State Budget for 2024 invests in boosting household incomes

At a press conference in the Ministry of Finance, shortly after delivering the State Budget for 2024 in Parliament, Fernando Medina underlined that the public accounts for next year are based on "three fundamental pillars" and went through the main measures of each of these pillars:

Boost Portuguese household incomes: wage rises, income tax cuts

On this first pillar, Fernando Medina stressed the wage rises for next year, particularly the "historical rise in the minimum wage to 820 euros". This amount is the outcome of reinforcing the Agreement on Income, Wages, and Competitiveness with the social partners signed last Saturday, and which also envisages a 5% benchmark rise in the private sector. Still on wages, Fernando Medina likewise underlined the "boost in salaries for civil servants".

The minimum subsistence benchmark will also be boosted, and the minimum wage will remain exempt from tax. 

As for pensioners, the Minister of Finance noted the update in pension rates for next year, with a 6,2% rise, "significantly above" inflation recorded in 2023 and expected for 2024 - the "greatest rise since we’ve had a formula for updating pension rates". 

In addition to the wages increases, the State Budget sets for next year a cut in income tax, a measure with "an impact across the board", focusing on middle class households, which is expressed in a "reduction in the tax rates up to the fifth tax bracket". To this measure we add the updating of the thresholds of the brackets at 3%.

The Minister of Finance shared practical cases to illustrate the effect of changes to income tax: a worker without persons dependent on them, with a 1300-euro wage, will pay 334 euros less tax when compared to 2023; a couple with two children and with joint income of 2000 euros per month will save 361 euros; a pensioner with a pension of 860 euros/month will gain 403 euros. 

The changes to income tax also extend to Youth Income Tax, with added tax waivers and broadened thresholds: young workers will have a 100% tax waiver in their first year working (with income up to the maximum of 40 times the Social Benefit index rate), 75% in the second year (30 times the index rate), 50% in the third and fourth years (with a maximum of 20 the index rate) and 25% in the fifth (ten times the index rate). A "powerful tool to enhance and boost" wages for younger people, Fernando Medina underlined.

The 2024 State Budget brings other novelties, namely with regard to family benefits:

• Expanding free kindergartens, which will reach around 120 thousand children.

• Strengthening the Solidary Complement for the Elderly, with a rise of 62.45 euros, which brings the goal to converge with the poverty threshold forward by two years. 

• Strengthening the Social Insertion Income, with a monthly rise of 28 euros.

Reinforce investment in public and private initiative

On this second pillar, Fernando Medina noted the investment in sectors such as the National Health Service, housing, or education. In the case of health, for instance, the State Budget transfers will increase 10% next year – that is, 1.209 billion euros, now reaching 13.5 billion euros. A "72% rise on 2015", Fernando Medina stressed. 

On the chapter or private initiative investment, the Minister of Finance underlined the boost in the incentive for company capitalising, reverting a logic that benefited those who invested with third party capital rather than equity.

Protecting the future

On the third pillar, Fernando Medina recalled that "we are working for the current, yet also future, generations", underlining that "we must have the lucidity to understand the challenges posed in the future". 

On this chapter, the Minister charged with Finance indicated as the main points the extraordinary boost of the Social Security Financial Stabilisation Fund, the creation of a structural investment fund and continuing the public debt reduction strategy, noting that "next year already we will be able to have public debt lower than 100% of GDP."

View here the 2024 State Budget.