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In late April 2003, the Spanish government presented a series of measures which focus mainly on cutting company costs and thereby seeking to promote employment. The measures include incentives to recruit women with children, changes to the social security scheme for self-employed workers, and lower taxes for small and medium-size enterprises and companies renting out housing.
On 25 April 2003, the the People's Party (Partido Popular, PP) presented proposals for a set of employment-related and company cost-cutting measures. The key points are as follows:
- measures on women's access to employment. The government feels that female unemployment is unacceptably high in many provinces, whereas the target of full male employment is being approached. It also wishes to avoid dissuading women from having children at a time when Spain has a low birth rate. It thus plans to have the state pay the full employers' social security contributions, for a period of one year, for women who return to work within 24 months of giving birth. In cases of women on temporary contracts that are converted into permanent ones, the period will be extended to 18 months;
- measures to promote rented housing. In order to increase the currently low supply of rented housing (ES0302106F) - which is having adverse effects on the labour market - the government proposes to reduce company tax on income from rented accommodation to 5% for newly-created companies that invest in property for rental, and on the capital gains obtained by selling property if it is reinvested in other property for rental, subject to a series of requirements;
- changes to the special social security system for self-employed workers. The government estimates that there are 3 million self-employed workers, who are covered by a specific social security system (ES0304106F). It plans the introduction of a special social security contribution for self-employed young people, at 75% of the current rate for workers under the age of 30. The government also proposes extending social security cover for temporary incapacity of self-employed workers, who will now receive benefit from the fourth day off work instead of the 16th day. This will affect all self-employed workers, whatever scheme they are covered by; and
- measures to support small and medium-size enterprises (SMEs). In the same way that it considers self-employed workers to be a motor of job creation, the government also thinks that SMEs are fundamental for the Spanish economy. Therefore, in addition to eliminating the municipal economic activities tax (Impuesto de Actividades Económicas, IAE), two further measures will be introduced. The first will create a 'company savings account', for which the amounts deposited may be deducted from personal income tax. These savings must be used to set up a company with at least one employee under the new category of the 'new firm company' (Sociedad Nueva Empresa). Furthermore, the threshold of turnover of SMEs to be covered by company tax will be raised from EUR 5 million to EUR 6 million, in addition to other incentives such as deductions for certain investments.
This package of measures has been put forward before the municipal elections to be held on 25 May 2003. The measures focus on: the social cohesion provided by the family; stimulating the economy and employment through small-scale private initiative; and dealing with the problem of housing by increasing the profitability of supply.
In summary, the government is continuing with its current line of 'flexible regulation', in which the tendency is to reduce the obstacles to, and costs of, private initiatives on the supply side, whilst avoiding any active demand-side policy or public sector intervention to stimulate the economy or increase social cohesion by reinforcing the welfare system. At a time of slowdown in growth and international economic problems, the government is placing its trust in the market to stimulate the economy and in the state to make markets profitable for private initiatives. However, critics state that it is not introducing expansive policies to fight the recession and to allow for the possibility of shrinking markets, and it is favouring the emergence of small companies that do not always have the minimum size required for economic viability.