Emergency cuts to public pay, pensions and benefits to reduce the deficit

Automatic summary, not yet reviewed

1. Pay for all public sector employees is cut by 5 percent on an annual basis starting June 1, 2010. The June extra pay is excluded from the cut, and labor staff whose full-time pay does not reach 1.5 times the minimum wage are not affected.
2. Senior officials face larger cuts: 15 percent for ministers, 10 percent for presidents of advisory bodies, and between 8 and 10 percent for secretaries of state, undersecretaries and directors general, depending on rank.
3. The annual adjustment of contributory pensions is suspended for 2011. Minimum pensions, non-concurrent SOVI pensions and non-contributory pensions are excluded.
4. For disability support benefits, applications must now be decided within six months. The right to the economic benefit starts the day after that deadline passes if no decision has been issued, and new applicants lose the retroactive payment back to the application date.
5. The 2,500-euro birth and adoption benefit is abolished for births or adoptions from January 1, 2011, both as an income taxincome tax The personal income tax (IRPF in Spain): what people pay on what they earn from work, business or savings. deduction and as the one-time Social Security payment. Births and adoptions in 2010 keep it if registration in the Civil Registry happens before January 31, 2011.
6. A 7.5 percent deduction applies to medicines dispensed by pharmacies and to medicines purchased by the National Health System, with exceptions for generics and medicines under the reference price system. The retail price of health care products drops by 7.5 percent, and by 20 percent for urinary incontinence absorbents.
7. Local government savings from staff cost cuts must go to clearing negative balances, reducing debt or funding investments. In addition, until December 31, 2011 they cannot take long-term credit for investments, and rules on filling posts reserved to state-certified local officials are reorganized.
8. Public spending control is tightened: public-private partnership contracts and public works concessions above twelve million euros require a binding report from the Ministry of Economy and Finance, as do loans and advances under chapter 8 of the budget, and any opening of embassies or centers abroad requires a prior favorable report.

Who it affects

• Public employees: Their pay is cut by 5 percent on an annual basis from June 1, 2010, with exceptions such as the lowest-paid labor staff.
• Retirees and pensioners: Contributory pensions will not be adjusted upward in 2011, though minimum and non-contributory pensions are excluded.
• People in a situation of dependency and their families: Applications must be decided within six months and new applicants lose retroactive payment from the application date.
• Families with children born or adopted from 2011: They lose the 2,500-euro birth and adoption benefit.
• City councils and other local governments: They cannot take long-term credit for investments until the end of 2011 and must use their savings to clean up their accounts or reduce debt.

Words worth knowing

Déficit público (public deficit)

The amount by which the State spends more than it takes in during a year.

Revalorización de las pensiones (pension adjustment)

The annual increase in pensions to offset rising prices.

Pensión no contributiva (non-contributory pension)

A pension for people without enough resources, even if they have not paid enough Social Security contributions.

Habilitación de carácter estatal (state certification for local officials)

A special status held by certain local officials, such as comptrollers and treasurers, that lets them oversee a city council's accounts.

Informe vinculante (binding report)

A report the administration must request and follow: if it is unfavorable, it cannot act.

income tax

The personal income tax (IRPF in Spain): what people pay on what they earn from work, business or savings.

It summarizes the law as published in the BOE. It is written by artificial intelligence and may contain mistakes: the official text is what counts. Read the official text · How we make summaries