The President of the Government, Pedro Sánchez, presented this Thursday at the Reina Sofía Museum in Madrid the strategic project ‘Spain 2050’, with which he intends to open a collective and plural reflection on the future challenges of the country after the pandemic. The plan is contained in the document, of more than 600 pages and prepared by experts and under the supervision of the National Office for Prospective and Long-term Strategy of the Country, department of Moncloa, sponsored by Iván Redondo, Sánchez’s chief of staff.
During the presentation, Sánchez has assured that it is an “open” document that will be submitted to a “national debate” in which he has invited all Spaniards to participate, also political parties, autonomous communities and municipalities, in order to decide “the country we want in 30 years”.
The document, which analyzes the nine major challenges facing Spain and sets 50 goals, is not “closed, it is a living document” and a “first proposal” that will serve as the basis for “a great national dialogue” to be will be held in the coming months.
Working market
The most ambitious objective of the plan is to reduce an unemployment rate of 18% -with data up to 2019- to 12% in 2030, 10% in 2040 and 7% in 2050. It would take 30 years to approach the European average -8%-. On the other hand, according to projections, the employment rate would stand at 68% in 2030, 72% in 2040 and 80% in 2050. In this horizon, the employment rate for women should rise from 57 current percentage to 82% and youth unemployment should fall from the current rates of 40% to 14%.
According to the plan, the Spanish GDP could grow at average rates of 1.5% per year in the next three decades if productivity increases by 50% between now and mid-century and employment rates increase. “This would allow us to reduce the gap in per capita income that separates us from the EU-8”, the Executive pointed out.
To achieve greater productivity, the plan focuses on a progressive reduction in the working day. The Government’s objective is for the average number of hours worked per week, which right now stands at 37.7 hours with data up to 2019, to become 37 in 2030, 36 in 2040 and 35 in 2050. The convergence with the eight major EU economies – averaging 35.4 hours – would take nearly three decades.
Along these lines, the Government estimates that the energy transition will result in a net increase in employment of around 250,000 people, on average per year, and in an increase in the level of GDP close to 2% compared to a trend scenario in 2050.
The text indicates that some “regulatory dysfunctions” must be corrected if the foundations of a more efficient and equitable labor market are to be laid. That is why it is committed to revisiting labor regulation, collective bargaining and active employment policies.
Regarding labor regulation, he says that temporary hiring continues to have an “excessively high” weight in the Spanish labor market, which translates into high volatility by promoting extensive adjustment based on hiring and firing, instead of favoring intensive adjustment , in which companies and workers negotiate changes in wages or hours worked.
tax hikes
In fiscal matters, the plan aims to raise tax collection to 43% of GDP in 2050, eight points more than now, and reduce the shadow economy by half, from 20% to 10% of GDP. The text points out that in 2019 the tax collection of Spain was 35% of GDP compared to an average of 41% of the EU-27 and 43% of the EU-8, so the objective of the ‘Spain 2050’ plan is to place this percentage at 43% of GDP in 2050, with two previous steps: achieving 37% of GDP in 2030 and 40% in 2040.
At the international level, he indicates that work must be done to achieve an equitable allocation of collection between countries, and adds that if an agreement is not finally reached in the OECD, Spain should promote the implementation of the ‘Common Tax Base’ system in the EU Consolidated’, in addition to a multilateral solution to tax large digital service companies and the implementation of a minimum effective rate for this tax.
The “comprehensive” reform of taxes on income, wealth and inheritance and donations to eliminate tax incentives in favor of investment in assets related to real estate assets, raising the effective taxation of capital to bring it in line with the countries of the EU-15, is another of the objectives set by the Government in the long term.
Likewise, it ensures that the role of the Wealth Tax and the Inheritance and Gift Tax in the regional treasuries must be reconsidered “to avoid undesirable tax competition strategies”, which “undermine” the collection and progressive scope of these taxes and the principle of equality.
It is also committed to modifying special taxes, raising the tax rates on alcoholic beverages, tobacco and oil-derived fuels -diesel and gasoline- until they converge with those established in the main EU countries, and to create a framework of incentives and instruments taxes that promote the ecological transition.
Finally, and in the face of technological changes between now and 2050, the Government advocates reconsidering the bases and types of taxation on work in personal income tax, adapting them according to the effects that technological change has on the labor market and the wage inequality in the coming decades.
Less plane and lien on the car
The Government also recommends in the document to prohibit journeys made by plane and that have an alternative to travel by train of less than 2.5 hours, with the aim of reducing the environmental impact of air transport.
Likewise, the Executive proposes the introduction of a frequent traveler rate or the establishment of taxes on airline tickets depending on the proximity of the destination, which would help limit its negative externalities and bring its tax treatment closer to that of other means of transport.
To achieve this objective, the Government also plans to adjust the taxation of road transport to the actual use of the vehicle, that is, moving from the current tax figures on purchase, circulation and fuel, to a tax on the actual measured use of the vehicle that take into account its characteristics, such as weight, power, emissions of atmospheric pollutants and greenhouse gases.
Less optimism with pensions
In the chapter on pensions, the document recognizes the pressure that the aging of the population and the increase in life expectancy will exert on the system, which could make the legal retirement age “obsolete” at 67 years.
According to the report, in 2050 for every person over 64 there will be 1.7 people of working age, compared to 3.4 today. The different simulation exercises carried out suggest that, in Spain, spending on contributory pensions will be in a range of between 15.2% and 16.9% of GDP in 2050 compared to 10.8% in 2019, they add.
Among the proposals on this point, the plan considers that retirement at 67, which will be the legal age in 2027, “is not a low threshold” in the European context, although it constitutes “a static limit that may become obsolete as increase longevity”.
And they add that an alternative path may be to act on the effective retirement age, offering incentives that manage to encourage permanence in the labor market after the ordinary age.
In order to neutralize the loss of the labor force caused by the aging of the population, the document states, “it will be necessary to increase the employment rates of women, young people and people over 55 years of age; encourage legal immigration, and promote the recovery and talent attraction.
Measures in housing
In terms of housing, the Government plans to create an adequate fiscal framework to increase the rental offer at affordable prices and favor access for households with lower low incomes, with special emphasis on the territorial areas subject to greater tension.
In addition, it proposes to encourage alternative forms of ownership to the traditional purchase or rental, such as temporary ownership and shared ownership, adapting them to the Spanish reality. Likewise, he believes that the collaborative economy could also break into the housing market.
It also seeks to promote the rental of empty housing. To this end, it proposes the creation or improvement of public rental intermediation exchanges and public-private collaboration frameworks that contribute to better management (partnerships or models similar to housing associations).
The document contemplates increasing the availability of public and social housing, establishing protection mechanisms for public housing assets, as well as land reserves for protected housing for rent. Among the objectives included in the text is also to increase the annual percentage of rehabilitated homes so that in 2050 2% of the total park is rehabilitated per year.
The Executive considers that there will be many people who will not be able to access decent and adequate housing without the support of the State, so it is believed that the potential demand for social housing in Spain will almost double in the next decade, from 1, 5 million homes that some studies estimate are currently necessary, to 2.6 million in 2030.
800,000 fewer students
The Government estimates that between now and 2050, Spain will have 800,000 fewer students between the ages of 3 and 15 due to the demographic changes that will occur in the near future, in which a stagnation in the birth rate is expected, or almost one million fewer students up to the age of 24, according to the plan.
However, the Executive does not see this as a “drama” but as an “opportunity”, according to Sánchez. Thus, thanks to this, Spain “will be able to double the budget per student until it is equal to that which Denmark already has without incurring a significant increase in public spending,” according to the plan.
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