The government of Luiz Inácio Lula da Silva (PT) has been promising for more than a month to present a spending cut package. The set of measures can finally be announced this Wednesday (27), when a statement by the Minister of Finance, Fernando Haddad, was scheduled. The minister will speak for just over 7 minutes on radio and television from 8:30 pm.
The expense containment package, considered unpopular, may be accompanied by the announcement of a benefit: the R$5,000 exemption from Income Tax, a campaign promise from Lula, to be counterbalanced by an increase in taxation of the richest. The rumor went down badly in the financial market: around 4pm, the B3 – Brazilian Stock Exchange – fell 1.3% and the dollar rose almost 2%, quoted at R$ 5.92.
Initially, the spending cut proposal would be taken to President Lula and announced shortly after the second round of municipal elections, held on October 27th. The announcement, however, was successively postponed.
Several measures have been aired in recent weeks, and some of them have been publicly discarded. It is unlikely, for example, that there will be a change in the constitutional minimum for health spending, while education may have a new calculation method that reduces government disbursements.
Changes are expected in the rules of the salary bonus, the Continuous Payment Benefit (BPC) and the social protection system of the Armed Forces. The minimum wage adjustment formula may also change. A reduction in spending on unemployment insurance, signaled in the first discussions, appears to have lost momentum.
The Minister of Finance, Fernando Haddad, would have signaled to the Congress leadership and party leaders that the package should result in savings of R$25 billion to R$30 billion in 2025 and R$40 billion in 2026.
Check out the main points that may be included in the package below:
New formula for the minimum wage
The package may change the minimum wage adjustment criteria. Today it receives the pass-through of the previous year’s inflation plus the equivalent of the variation in the Gross Domestic Product (GDP) from two years before, which has guaranteed real increases of close to 3% per year. It is speculated that this real gain will be limited to something between 0.6% and 2.5%, following the growth range authorized for all expenses governed by the fiscal framework.
New rule for salary bonus
A type of “14th salary” for workers in the private sector governed by the CLT, the salary bonus may have a change in the access rule within the spending cut package that will be announced by Haddad.
Today the value of the bonus is up to one minimum wage, and the benefit is paid to those who received remuneration of up to two minimum wages in the base year, with payment proportional to the number of months worked. The idea debated in the government is that only those who had a monthly salary of up to 1.5 minimum wages in the base year can receive the bonus.
Cutting spending on the Continuous Payment Benefit (BPC)
The BPC is paid to people aged 65 or over or with disabilities, with income below a quarter of the minimum wage – or, in exceptional cases, below half the minimum wage. In addition to the fine-tooth comb already carried out on expenses, which have increased significantly in recent years, the government intends to determine that the Judiciary, when analyzing BPC concession requests, also consider the informal incomes of those who intend to receive the benefit. The idea is to close loopholes that allow people with income above the permitted level, even if informal, to receive the BPC.
Cutting military spending: minimum age and other measures
The cost containment package may set a minimum age of 55 for soldiers to enter the paid reserve. Today the only criterion for this is a length of service of at least 35 years, with no minimum age requirement. It is also being studied to charge a contribution of 3.5% to the military health fund.
Calculations of think tank Center for Public Leadership (CLP) indicate that the savings generated by the minimum age of 55 tend to be small, R$12 million in 2025. The contribution to health, in turn, could generate revenue of R$2 billion.
Another possible measure is the extinction of “fictitious death”, a situation in which family members receive a pension from a soldier expelled for a crime or serious infraction, as if he had died. The benefit, in this case, would be replaced by a type of confinement aid.
Finally, the government is considering limiting or preventing the reversal of pensions. Therefore, when a first-order beneficiary – a widow or child, for example – stops receiving the pension, it will no longer be possible to transfer it to a second-order beneficiary.
Fight against “super salaries”
The government has already indicated that it supports a limitation on civil servants’ “super salaries”. A bill like this has been awaiting evaluation by the Senate for three years. It is believed that it could generate savings of R$3 billion to R$4 billion per year. However, the Movimento Livres calculation questions this possibility. According to the think tankthe proposal allows 32 “penduricalhos” to continue to be received by employees, without impacting the constitutional ceiling.
New calculation of the education floor
The government intends to increase the amount of resources allocated to Fundeb (Fund for Maintenance and Development of Basic Education and Valorization of Education Professionals) that are accounted for within the constitutional minimum for education spending.
Today, 30% of the money that the federal government puts into Fundeb is counted towards meeting the education minimum. The idea is to increase this percentage, in order to reduce the disbursement necessary to meet the minimum.
Cut spending with a fine-toothed comb on social benefits
Some announcement of continuity or new version of the fine-tooth comb in social benefits is also expected, which seeks to remove people from the registers who are not entitled to receive them. These programs had results below what was promised in 2024.
Blocking parliamentary amendments
The government even leaked to the press the idea of allowing a temporary blocking of parliamentary amendments – by rapporteur, individual and bench – as a way of expanding the margin for fiscal adjustment in situations of need. The measure would probably have negative repercussions in Congress, and therefore its inclusion in the spending containment package is less likely than the other items.
“Bonus”: exemption of R$5,000 from Income Tax and higher taxation of the rich
To compensate for the expected negative reaction to the cut in social spending, there is speculation that the government may announce – together with the package – the expansion of the Income Tax exempt range to R$5,000. Today, the zero tax only applies to installments of up to R$2,259.20 per month. This benefit would be accompanied by an increase in the taxation of the richest taxpayers, in order to maintain the “neutrality” of total income tax collection.
