Bank of Italy, with the Irpef reform, family income will rise by 1.5% in 2024

In a hearing before the Budget commissions of the Chamber and Senate, the deputy head of the Economy department Andrea Brandolini quantifies average increases in family income at around 600 euros per year with benefits for almost three out of four families. Palazzo Koch confirms GDP at +0.7% for this year and +0.8% for 2024

The reform of Irpef contribution rates will increase family income by 1.5% starting next year. Bank of Italy claims this during the hearing on the 2024 budget before the joint budget commissions of the Chamber and Senate. The deputy head of the Economics and Statistics department Andrea Brandolini estimates benefits for “almost three out of four families”, quantifying the average increase of 600 euros per year. “The increase is attributable for two thirds to the exemption from contributions, for the remaining part to the changes to the Irpef”, he specified. “Families between the second and sixth tenth of the distribution of equivalent disposable income would benefit from the largest income increases (up to 2.3%). The increases would be more contained in the highest income tenths of the distribution. The interventions would contribute to a slight reduction in the inequality of equivalent disposable incomes (the Gini index would decrease by 0.3 percentage points)”. “The measures under discussion would be reflected in the monetary incentives of individuals and could change the behavior of some of them. For all taxpayers with income from work, the effective marginal rates would be reduced on average by almost 3 percentage points. At the same time, would accentuate the irregularities in their progress in proximity to two income thresholds. As a result of the decontribution – he explained -, the profile of the new effective marginal rates would show a first peak for employees with annual incomes of around 25,000 euros and a second peak, more marked, around 35,000 euros: in the latter case, many taxpayers would be subject to marginal rates higher than 100 percent”.

Bank of Italy: “Debt creates vulnerability”

On the reduction of the ratio between public debt and GDP, the Via Nazionale institute predicts a slowdown for the next three years: “The decision to implement an expansionary measure, associated with a privatization plan, implies a marginal decline in the three-year period”, so Brandolini at the hearing on the budget measure.

“On the wedge you need orientation, risk of deviations”

“The contribution relief, the item that absorbs the most resources in the current budget, has a transitory nature, as in the last two years, with an impact limited to next year. To avoid having to resort to sudden increases in contribution rates or new deviations in a year’s time budget, it seems appropriate to define the orientation for the medium term in the coming months”, said Brandolini.

GDP 2023 at +0.7% in a context of “high uncertainty”

During the hearing in Parliament, Bankitalia confirmed the phase of weakness of the Italian economy for which it estimates a growth in gross domestic product of +0.7% for this year. According to Bankitalia, the situation of “high uncertainty” caused by the conflict in the Middle East and the tightening of financing conditions risk jeopardizing the achievement of Nadef’s objectives. “On growth, our forecasts are slightly lower than those given by the government: 0.7% for 2023 and 0.8% for 2024. These are the ones we made in October and which, despite the latest information, we still do not deny “, Brandolini then said in response to a question. “Our multipliers correspond to the estimate given for this measure, it is an expansion linked to the spending possibility of a part of the medium-low and even medium incomes. Therefore from the impact it could have”, Brandolini replied again to those who asked him for him to speak of an “expansive” maneuver.

Bank of Italy: health spending as a percentage of GDP will fall below pre-Covid average

“The trends illustrated in the Nadef and the increase in funding for the National Health Service indicate that public health spending in relation to GDP over the next three years would gradually decrease, below the average level in the five years preceding the pandemic (6.5%)” , says Bank of Italy. “Looking ahead, the aging of the Italian population, among the most pronounced in the world, and the associated spread of chronic pathologies will generate further pressure for an increase in the public provision of healthcare services”, he observed. “According to the available evidence, the strengthening of local medicine, i.e. the provision of services outside hospitals by general practitioners and paediatricians, clinics and consultants, could have a favorable impact on the health conditions of the most fragile population and on the overall costs of public health. This evolution – added Brandolini – is one of the priority lines of intervention in the Pnrr mission dedicated to health”.

Bank of Italy: achievable spending cuts but select measures

“Compared to the amount of primary spending (over 1,000 billion in 2022), the size of the cuts ordered by the budget appears achievable. If they are carried out using in-depth analyses, which select the measures on the basis of effectiveness and improve their efficiency, they will not be detrimental to the quality of public intervention”, explains the deputy head of the Economics and Statistics department of Bank of Italy.

Bank of Italy: with PA resources +5.8% average salaries when fully operational

“Overall, according to official documents, the funds” for public employment, “including those already provided for by current legislation, would be consistent with an increase in average wages per capita of 5.8% when fully operational”, Brandolini said at the hearing . “The bill provides for a similar increase to also be provided for staff not belonging to the state sector. As always, the respective administrations will have to find the necessary resources within their budgets (officially estimated at 4.5 billion when fully operational) “, he added.