Government still popular despite harsh tax measures

news: Government still popular despite harsh tax measures

• The tobacco price rises are to help balance the country’s coffers
• The tobacco price rises are to help balance the country’s coffers

THE GENERAL public are aware of the necessity to tighten their belts in order for the State’s finances to be re-balanced and, for now, it seems the people of Portugal are not turning against the government, or the Prime Minister, in the wake of the strict measures announced last month. However, this does not mean they are happy about the tax increases, merely just resigned to the situation: a point clearly illustrated in a survey carried out last week by the Expresso media group in conjunction with Eurosondagem. In the first poll carried out since the government announced the main measures to be enforced under the Programa de Estabilidade e Crescimento (Stability and Growth Pact), the popularity of Prime Minister José Sócrates has actually increased, with 61 per cent voting positively and just 18 negatively. The government, too, maintains a comfortable margin in terms of its overall popularity, with 41 per cent voting favourably and 30 per cent voting against. Meanwhile, the majority of the population considers the plan of cuts to be justified (47 per cent against 41 per cent) in order to reduce the State deficit. According to the poll, the increase in the price of fuel is the most unpopular measure being introduced, with 71 per cent of people surveyed voting against. Meanwhile, 57 per cent voted against the increase in IVA (VAT).

On the other hand, the most popular measure that has been announced is the end to the pensions for life for politicians (a measure welcomed by 65 per cent of those polled). Meanwhile, the increase in tax levied on those in the upper band (those earning above 60,000 euros a year) has received the support of an ample majority, with 57 per cent (more about this measure below).

In addition, more Portuguese agree with the freezing of automatic career progression for public service workers (49 per cent for and 40 per cent against), however, opinions are strongly divided over the increase in the maximum working age for civil servants from 60 to 65, a measure that aims to bring public services in line with companies in the private sector (46 per cent voted against and 45 per cent voted in favour).

Opposition and PS ‘rebels’ not

so understanding

José Sócrates and his government may not have fallen in the public’s esteem since the announcements last week, but the opposition parties are clearly not feeling so charitable.

The PSD (Social Democrats) criticised the government at the weekend because it feels it is acting “incoherently” and “hypocritically” since, although asking the public to accept losses in their wallets, it is not leading by example – some members of the government have received salary and pension increases, such as the Minister for Finance.

PSD leader, Marques Mendes, repeated his party’s main complaints about the measures, stating: “Three errors have been committed in this plan: the attack on public service workers, the increase in taxes and the lack of courage to reduce the dimension of the State (what it owns and controls),” he said.

Even the PS (Socialist Party), the government’s own party, witnessed some of its members criticising the Prime Minister for breaking the electoral promise of not increasing taxes.

Meanwhile, the leader of Communist Party (PCP) criticised the government for delivering a moral lesson to society, while putting up “one of its own” for one of the best paid jobs on public television as a commentator (António Vitorino).

Attack on public service

workers continues

Public opinion generally points to the belief that public service workers have “had it too good for far too long” and for civil servants the ‘gravy train’ appears to be at an end.Apparently, according to latest reports, public service workers will not receive pay rises until the year 2009, an action sure to be lambasted by the PSD party in light of recent comments by its leader.

Daily business newspaper, Jornal de Négocios, reports that the measure is “one of the latest included in the Stability and Growth Pact for 2005-2009”, declaring that the salaries of public service workers will increase “two per cent per year, below the rate of inflation, until the end of the government’s term in office”.

No way back

According to the same source, in the event of economic conditions becoming even worse, the Socialist government promises that the country “will continue to endure the measures to reduce the deficit”.

Middle classes getting poorer

The recent government announcements have led many to debate the economic issues affecting society. According to a leading economist, the middle classes are 15 per cent poorer since 2001. “The Portuguese have already been very patient in light of the significant impoverishment that they have been suffering over recent years,” considers Carlos Pereira da Silva, professor from the Instituto Superior de Economia e Gestão, the superior institute of economics and management.

The economist estimates that the middle classes have suffered a 15 per cent loss in spending power only in the period between 2001 and 2005. An erosion that will also be maintained over the coming years and which will be aggravated by the increase in IVA (VAT) and with the announcement that the public service workers will only receive two per cent increases in their salaries until 2009.

“The middle classes have also become poorer due to Portugal signing up to the Euro, which produced a chain reaction of price increases,” he comments. “European studies show that, with the Euro coming into force, it was responsible for a two to three per cent increase in prices on average and, in some cases, an increase of five per cent. “People were ‘fooled’ for around a year before they realised they were paying more for everything,” he says.

Other factors responsible for the financial weakening of the middle classes, he believes, is the reduction of disposable income for families. One example he gives is the “brutal” increase in Imposto Municipal Sobre Imóveis (previously council tax) that from one day to the next saw a sharp increase in the family bill.

Another example is the reduction of social security payments, such as ‘abono de família’ (family benefit or children’s allowance), which was reduced for many middle class families. In addition, since 2004, sick benefit was reduced from 65 per cent to 55 per cent for absences of up to 30 days. Another reason he points to, among others, is the cut in pensions. Caroline Cunha

Rich to be taxed at

42 per cent

The Portuguese government is to raise the upper ceiling income tax limit from 38 per cent to 42 per cent for high earners grossing 60,000 euros or over. Sócrates explained to PS National Commission last week that “this time, the rich, too, are going to pay for the crisis”, which has left exports tumbling, unemployment soaring and a nearly seven per cent deficit hole in the country’s finances. However, in the same speech, he promised that investment in public services “would not be affected” by the programme of austerity measures revealed last week, in which value added tax was hiked up to 21 per cent.

In his brief address, the Socialist Prime Minister drew parallels and distinctions between the policies his government would adopt to deal with the country’s economic problems and those adopted by his predecessor José Manuel Durão Barroso. He also outlined stiffer measures and penalties for citizens who “were liable to try and evade their financial obligations”.

The General Secretary of the PS also assured members of the National Commission that “on the contrary to what happened in 2002 and 2003, this time, the Socialist government would not reduce public investment”.

The Minister for the Economy, Manuel Pinho, had already said that the government’s programme for dealing with the budgetary overspend was designed not to prejudice either public or private investment, which was already suffering from low economic growth.

In a message to the PS Permanent Council, Jorge Sampaio called for its members to “arrive at a solid commitment in its analysis of the country’s problems, the evaluation of projects and the formulation of consistent policies to solve them”. C.G.

80% price hike on the price of tobacco by 2009

The price of a packet of cigarettes costing 2.60 euros today will cost around 4.70 euros by 2009 in Portugal, according to the government. The Minister of Health, Correia de Campos, said last week that tobacco would cost 80 per cent more than it does today. In a statement, he said that the gradually phased-in price rises, over the next four to five years, was to help balance the country’s coffers and reduce the current stress on the country’s health service budget caused by smoking related diseases, such as lung cancer, coronary heart disease, bronchitis and asthma.

The Minister also revealed that it would be illegal to sell tobacco to minors under the age of 18. C.G.