Government changed last-minute data to artificially cut INSS spending – 04/11/2023 – Market

The government of Luiz Inácio Lula da Silva (PT) changed a data in the 2023 Budget to artificially reduce the forecast of expenses with INSS (National Social Security Institute) and avoid, at the last minute, greater pressure on expenses right at the beginning of the new mandate.

Document obtained by Sheet through the Access to Information Law shows that the SPE (Secretariat for Economic Policy), linked to the Ministry of Finance, reduced the value of the minimum wage in the grid of parameters days after having prepared a first version with a higher floor, of R$ 1,320 —amount promised by Lula as of May 1st.

The revision of the grid to keep the minimum wage at the current level (R$ 1,302) allowed a reduction of R$ 7.7 billion in expenditure on social security benefits in relation to what was foreseen in the Budget, which reduced the projected deficit for the year and the risk of having to block other expenses.

The maneuver was the subject of an alert by the Directorate of the RGPS (General Social Security Regime), linked to the Ministry of Social Security, responsible for calculating INSS retirement and pension expenses.

In an informative note signed on the afternoon of March 21 —the day before the publication of the bimonthly report on revenues and expenses, a document required by law and which indicates whether there is a need to block resources for the year—, the RGPS technicians presented the new figures under the heading minimum wage of R$ 1,302.

Despite this, they underlined in the text that it was “necessary and relevant” to note that the data would be inconsistent with the spending trajectory for the following years, projected from the floor of R$ 1,320 —according to guidance given 11 days before by the SPE, in March 10th.

According to the technicians, the review of INSS expenses responded to an email sent by Cofis-SOF (Coordination of Fiscal Affairs of the Federal Budget Secretariat, linked to the Ministry of Planning) at 10:30 am on that same March 21, “in order to consider a minimum wage of R$ 1,302.00 for the entire year”.

“It is necessary and relevant to note that the data referring to the period 2024 to 2027 presented in the aforementioned Technical Note are not consistent with the 2023 data sent here, since the social security expenditure series is chained and the projections were prepared based on the Grid of Parameters of the SPE/MF of 03/10/2023, which presents, for 2023, a minimum wage value of R$ 1,320.00”, says the note.

The grid of parameters was officially released on March 17, but the SPE announced only its estimates for GDP growth and inflation, without the value of the minimum wage. Therefore, the change on the eve of the report was not known at this time.

According to experienced technicians heard under reservation, this type of request is quite uncommon in the budget routine, since the areas require some advance notice to be able to produce the necessary projections and documents.

When contacted, the Ministry of Finance said that the Technical Commission for Budgetary and Financial Management (CTGOF) and the JEO (Budget Execution Board) understood that the new minimum wage value should not be included in the parameter grid before the MP was issued ( provisional measure) that formalizes the additional increase.

The CTGOF is the collegiate formed by technicians from Finance, Planning and the Civil House to subsidize the discussions of the JEO, which, in turn, has decision-making power and is formed by ministers Rui Costa (Casa Civil), Fernando Haddad (Finance ), Simone Tebet (Planning) and Esther Dweck (Management).

The JEO meeting to discuss the Budget review was held on the morning of March 21, the same day that the data were changed. Haddad was represented at the meeting by the secretary of the National Treasury, Rogério Ceron.

The Treasury also denied that the change in the grid was intended to avoid blocking expenses. “The change occurred for purely technical reasons, reflecting JEO’s position, and aimed only at following the standard protocol”, says the note.

The Ministry of Planning and Budget reported that the bimonthly report was prepared “based on guidelines established by the Budget Execution Board”. According to the agency, the report considered the projected social security expenditure “based on the grid of parameters prepared by the SPE/MF on 03/21/2023, whose minimum wage value for 2023 is R$ 1,302.00, according to guidelines defined by the said board for preparing the report”.

The Ministry of Social Security (MPS) confirmed, via a press office, that the “main reason” for the decrease in expected spending on benefits came from the difference in the value of the minimum wage. According to the folder, the difference in Social Security expenses will be changed “from the eventual approval of a new value for the minimum wage”.

In March, the Sheet showed that technicians and authorities heard on the eve of the JEO meeting stated, at the time, that the government deficit estimate for the year was around R$ 120 billion. The following day, the number dropped to the announced R$107.6 billion — equivalent to 1% of GDP (Gross Domestic Product), as had been promised by Haddad.

In addition to the unusual expedient of changing the grid of SPE parameters, there is a concern with the consequent underestimation of INSS expenditures. A specialist in public accounts who preferred not to be identified estimates that Social Security spending should be R$ 13 billion greater than the R$ 825.2 billion calculated by the government for the year.

The value, however, may end up being lower because the waiting list for benefits grew again under Lula’s administration. In December 2022, there were 1.1 million applications awaiting analysis at the INSS, a number that rose to 1.23 million in January of this year. The more dammed the queue, the smaller the pressure on government spending.

Questioned about these points, the MPS gave contradictory information. First, regarding the cut in expenses, he said that “the picture is compatible with reality” and that he used, for the 2023 estimate, “a lower expense growth rate”, since the amount of benefits and the monthly amount show “decreasing growth rate”.

In a question about the queue, however, the ministry said that “the growth rate considered includes an acceleration in the granting of benefits”.

Economist Marcos Mendes, research associate at Insper and columnist at Sheetassesses that the maneuver in the Budget to reduce Social Security spending conveys an idea of ​​”low credibility” of the new government.

“Basically what they did was an arrival account. They are torturing the numbers to say that they will reach a deficit of 1% of GDP. But it is a very bad sign, torturing the numbers in the first report”, he says.

“They are confident that revenue will boom and that they will be able to put back the underestimated expenses and that the deficit will not grow. Now, is this credible and is it perpetuated from 2024 onwards?”, says Mendes.

He recalls that the government itself has already decided to step on the brakes on privatizations and concessions, and should collect less dividends from Petrobras. All of these measures have the potential to reduce the government’s sources of revenue.

In addition, there are other dammed expenses, such as compensation to states for cutting ICMS rates on fuel, financial aid to states and municipalities to pay for the new nursing floor and the cost of the so-called lifetime review.

Approved by the ministers of the STF (Federal Supreme Court) by 6 votes to 5 in December 2022, the lifetime review is a correction in which policyholders can include the amounts of contributions made before 1994 in the calculation of retirement benefits and pensions , benefiting those who had higher payments before the beginning of the Real Plan.

In March 2022, the INSS estimated that a decision favorable to the beneficiaries could generate an invoice of BRL 120 billion in retroactive payments, not counting other repercussions on the Social Security Budget.

The MPS confirmed that this cost is not yet accounted for in the Budget and said that the discussion is still in the “legal field”.