What will happen if the Government decrees are not approved?

The reduction in VAT on electricity, the increase in pensions or the unemployment benefit reform approved by the Government in the last weeks of 2023 are up in the air due to Junts’ refusal to support the validation of the decrees that include these measures.

The Congress of Deputies faces a decisive vote this Wednesday, which could have serious economic consequences, which is why the groups are speeding up negotiations. The negotiations have dragged on. Jordi Turull and Miriam Nogueras were negotiating with the PSOE in Madrid this Tuesday, without changing the direction of their vote. And this Wednesday there was no Junts representation in the chamber during the debate.

The Government has the votes of the PSOE, Sumar, ERC, Bildu, PNV and the Canarian Coalition for the three decrees. 166 votes compared to the total of 183, at the moment in the no block. More votes in favor than against are needed. Check the possible combinations in this voting center.

These are some keys to the crossroads of the Government with its independence partners.

What is debated in Congress?

Congress debates three royal decree laws approved in December: one with the eighth package of measures to combat the effects of inflation, another with the unemployment benefit reform and an omnibus norm with the pending reforms committed to in the Recovery Plan.

The anti-inflation package includes, among other measures, free suburban and medium-distance trains, a 30% reduction in urban and interurban transport, a 10% reduction in VAT on electricity and gas (in the latter case, only the first quarter) and zero VAT for basic foods.

Also the increase in contributory pensions by 3.8%, the elimination of commissions for cash withdrawals at the window for those over 65 years of age or the extension of the ban on evictions for vulnerable households, as well as the extension by one year of the tax on large fortunes and taxes on banking and energy.

A second decree reforms the unemployment benefit, which is extended to hitherto exempt groups, such as those under 45 years of age without family responsibilities, and rises from 480 euros to 570 euros in the first six months and to 540 euros for the next six, compatible with the job during the first 180 days.

In addition, all workers are allowed to enjoy breastfeeding leave cumulatively and the prevalence of regional agreements over state ones is introduced.

The omnibus decree includes the pending reforms to access the fourth tranche of European funds, relating to justice, the local regime, patronage and, in economic matters, the content of the public service law, which declined with the electoral call, which includes the introduction of performance evaluation of officials.

What happens if the decrees fail?

All of these measures are already in force because they are included in royal decree laws published in the BOE, but to remain so they need to be validated in the Congress of Deputies. Otherwise, the decrees and their content will decline. It would only be recovered if new decrees are approved, which would need their corresponding validation within a month.

This implies that the Cercanías will no longer be free, urban transport will no longer be subsidized and VAT on electricity and gas will rise to 21%; that of basic foods such as bread, at 4%, and that of pasta and oils, at 10%.

Banks will be able to charge seniors again for withdrawing money over the counter and the increase in pensions will be suspended.

There would not be an immediate effect for recipients of unemployment benefits, because the bulk of the reform does not come into effect until June.

The tax on large fortunes and levies on banking and energy would decline, with the consequent loss of income, which would also mean that wealth would once again be exempt from taxation in communities that have a reduced wealth tax.

By withdrawing the reforms of justice, unemployment benefits or the public service, the receipt of 10 billion European funds that were linked to these milestones would be put at risk.

And how would it affect public accounts?

The cost of the anti-inflation package is 5,350 million, according to the Government, so in principle its withdrawal is positive for public accounts, although the impact of each measure has not been detailed.

The taxes on banking and energy and the tax on large fortunes raised 3,528 million euros in their first year in force, which would be lost with their disappearance.

But at the same time, spending derived from transport aid (about 1,360 million, according to the budget plan) or VAT reductions on gas, electricity and food would be reduced (about 4,500 million in 2023, according to AIReF, although in 2024 the amount would be lower because it would be repaid to a lesser extent).

To this should be added the eventual loss of 10 billion European funds for not meeting the milestones of the Recovery Plan, although this would depend on the evaluation of the European Commission.

Why is the validation of the decrees at risk?

JxCAT refuses to support the decrees considering that the judicial reform puts the application of the amnesty at risk and Podemos also questions its support for the unemployment benefit reform and the anti-inflation package. Without their votes, the Government does not have a sufficient majority to validate the decrees.

Is the vote lost?

Junts has asked for the withdrawal of the three decrees and for them to be negotiated before presenting them again. His demands include withdrawing the articles of the judicial reform that he believes would affect the amnesty, tax benefits for companies to return to Catalonia and sanctions for those that do not do so.

Podemos’s demands to support the subsidy reform include withdrawing the cuts in contributions and the anti-inflation package and limiting the increase in the price of rent and food in large stores to 2%.

In parallel to the negotiation with its investiture partners, the Government maintained contacts with the PP with the intention of obtaining its support, although the main opposition group has only offered its abstention in exchange for deflating personal income tax for incomes of less than 40,000 euros. , lower the VAT on meat, fish and canned goods and keep the VAT on electricity and gas at 5%.