The social security system that guarantees aid to the poorest is already running red

The system of social security, citizenship, social protection, which aims to support the most deprived population, through subsidies or social benefits, registered a deficit of 108 million euros last year. It’s the first negative balance since 2016, according to analysis by the Public Finance Council (CFP) released this Thursday. Disappointing tax collection and under-budgeting of expenditure drove the bills into the red, as this regime is financed exclusively from resources from the state budget. In other words, in this case, social contributions, which actually increased and largely due to the increase in employment and wages, did not contribute at all.

The Social Security Budget for 2022 already foresaw a deficit on the Social Security accounts of 51 million euros, which eventually worsened to more than double: 108 million euros. The negative result is comparable to the successive surpluses since 2016, when the positive balance amounted to 374 million euros. Even during the years of the covid-19 pandemic crisis, the bills were in the green. In 2020, the balance was 423 million euros and in 2021 the surplus even grew to 653 million euros. “From 2016 to 2021, the amount of transfers from the state budget to this system exceeded expenditure, generating significant positive balances,” underline the CFP technicians.

The deficit of the Social Protection Citizenship Scheme recorded last year is justified by the negative balances of the Social Action and Family Protection subsystems. The report’s data shows that the social action subsystem, excluding the impact of the European Social Fund (ESF) and the European Fund for Aid to the Most Deprived (FEAC), ended the year with a deficit of EUR 111 million, mainly as a result of , a lower execution of current revenue than foreseen in the initial budget of the social security, which even foresaw a surplus of 20 million euros. For this result, the GVB attributes the weak contribution of the following items, the evolution of which lagged behind the budget: “other current income, income from the Special Online Gaming Tax, income from social games and capital transfers, related to investment projects in social equipment” .

The family protection subsystem, which allocates social benefits, with particular emphasis on dependency and disability areas, was also below the waterline, registering a negative variation of €2 million compared to 2021, “indicating a lower volume of transfers received compared to the expenses incurred,” according to the report. “The transfers to this subsystem represent almost all revenues, with an emphasis on the social VAT and various current transfers from the central administration,” the study states.

In the opposite direction, the Solidarity Subsystem recorded a positive balance of €6 million. This regime, which is also part of the Social Protection Citizenship Scheme, is responsible for paying social benefits and the extraordinary pension update of 10 euros, which expired last year, and also for awarding the support subsidy to informal carer, social insertion income, unemployment allowance and solidarity allowance for the elderly. However, the slight surplus can be explained by “lower implementation of expenditure than foreseen in the budget programming document”, the CFP emphasizes.

The citizenship social protection system, which includes the three subsystems described above, is not fueled by social contributions, unlike the social security system, which pays pensions or unemployment benefits, and its main source of funding is current transfers from the central government, including taxes. “In this way, the deficits referred to are due to an underestimation of the expenditure legally supported by the state budget,” emphasizes the organization, led by Nazaré Costa Cabral.

Tax collection even increased by 3.3% to 1,646 million euros, but was 9 million euros lower than the estimate of the initial Social Security budget, which was expected to collect 1,655 million euros. Nevertheless, tax revenue increased by 53 million euros compared to the 1,593 million euros raised in 2021. Social VAT contributed to this increase, which rose by 55 million euros from 915 million to 970 million euros. However, the positive evolution of the tax was not enough to contain the shortfall of the family protection subsystem. Likewise, revenues from social games, which fund Social Action, increased by 18 million euros, from 212 million euros to 230 million euros. But they couldn’t prevent the negative outcome of that subsystem.

Despite the deficit of the social protection system, the pension system posted a surplus of €4167 million, largely thanks to social contributions that increased due to employment and wages, namely the guaranteed minimum monthly allowance (RMMG) which grew by €40, from €665 in 2021 to 705 euros in 2022. This strong contribution of the pension system made it possible to overcome the poor performance of the social security, bringing the total social security balance in 2022 to 4059 million euros, plus 1711 million euros than last year. This is the “largest budget surplus in more than a decade from the point of view of the government budget accounts, excluding operations related to the ESF and FEAC”, according to the CFP.

Salomé Pinto is a journalist for Dinheiro Vivo