By Trabalhadores Unidos
As we’ve written before, the current PSD government is in a sui-generis situation. It was born as a result of very close election, with an extremely short relative majority and no guarantee that it would benefit from new elections. As a result, the government is forced to live in a permanent campaign, focussed on the middle classes, where it competes for voters with the PS and Chega. It is also terrified of the mobilisations that haunted the last year of the PS government.
By combining these factors, it is trying to distance itself from the image left by the previous PSD government – linked to austerity, cuts in social support and salaries – but it doesn’t stop serving the interests of the bosses. This State Budget is a reflection of that: with policies designed to serve the interests of big business while trying to give ‘social’ cover to the ‘social democrats’.
In this sense, this budget is similar to those that the Socialist Party itself has presented – full of illusionist tricks – thus revealing that the intricate dance between the PS opposition and the government is nothing more than political theatre. It thus continues the trajectory of recent years of disinvestment in public services with the now clearer prospect of privatisation.
The government’s phoney social measures
In the case of public transport, the government has introduced two new measures: the Under-23 Free Social Pass, which was previously only for students, and the €20 Green Rail Pass. These are measures that come close to making public services free, but they raise the question: who is going to pay for these passes? The public transport companies, for example, were quick to demand that the government pay off the debts it already has, at the risk of not recognising the new fares.
The Green Rail Pass raises questions about how this would affect CP’s financial stability – opening the door to future privatisation. In reality, CP has been the victim of a privatisation process over the years, from the management of the company by a private entity to the sale of CP Cargas, the freight sctor (now Medway). Medway’s profits, for example, could be used to improve CP’s service with lower fares and cover the green social pass, but this would go against the interests of the private sector and the European Union. What’s more, by not reinforcing the offer of intercity and regional trains, this pass is unlikely to have any real effect on the majority of the population.
Following in the footsteps of the previous PSD government, the PSD also has no structural measures to combat the housing crisis. It hasn’t proposed anything for the rehabilitation of vacant homes, it doesn’t plan to build more public housing or cap rents. It has therefore maintained the support of the Socialist Party, which paid tenants part of the rents, allowing landlords to continue speculating.
Tax cuts for whom?
After 10 years of opposing the Socialist Party’s policies, especially the PS’s tax policies, you’d think that the PSD would bet on a reversal of these policies. On the contrary, the PSD is applying the PS policies of increasing taxes for the poorest and tax breaks for the richest, now more brazenly.
This budget, while claiming to reduce taxes, provides for an increase in tax revenue. How is this possible? Essentially in two ways. Firstly, the budget recovers taxes from the PS, such as fuel taxes – which had been unfrozen since the beginning of 2022. Secondly, it hopes that private consumption will increase – in other words, that the Portuguese will consume more, including fuel, tobacco and alcohol.
With regard to the personal income tax, the government’s proposals include an expansion of the youth tax, from 5 to 10 years, and a change in the personal income tax tables. As is to be expected, the changes to the personal income tax rates will mainly benefit the higher brackets, with more favourable rates.
As for companies, the government promises to reduce the corporate income tax to 20 per cent, among other tax benefits, such as a reduction in the rate of autonomous taxation on the purchase of new cars, increasing the first bracket from 20,000 to 30,000 euros.
In other words, exactly the PS recipe: increase taxes for the general population and reduce them for the richest.
Public services on the path to privatisation
This budget leads to the long-term privatisation of public services. The most serious example of this is the National Health Service, but Education and RTP also seem to be heading down the same path. As an example, it’s interesting to note how there has been an 11% increase in the defence budget, but only a 6.8% increase for education, revealing this government’s priorities.
In the case of RTP, the proposal to end advertising on the public channel is mainly motivated by an interest in deregulating the advertising market, allowing private companies to charge more per minute. According to the government, they are following the example of the public channels in England (BBC) and Spain (TVE). But in the case of the BCC, funding is guaranteed by a higher rate than the audiovisual levy applied in Portugal. In the Spanish case, investment is allocated directly from the state budget. However, this budget makes no provision for changes to the audiovisual levy or for greater spending on RTP, which means that it is a direct cut in the company’s income.
As for health, this budget foresees an increase of 9 per cent. But the most important thing is to know where this increase in investment is going. Of the almost 16 billion in current expenditure, 7 billion goes on staff costs, while ‘purchase of goods and services’ accounts for more than 8 billion, or around 53 per cent of total health expenditure. The ‘purchase of goods and services’ category includes expenses such as the purchase of medicines, analyses and other services reimbursed by the state, which could be offered directly by the state, but instead are handed over to private companies to boost their profits.
The budget also provides for the construction of new health centres, but these are Type C Family Health Units (USF-C). USF-Cs were introduced by José Sócrates’ government, but never put into practice. They are privately-run health centres that have complete autonomy in management decisions, including the pay of health workers. There are also plans to build a new hospital in Barcelos or the Algarve, but, as we’ve come to expect, these are Public-Private Partnerships.
The illusion of debt reduction
Ever since the sovereign debt crisis, debt reduction has been an alleged concern of governments, mainly as an excuse to disinvest in public services.
This budget is no exception. The government announced an estimated reduction in debt from 95.9 per cent to 93.3 per cent as a percentage of GDP. But this is yet another sleight of hand, and the budget itself says so: ‘Nominal GDP growth and the primary surplus will contribute to the reduction in the debt ratio’. In other words, as GDP is expected to rise, debt (as a percentage of GDP) will fall. In reality, the debt has stood at 270 or 280 billion euros since 2020, and no substantial reduction is expected. Much less are the PS and PSD governments interested in the suspension of debt payments and an independent audit to determine how much of this debt is odious debt.
Agreements with the workers
The previous PS government ended the legislature facing the working class in a major mobilisation process. There were protests by education professionals, health workers, judicial workers, police officers, etc. Aware that the new government was too weak to confront this mobilisation directly, Montenegro’s government decided to invest in negotiation.
That’s why this budget shows the negotiations that have been reached for all the professional groups that have been fighting in recent months. It shows that the struggle has led to victories. The length of service returned to teachers, for example, is not a gift from the current executive, but the fruit of the intense struggle of these workers over the last period.
But many of the demands that brought thousands of professionals to the streets have not been met in this budget. Schools are still short of operational assistants and psychologists, and their infrastructure is decaying. Nothing has been given to the operational assistants, who have also been fighting. They still have to work for over 100 years to reach the top of their careers, for example.
Through this budget, the government is trying to make it easier to change the labour rights of the civil service. It’s not yet public what exactly the government wants to change, but it’s likely to touch on sick pay, holiday entitlements and strike notice announcments. Given what this government has already demonstrated in a short space of time, these changes will certainly not be in favour of workers.
The theatre of the parties in the face of the budget
It was very revealing to witness the behaviour of the various political parties towards the budget and the weak PSD government. On the right, IL, given its insignificance in parliamentary arithmetic, ended up disappearing from the negotiations, limiting itself to vague criticisms of the budget; Chega repeated the sad role of Santana Lopes from a few years ago, oscillating between revocable and irrevocable as to whether it would approve or vote against the budget.
In the end, it was the PS that gave Montenegro the upper hand. This is not surprising given that this budget is not very different from those presented by the PS, but it contrasts with the rhetoric of Pedro Nuno Santos, who said that they would never favour a right-wing budget.
On the left, between the BE, LIVRE and PCP, and even the trade union forces like the CGTP, there was a clear lack of combativeness to confront this budget. Keeping the struggles separate and disarming the working class.
