Pedro Sánchez this week. / EP

Broken record

Social spending by the government is its highest ever, but is that really the case?

Mark Nayler
MARK NAYLER

With its sights on next year's general election, the Socialist-led government this week announced a 2023 budget packed with crowd-pleasing measures: more cash for its favourite but hazily defined cause, "social justice", more cash for pensioners, more cash for the unemployed, more cash for civil servants, more cash towards defence to reach Nato goals (something once fiercely opposed by junior partner Podemos). A record six-out-of-every-ten euros will go on what's loosely defined as "social spending" - or will it?

A quick look at this year's budget casts doubt on the likely effectiveness of the plan for 2023, even if there is more money to play with. Late last October, Sánchez announced his first record-breaking budget, pumped with 27 billion euros from the EU's "Next Generation" project. These unprecedented handouts, you'll remember, are being deployed until 2026 to help countries recover from disastrous measures such as lockdowns (in this sense, Spain was one of the hardest hit in the world).

Sánchez hailed last year's budget as "the most ambitious in [Spain's] democratic history". But according to The Corner, a Spanish financial news website, the reality has been somewhat different. After comparing the most recent statistics from the EU and Spain's General Comptroller of the State Administration, the website concluded that only seven billion euros of the Next Gen funds had actually been deployed as of July 31st this year.

Sánchez has also promised more money to the long-term unemployed, but there aren't many signs that his government is tackling this deep-set problem at its source. In its annual education report, released this week, the OECD found that 28% of Spaniards between 25 and 34 years of age have not completed the Baccalaureate or intermediate vocational training, both of which it defines as the "minimum qualification" for "successful participation in the labour market". That's twice the average rate for developed countries and the worst among Europe's OECD members. Spain's youth unemployment rate sits at 28.9%, the second highest in the EU after Greece.

Sánchez's costly 2023 budget will, in part, be financed by a temporary wealth tax - but do such measures actually work? In 1990, according to the OECD, around twelve EU countries had wealth taxes; but most have dropped them since, usually because the revenue generated was too small to justify the expense and difficulty of enforcing them. Along with Norway and Switzerland, Spain is now one of only three EU countries that still has a wealth tax.

That may well be one of the reasons why next year's budget, just like this year's, will fail to deliver the historic performance promised by its creators. Rather than breaking fiscal records, the Sánchez administration is starting to sound like a broken record.