Government ignores INSS queue and maneuvers to reduce spending – 09/15/2023 – Market

The government of Luiz Inácio Lula da Silva (PT) made a last-minute change to the 2024 Budget estimates with the aim of reducing Social Security spending, which is mandatory, and avoiding an even greater compression of other discretionary expenses, such as funding and investments.

In an interval of two weeks, the CNPS (National Social Security Council) approved two different versions of the budget, the last one with a cut of R$ 12.5 billion ordered by the economic area to contemplate “reduction measures” related to the review of benefits.

Expense projections also ignore any acceleration in the granting of benefits to face the INSS (National Social Security Institute) queue, which accumulates at least 1.69 million requests — the number is under scrutiny after divergences between reports revealed the disappearance of 223 thousand applications, as shown by Sheet.

Documents obtained by the report show that the CNPS, a collegiate formed by representatives of the government, employers and workers, approved a first version of the RGPS (General Social Security Regime) budget in an extraordinary meeting on August 3rd.

The presentation made to the counselors indicated the need for R$895.7 billion to honor social security benefits next year, a value 7.24% higher than expected for 2023. The figures were calculated by the INSS in a technical note produced on 14 July.

The amounts were discussed and approved at the meeting and resulted in resolution CNPS/MPS 1,354, published in the Official Gazette of the Union on August 4.

On August 15, the INSS produced a new technical note “with the purpose of meeting the demands set out in Official Letter SEI No. 3229/2023/MPO, dated 08/01/2023”. MPO is the acronym for the Ministry of Planning and Budget.

A Sheet did not have access to this specific letter, but found that there was a joint request from the JEO (Budget Execution Board) for the Social Security estimates to incorporate a saving of resources from the review of benefits.

The JEO is a body for deliberation on budgetary issues formed by ministers Rui Costa (Civil House), Fernando Haddad (Finance), Simone Tebet (Planning) and Esther Dweck (Management). The body counts on the advice of technicians from the economic area.

The new INSS technical note indicated the need for R$897.7 billion to honor social security benefits (R$2 billion more than in the previous estimate), but deducted R$12.5 billion referring to “reduction measures”.

The document does not provide any details on how this impact was achieved, it only listed “the need to undertake a review of social security benefits” with the purpose of complying with the decisions of the TCU (Federal Audit Court) as a factor considered in the projections.

The aforementioned rulings indicate potential effects of R$2.9 billion with the correction of irregularities and R$6.6 billion with the review of possible undue payments due to the absence of medical expertise within the due period.

On August 17, in an extraordinary meeting, the CNPS approved the new version of the RGPS budget for 2024, with a total reserve of R$885.2 billion for the payment of benefits — a nominal increase of 5.98% compared to 2023.

A second resolution, number 1,355/2023, was published in the Official Gazette on August 18 — just 13 days before the budget proposal was formally sent to the National Congress.

When contacted, the Ministries of Finance and Planning said that questions on the topic should be directed to the Ministry of Social Security, which forwarded it to the INSS.

The INSS reported that the budget projection takes into account the TCU rulings, which indicate the existence of irregularities.

“It is worth noting, however, that an interministerial working group was created by President Lula, and measures will be taken based on the guidelines of this group. The INSS reaffirms its commitment to combating fraud and minimizing errors to provide an excellent service to citizens” , he says, in a note.

The Civil House did not comment.

The spending review has been publicly defended by minister Simone Tebet, who stated that it was necessary to analyze INSS spending with a “magnifying glass”.

“The Federal Court of Auditors said that, out of R$1 trillion in benefits, there could be something around 10% of errors or fraud. If we end up with 1% of R$1 trillion, or 2% of R$1 trillion In this magnifying glass that we have and that we will do in relation to INSS frauds and errors, it is exactly between R$ 10 billion and R$ 20 billion that we need and have to do to restore the budget of all ministries, which would have in a first [momento] a loss from 2023 to 2024”, he said on August 22, days after the adjustment in the RGPS accounts.

Experts view the government’s numbers with skepticism, as the variation in Social Security spending scheduled for next year barely covers the mandatory correction of existing benefits.

According to the INSS itself, 62% of payments correspond to a minimum wage. The government predicts that the floor will rise to R$1,421 next year (an increase of 7.65%) thanks to the new valuation policy proposed by the Executive and endorsed by Congress. The remaining 38% is adjusted for inflation, estimated at 4.48%.

Technicians consulted under reserve estimate that the average adjustment, weighted by this differentiated composition of benefits, should be 5.9%, already very close to consuming all the space available in the 2024 Budget.

The INSS also predicts a vegetative growth of 1.03% in the payroll, a measure of how much the number of Social Security beneficiaries should expand given the new concessions.

But the variation could be greater if the Ministry of Social Security is successful in its attempt to tackle the waiting list, a problem that has been going on for years and was placed as a priority by President Lula given the negative impact on the lives of insured.

From the government’s perspective, however, the greater the number of concessions, the more pressure on the Budget.

In the second technical note, with the reduced estimates, the INSS added a type of vaccine opening the possibility of future revision of the numbers. The caveat was not included in the first technical note.

“We emphasize that the projection is considering the measures outlined in items 6 to 8 of this technical note, with the aim of improving budgetary and financial execution, being monitored and evaluated in bimonthly reports, to allow the correction of possible distortions”, says the document .

Behind the scenes, a wing of government technicians believes it is possible to achieve the savings of R$12.5 billion projected in the 2024 Budget, similar to the work being carried out to review the Bolsa Família registration.

Another group within the government itself, however, expresses discomfort with the reduced estimates and recognizes that it is very difficult to reach a significant result in the short term with a review of benefits.

Outside experts corroborate the view of the more skeptical wing. “There has still been no explanation as to how this [economia com revisão de benefícios] will be obtained. A guessed number came”, says economist Marcos Mendes, former head of the Special Advisory of the Ministry of Finance and columnist for Sheet.

In his view, the programmed values ​​will not be sufficient to accommodate benefit readjustments and new concessions.

This is not the first time that the Lula government has changed last-minute data to reduce the weight of mandatory expenses in the Budget.

As revealed by Sheet in April, the Executive reduced its minimum wage forecast for 2023, from R$1,320 to R$1,302, despite Lula having already announced the new value, to avoid an increase in Social Security spending in the first Budget evaluation report published during the PT administration.

At the time, the change was also a decision by JEO. Technicians, however, minimize the weight of the episode, since the impact was effectively incorporated into spending estimates in the subsequent report, released in May.