With the promise to save R$70 billion over the next two years, the Minister of Finance, Fernando Haddad, announced on Wednesday night (27) the general lines of the mandatory spending cut package that will be detailed this Thursday ( 28). The minister announced changes to salary bonuses, military pensions, parliamentary amendments and indicated that the rules for adjusting the minimum wage could change.
Haddad also announced the reinforcement of the fine-tooth comb of privileges.
“To ensure that public policies reach those who really need them, we will improve the control mechanisms, which were dismantled in the previous period. Fraud and distortions delay assistance to those who need it most”, declared the minister in a speech on national radio and television, which lasted almost eight minutes.
Military pensions
Regarding military pensions, the minister announced an increase in the minimum age for the reserve and stricter pension rules.
“For military retirements, we will promote more equality, with the establishment of a minimum age for the reserve and the limitation of pension transfers, in addition to other adjustments. These are fair and necessary changes,” said Haddad.
The minister did not confirm whether the proposal provides for the introduction of a minimum age of 55 years and the prohibition of payment of pensions in cases of fictitious death, when the soldier is expelled from the Armed Forces, but until now he is considered dead under the legislation. Last week, Haddad had said that changes to military pensions would generate savings of R$2 billion per year.
Allowance and minimum wage
Regarding the salary bonus, which is equivalent to a kind of 14th salary for those who earn up to two minimum wages per year with a formal contract, Haddad said that the maximum value of the benefit will be maintained at R$2,640 (currently two minimum wages). The allowance, however, will be adjusted for inflation from now on, instead of rising above inflation, as is the case with the minimum wage.
Brasília (DF) 11/27/2024 – Haddad announces federal government spending cuts package- Frame Ministry of Finance
With the adjustment following only inflation, the value of the salary bonus will fall below two minimum wages over the years. “This value will be adjusted for inflation in the coming years and will become permanent when it corresponds to one and a half minimum wages”, declared the minister.
The minister indicated that the minimum wage adjustment rule will undergo changes to adapt to the spending growth ceiling of the fiscal framework, which limits the expansion of public spending to 2.5% above inflation. “We have already returned to workers the real gain in the minimum wage. This right, forgotten by the previous government, returned under President Lula. And with the new proposed rules, the minimum wage will continue to rise above inflation, in a sustainable manner and within the new fiscal rule”, he stated.
Currently, the minimum wage is corrected for the previous year’s inflation by the National Consumer Price Index (INPC) plus the growth of the Gross Domestic Product (GDP) from two years before. With the change, there will be a ceiling that will limit GDP growth to 2.5% above inflation.
Super salaries and amendments
Haddad also mentioned the intention to limit super salaries in the public service by correcting loopholes in the legislation that allow payment above the ceiling.
“The measures also combat privileges that are incompatible with the principle of equality. We will correct excesses and ensure that all public agents are subject to the constitutional ceiling”, he said.
Regarding the parliamentary amendments, Haddad said that the government, with the Federal Supreme Court and Congress, improved the Budget rules. “The overall amount of parliamentary amendments will grow below the limit of fiscal rules. Furthermore, 50% of amendments from Congressional committees will necessarily go to public health, reinforcing the SUS [Sistema Único de Saúde]”, he declared.
I estimated
According to Haddad, the measures will result in savings of R$70 billion in mandatory spending by 2026, allowing government expenses to fit within the fiscal framework.
The minister announced that, if the government records a primary deficit, expenses greater than revenues without interest on public debt, the creation, expansion or extension of tax benefits will be prohibited.
“These measures I mentioned will generate savings of R$70 billion over the next two years and consolidate this government’s commitment to the country’s fiscal sustainability,” he declared.
For the Finance Minister, approval of the package will be important to reduce inflation and lower interest rates in the future. According to him, the government designed the proposal so that those who earn more contribute more. In theory, the package involves sending a proposed amendment to the Constitution (PEC), a complementary bill and substitutes for bills currently being processed in Congress.
“Fighting inflation, reducing the cost of public debt and having lower interest rates is a central part of our humanistic view of the economy. The Brazil of today is no longer the Brazil that closed its eyes to inequalities and the difficulties of our people. Those who earn more should contribute more, allowing us to invest in areas that transform people’s lives”, concluded Haddad.
