Royal Decree-Law 20/2012, of July 13, on measures to guarantee budgetary stability and promote competitiveness

OFFICIAL STATE BULLETIN
No. 168 Saturday, July 14, 2012 Sec. I. Page 50428
I. GENERAL PROVISIONS
HEAD OF STATE
9364 Royal Decree-Law 20/2012, of July 13, on measures to guarantee budgetary stability and promote competitiveness.
I
The recession that the Spanish economy began to experience in 2008 and the economic policy then followed to address it led to the accumulation of some unsustainable macroeconomic imbalances. To the extent that these imbalances are only partially resolved, the recovery of a stable growth path in our country is unviable. This became evident throughout 2011, when, after several quarters of slight recovery, the Spanish economy showed intense vulnerability to the deterioration of the euro zone and plunged back into a recessionary period.
This recent relapse of the Spanish economy, although not reaching the severity of 2009, is having great virulence and serious consequences for job destruction. During the first two quarters of this year, economic activity deepened its deterioration, and prospects for the second half of the year will not be better if urgent measures are not adopted. To the imbalances pending resolution in the Spanish economy has been added on this occasion a crisis of confidence in financial markets, to which various institutional problems of the euro zone are not unrelated. The most immediate consequence of this instability in the markets has been a strong tightening of financing conditions for private agents. Fundamental to overcoming this situation will be not only the design of an economic policy strategy containing the appropriate elements in the current context, but also its articulation over the medium term in a plausible manner capable of garnering the credibility of financial markets. These two requirements imply that such a strategy must comprise a variety of policies with clear objectives in terms of implementation dates and consequences for growth, quantified within a coherent and multiannual macroeconomic framework. The aforementioned strategy pivots mainly on two axes: fiscal consolidation and the impetus for new structural reforms. Fiscal adjustment measures are essential at this moment as a reinforcement of those already included in the last Update of the Stability and Growth Programme 2012-2015 to ensure that Spain rigorously fulfills its fiscal commitments within the framework of the Excessive Deficit Procedure established by the European Union. Furthermore, they are necessary to recover the confidence and credit of Public Administrations. New structural reforms are also key not only to guarantee that our country flexibilizes its productive structure and prepares optimally for the next expansionary phase of the cycle, but also to generate additional growth and partially compensate for the restrictive impact of fiscal policy in the short term. Over the medium term, the two types of reforms will combine effects in the same direction and will be unequivocally positive for recovering the growth of the economy, production, and employment. The modification of the fiscal path planned by Spain in the Stability and Growth Programme 2012-2015 has been driven by the ECOFIN meeting of July 10. At it, EU Ministers of Economy decided to grant Spain a one-year extension to correct its excessive deficit and bring it below 3% of GDP. This decision, therefore, leads to the modification of the Excessive Deficit Recommendation issued by the European Council on November 30, 2009, which set 2013 as the deadline for achieving a general government deficit of 3% of GDP.

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OFFICIAL STATE BULLETIN
No. 168 Saturday, July 14, 2012 Sec. I. Page 50429 Although within the framework of this latter Recommendation Spain has been taking measures aimed at its compliance, the national and international economic context has raised the degree of procyclicality derived from the reduction of a very substantial part of the public deficit in a relatively short time horizon. Such circumstances are what have led the EC to advise flexibilizing the path of elimination of this excessive deficit, specifying that the compliance objectives are now 6.3% of GDP in 2012, 4.5% in 2013, and 2.8% in 2014. Even so, the structural fiscal effort to be made by Spain is very significant. Therefore, the configuration of this new fiscal path in no way can be considered a relaxation of fiscal policy, but an adaptation of it to a new starting reality given by a much larger starting deficit in 2011 (8.9% of GDP vs. 6% planned) and a more complex economic environment. It is within these coordinates that the different fiscal measures included in this royal decree-law must be situated. On the one hand, the increase in indirect taxation on consumption rebalances the composition of the tax structure towards a figure underdeveloped compared to our EU partners and more neutral with regard to long-term growth, especially when accompanied, as the Government intends, by a gradual reduction of Social Security contributions from 2013. On the expenditure side, this has also been the main criterion around which the design of the measures has gravitated. The incidence has been borne especially by those expenses that are more superfluous or have weaker effects on the incentives of economic agents. In this line, one must situate the bonuses for hiring in Social Security contributions (which have lost relevance in the context of the new measures introduced by the last labor market reform) or the unemployment benefit model. The tax deductions in the Personal Income Tax (IRPF) for housing, after having been useful in a year of special weakness in housing demand, are also eliminated in 2013 in a horizon of gradual recovery of the fundamental variables of this type of expenditure. From a general perspective, these measures comply with much of the Specific Recommendations formulated by the European Council to Spain in June and as a climax to the European Semester: expansion of the main tax bases, elimination of deductions and exemptions, and partial substitution of taxation on work by indirect taxation. On the other hand, all these measures, along with others planned to be adopted in the medium term, will be incorporated into the Biennial Budget that Spain will present to the European Commission during the summer of 2012, which constitutes another of the specific recommendations made to Spain in fiscal matters. This budget will represent, moreover, a strategic document of first order where the temporal coherence of the measures with the path of the new Excessive Deficit Recommendation for Spain and the
macroeconomic framework associated with the new growth projections will be made evident. The structural measures accompanying this fiscal package are no less significant. All of them aim ultimately to open new markets to the private sector and promote the development of innovation and new services in sectors critical for productivity growth and the reduction of business costs. Finally, although no less important, the new steps in the field of professional services will facilitate the permeability of different market niches to new competitors and at the same time guarantee the quality of these services, reducing margins in segments traditionally less exposed to competition but nevertheless crucial for the configuration of costs in the exercise of business activity. II The current economic conjuncture and the need to reduce the public deficit without undermining the provision of essential public services make it necessary to improve the efficiency of Public Administrations in the use of public resources, with the object of contributing to the achievement of the inescapable objective of budgetary stability, derived from the constitutional and European Union framework. The Government has already adopted measures to contain personnel expenses. Thus, Royal Decree-Law 20/2011, of December 30, on urgent measures in budgetary, tax, and financial matters for the correction of the public deficit, establishes that in the year 2012, the remuneration of personnel serving the public sector will not experience any increase compared to those in force on December 31, 2011. Similarly, during the 2012 fiscal year, contributions to employment pension plans or collective insurance contracts that include coverage for the contingency of retirement will not be made. On the other hand, throughout the 2012 fiscal year, there will be no incorporation of new personnel, except that which may derive from the execution of selection processes corresponding to Public Employment Offers of previous years, a limitation that also extends to positions involved in employment consolidation processes provided for in the fourth transitional provision of the Basic Statute of the Public Employee, although the freeze on the public employment offer will not apply to certain sectors and administrations where the replacement rate is fixed at 10 percent. Furthermore, it sets the working hours of the state public sector at thirty-seven and a half hours of effective work per week on an annual average. Law 2/2012, of June 29, on the General State Budgets for the year 2012 emphasizes these same measures. Currently, the process of fiscal consolidation and sustainability of public accounts requires Public Administrations to continue adapting a series of extraordinary measures whose adoption must be urgent, aimed at rationalizing and reducing the personnel expenses of Public Administrations and increasing the efficiency of their management. The 2012 National Reform Programme is the framework in which
this process of modernization and rationalization of Public Administrations must be understood, as a complement to exclusively fiscal adjustments and the reduction of administrative structures. Measures must be adopted that save personnel expenses and increase the quality and productivity of public employment. Therefore, various measures are adopted that advance in the optimization of resources, the improvement in management and transparency of the Administration, and the increase in the productivity of public employees. It is therefore a matter of undertaking a series of reforms whose necessity is extraordinary, given the very nature of this crisis and its effects on the economy, the labor market, and Spanish finances, and urgent due to the speed with which structural reforms in our public employment system must be undertaken to contribute to reinforcing both the guarantee of compliance with the commitments acquired by Spain in matters of public expenditure and deficit and the improvement of efficiency, productivity, and competitiveness of our economy. These are measures that must be adopted jointly to offer a structural and coherent change that allows, viewed in its entirety, the satisfaction of the mentioned objectives of austerity and efficiency in Public Administrations. Many of these measures are included in the 2012-2014 Economic-Financial Rebalancing Plans of the Autonomous Communities approved within the Fiscal and Financial Policy Council. This Royal Decree-Law adopts a series of measures that seek to achieve the indicated effects. On the other hand, part of these measures has a temporary character or is planned to be applied only when exceptional circumstances concur, their validity being subordinated to the persistence of the difficult current economic conjuncture affecting the sustainability of public accounts or to reasons of public interest making their application necessary in the future.

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No. 168 Saturday, July 14, 2012 Sec. I. Page 50430 First, the incompatibility of indemnity pensions, compensatory benefits, and similar perceptions received by certain former high-ranking officials of a basic nature is regulated on a basic level, with the object that this benefit is received only in the event that the former high-ranking official does not perform any other remunerated public or private activity.
The measure will apply to high-ranking officials of all Public Administrations, including those who provide their services in the public sector, understanding also as such the activity developed by the elective members of the General Courts, Autonomous Legislative Assemblies, and Local Corporations, constitutional bodies, including the Judiciary and the Public Prosecutor's Office.
The extraordinary payment for the month of December and the additional payment for specific complement or equivalent additional payments for the month of December are suppressed during the year 2012. The amounts derived from this suppression may be destined in future years to make contributions to pension plans or collective insurance contracts that include the contingency of retirement, provided that compliance with the budgetary stability objectives established in Organic Law 2/2012, on Budgetary Stability and Financial Sustainability, is foreseen and in the terms and with the scope determined in the corresponding budget laws. It is also made possible, in this case with an exceptional character, the suspension or modification of collective agreements and agreements affecting labor personnel, only when a serious cause of public interest derived from a substantial alteration of economic circumstances concur. This mechanism was already provided for in the Basic Statute of the Public Employee, and the modification now introduced merely clarifies its scope of application and homogenizes its treatment, regardless of whether the agreements have been adopted within the scope of general negotiation tables or through the collective negotiation of labor personnel. In any case, it will be understood, among other causes or circumstances, that a serious cause of public interest derived from the substantial alteration of economic circumstances concur when Public Administrations must adopt adjustment measures or plans, rebalancing of public accounts, or economic-financial character to ensure budgetary stability or the correction of the public deficit. The days of free disposition are reduced. In addition, additional days for seniority are suppressed both in the case of vacations and in the case of days for personal matters, and pacts and agreements that contradict these provisions are suspended. The regime of permits is also homogenized for all Public Administrations. With the same purpose of rationalizing personnel expenses, the number of days for personal matters and additional days to those of free disposition that Public Administrations may have established is limited, and measures with the same purpose are adopted regarding labor personnel, as well as regarding vacations. Similarly, in matters of paid time to perform union and representation functions, appointment of union delegates, dispensations from work attendance, and other union rights, the currently existing ones are limited to those strictly provided for by labor regulations, favoring the increase of working times dedicated directly to public service. The remuneration regime of personnel included in the General Regime of Social Security during the situation of temporary incapacity is temporarily modified, without prejudice to the fact that a mandate is established directed to Public Administrations to adopt measures to reduce the absenteeism of their personnel. Thus, each Public Administration
will determine, with respect to personnel at its service, the remuneration complements that correspond in the concept of voluntary improvement of the protective action of Social Security in situations of temporary incapacity. In any case, when it concerns a temporary incapacity due to common contingencies, during the first three days, both for civil service personnel included in the General Regime of Social Security and for labor personnel, the remuneration complement that with the character of voluntary improvement can be established will not exceed fifty percent of the remunerations. Likewise, from the fourth day of the situation of temporary incapacity due to common contingencies and until the twentieth, both inclusive, the remuneration complement that with the character of voluntary improvement can be established will not exceed seventy-five percent of the remunerations. In these same terms, the full remuneration of the economic benefit of personnel integrated into the Regime of Civil Servants of the State and personnel integrated into the special social security regime of the armed forces is modulated, in case of temporary incapacity. On the other hand, a series of measures for the rationalization of personnel expenses of the General State Administration are adopted. In this line, a Register of bodies representing personnel serving the General State Administration is created, and the Ministry of Finance and Public Administrations is enabled to adopt measures aimed at guaranteeing an efficient allocation of human resources. Similarly, in compliance with the National Reform Programme, the conditions of access and permanence in the situation of temporary incapacity of civil servants are modulated, with the objective of reducing costs and impairment of productivity derived from the same. The age of forced retirement of civil servants included in the General Regime of Social Security will be that provided at each moment by the regulations governing said regime for access to the ordinary retirement pension, in its contributory modality, that is, without a reducing coefficient due to age. The structural change that this range of measures introduces in Public Administrations, which must operate jointly, constitutes a fundamental instrument of economic policy, which will allow improving their functioning, adapting them more effectively to the current conjuncture, and maintaining the quality of the service provided to the citizen. The measures included in this Title represent a sacrifice of special intensity for all those who receive remuneration from public resources. Reasons of Justice justify that these measures extend to all public servants regardless of the nature of the entity from which they depend and their statute. The universality that underpins this reform avoids discrimination between groups and sectors. Therefore, based on the principle of necessary solidarity that must prevail in these moments in all social and political spheres and in
order to share the effort that the measures established in this Royal Decree-Law represent for the collective of public employees of all Administrations in its broadest sense, it is the will of the legislator to promote all existing legal mechanisms to allow the extension of the aforementioned measures both to deputies and senators, as well as to personnel of other constitutional bodies, applying, where necessary and when necessary, the regulations governing them in matters of remuneration. In compliance with what is provided in article 37.1 of the EBEP, the measures included in Title I of this Royal Decree-Law have been brought for negotiation to the General Negotiation Table of Public Administrations and to the General Negotiation Table of the General State Administration. III In matters of Social Security, the Royal Decree-Law includes two measures for the simplification and improvement of its management regime, and its homogenization with the tax regime. The modification of the surcharge regime included aims to favor the application of the procedure for the deferral of payment of contributions against the previously progressive surcharge system, since deferrals are granted considering the existence of temporary cash flow difficulties, which offers both the Administration and the subject responsible for fulfilling the obligation to contribute a way of solution with greater flexibility and guarantee. This favors that whoever has temporary cash flow difficulties for the payment of the contribution can resort to the means of regularization of the debt established reglamentarily, instead of remaining in a situation of non-compliance with their obligations with Social Security. On the other hand, the measure implies a simplification of the system, something that would have a positive repercussion on administrative management. On the other hand, the regulation of the bases of contribution of workers for hire and the concepts included for the purposes of the levy of the Personal Income Tax is included, respectively, in article 109 of the consolidated text of the General Law of Social Security, developed by article 23 of the General Regulation on contribution and liquidation of other rights of Social Security, and in Law 35/2006, on the Personal Income Tax. However, a series of differences between both regimes persist unjustifiably that must be corrected with the objective of homogenizing the legislation in matters of tax and Social Security, so that those concepts that are considered as income in tax legislation, and as such taxed for IRPF purposes, are also included in the contribution base. It lacks foundation that the same concepts have a different legal consideration in different areas of current legislation. The measure contributes to simplifying and homogenizing the system, freeing companies from administrative burdens. The limits established in the current regulation with respect to the concepts excluded from the contribution base are also
modified. The current limits allow a use of them that contravenes the sense of the exemption to the detriment of Social Security. Therefore, a maximum cap of the concepts that can be the object of exclusion from the contribution base is established, with respect to the set of salary perceptions that individually considered are excluded totally or partially. Said maximum cap must be determined reglamentarily by the Government.

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