The State lends 10,000 million to Social Security to pay the ‘extra’ of November pensions

The central State will lend 10,003 million euros to Social Security to face the extra pension payment next November. A zero interest credit and a lost fund that is reflected in the General State Budgets (PGE) for 2023, which are currently extended.

This was announced this Tuesday by the Secretary of State for Social Security, Borja Suárez, during the press conference to present the unemployment and Social Security affiliation data. Employment figures that include the creation of 142,000 jobs last October thanks, fundamentally, to the pull of education.

Questioned about the credit, Suárez stated that its concession was approved in the Council of Ministers on October 21 and that The amount will be the same as that included in the extended accounts. That is, exactly 10,003 million euros. A figure practically equivalent to the monthly payroll of the contributory pension system.

Elma Saiz’s ‘number two’ has defended that the granting of this loan, which will increase the Social Security debt, is “perfectly consistent with an improvement in the financial situation” of the organization. “The fact that we need a loan does not mean that things are worse. Quite the opposite”said Suárez, who added that the system’s deficit has been reduced from 1.5 points of GDP in 2023 to half a tenth last year.

Suárez has highlighted that the pension reserve fund (popularly known as the pension ‘piggy bank’) will close the year with more than 14,000 million in revenue. Likewise, he has claimed that contribution income is growing at a rate of 6.8% year-on-year, with collections exceeding that of last year by 8.4 billion at this point.

Debt of 126,178 million

The truth is that the Social Security accumulates a debt of 126,178 million euros (7.7% of GDP) which has been contracted practically in its entirety with the State for the loans that the central administration grants it to meet its expenses. Since 2022, the liabilities of this subsector have increased by 19% since 2022 (20 billion more), although for the purposes of fiscal rules – which measure macroeconomic magnitudes compared to GDP – it has remained stable.

The loans received by Social Security, added to the transfers received by the State to finance certain benefits, show the inability of the organization to meet the growing expenses reflected in its accounts. A part of these disbursements, such as the minimum vital income or minimum supplements, are not contributory so it is logical that they be financed with other resources. However, a very substantial part of this deficit is contributory.

The consequence of this is that an increasingly large part of this deficit between income from contributions and expenses on contributory benefits (which by definition should be covered with contributions), It is financed with funds from the General State Budgets. That is, with income coming primarily from what is collected through taxes. A reality that the Government assumes and does not view with a bad eye, but that raises debate in academia about whether it is the optimal destination for fiscal resources.