” by the socialist Government for certain accounts to the detriment of investment in areas where the country has shown more difficulties.

Party leaders were meeting to debate the strategy of opposing the right-wing parliamentary majority, a meeting seen as positive by both parties.