State budget 2027 reaches parliament with backing guaranteed by Socialist Party

The Government delivered the State Budget Bill for 2027 to parliament early on Thursday afternoon, two days before the deadline, after approving it that morning in the Council of Ministers. The document was handed over by the Minister of Finance, Joaquim Miranda Sarmento, to the Speaker of the Assembly of the Republic, José Pedro Aguiar-Branco. The third State Budget put forward by Luís Montenegro’s government is once again assured of approval thanks to the Socialist Party (PS).

The Socialist leader, José Luís Carneiro, announced last week that his party plans to abstain in the first reading vote, scheduled for 28 October, after the prime minister, Luís Montenegro, gave guarantees on four conditions set by the Socialists: a constitutional revision with a central role for PS and PSD, protection of current and future pensions, funding for investments left unfinished after the RRF, and support for the recovery of municipalities and regions hit by storms. The detailed debate and vote will take place between 29 October and 24 November, with the final overall vote scheduled for 24 November. The Communist Party (PCP) and the Left Bloc have already said they will vote against the Government’s proposal.

Chega has also threatened to vote it down (source in Portuguese)if the prime minister does not agree to lower the retirement age, and has tabled an additional demand: cutting VAT on fuel and introducing zero VAT on a basic basket of essential foodstuffs. Red lines the Government has already rejected. The other parties have yet to announce how they will vote. The President of the Republic, António José Seguro, said on Thursday that he expects a "fruitful debate" to improve people’s lives "at a very difficult time".

Speaking to journalists in parliament after meetings with the parties on the Budget proposal, the Finance Minister, Joaquim Miranda Sarmento, declined to say how much room there is for negotiation, and confirmed that the projected surplus for next year is between 0.1% and 0.2% of Gross Domestic Product (GDP). The Government estimates that the economic measures already adopted, which will continue to feed through into the public accounts in 2027, will have an impact of 4.8 billion euros next year, not yet counting any new policies that may be included in the next Budget. On the macroeconomic front, for next year the Government is forecasting economic growth of 2%, in line with recent years, along with an budget surplus of up to 0.2%.

Pensions, public sector wages and debt interest are among the main sources of pressure, alongside tax measures such as updating personal income tax brackets, cutting corporation tax and housing measures. The Finance Minister said that the 2027 Budget provides for a further cut in personal income tax, through updating tax brackets, specific deductions and the minimum subsistence threshold, mechanisms which by law must be adjusted. The PSD/CDS-PP government has decided to lower personal income tax rates from the 1st to the 6th bracket by between 0.3 and 0.5 percentage points, a measure with an estimated impact of 400 million euros which will already be reflected, in 2026, in withholding tax. The reduction will be 0.3 percentage points in the 1st bracket, 0.5 points from the 2nd to the 5th brackets and again 0.3 points in the 6th bracket. The Government also announced a 50-euro increase in the solidarity supplement for the elderly (CSI) in 2027, with the reference amount rising to 720 euros. The Government’s programme foresees this amount reaching 870 euros in 2029, up from the current 670 euros. The Budget also provides for a rise in the minimum wage from 920 to 970 euros.

The tripartite agreement on wage valorisation and economic growth for 2025-2028, signed in October 2024 between the Government, the four employers’ confederations and the UGT trade union, revised upwards the path for the national minimum wage. The agreement envisages rises of 50 euros a year, with the aim of reaching 1,020 euros in 2028. In the civil service, the multi-year agreement in force sets pay rises of 2.3% in 2027, with a minimum increase of 60.52 euros. If the increase laid down in the agreement goes ahead, the base salary in the public administration should rise to 995.51 euros in 2027.

The same agreement also provides for an increase in the meal allowance, currently set at 6.15 euros, of 15 cents a year through to 2029.