Budget bill: Cabinet meeting today. The League’s proposal on retirement at 64 has been scrapped. Agreement reached on the 5 billion from the banks

The Council of Ministers is due to meet this afternoon at 3 pm to finalise the next Budget Bill, the last under the Meloni government. Following days of negotiations between the majority parties, a draft has been tabled that seeks to reconcile tax cuts for the middle class, incentives for youth employment, support for families and, above all, the funding required to finance these measures. The total value of the Budget Bill is expected to be around 23.5 billion euros, with the possibility of rising to 25 billion. One of the most sensitive political issues – the contribution sought from banks and insurance companies – appears to have been resolved: Economy Minister Giancarlo Giorgetti says an agreement has been reached within the majority, whilst discussions with the financial institutions will take place at a later date.

The contribution from the banking and insurance sector is expected to provide nearly 5 billion euros, one of the main sources of funding for the budget. This has been achieved despite opposition from Forza Italia, which is against new levies on credit institutions. Among the options still under consideration is an exemption for community banks and small local institutions. In addition to the funds from the financial sector, there is also expected to be a contribution from energy companies.

On the issue of pensions, however, the Lega did not achieve the result it sought. The proposal to lower the retirement age to 64 has not been approved, but in its place a fund for pension flexibility is to be established, to come into effect next year. The Carroccio could, however, claim a victory on the tax front, with the reinstatement of the ‘rottamazione quater’ and ‘rottamazione quinquies’ schemes, which have also been extended to include tax demands arising from tax assessments.

On the tax front, the main measure concerns personal income tax (IRPEF) and the middle class. The latest draft proposes extending the 33 per cent tax rate to cover income up to 55,000 euros, compared with the current 50,000. In previous weeks, there had been discussion of the possibility of raising the threshold to 60,000 euros, but the cost of the measure, estimated at 2.7 billion per year, would have placed an excessive burden on the public purse. The solution identified therefore reduces the number of beneficiaries and halves the tax benefit compared with the approximately 1,000 euros initially envisaged. For those on lower incomes, however, there are plans to exempt the thirteenth-month bonus from tax, with a reduced rate that could be set at 10 or 15 per cent.

One section of the budget is dedicated to young people and employment. The most significant measure is a 5 per cent flat tax for new recruits under the age of 35 on permanent contracts, up to an income threshold yet to be defined, provisionally between 30,000 and 35,000 euros. For those under 30, a ‘mini-Irpef’ is also being considered, whilst among the options under discussion is the extension of the tax-free allowance for those under 25. Incentives for workers would be accompanied by those for businesses: an increased deduction on labour costs, of between 130 and 140 per cent, for the recruitment of those under 35, which could rise to 180 per cent in the case of working mothers. The 5 per cent tax rate on pay rises resulting from contract renewals has also been confirmed.

Changes are also on the way for the self-employed. The revenue threshold for qualifying for the flat tax is set to rise from the current 85,000 to 100,000 euros, but with a compromise: above 85,000 euros, there would be an obligation to charge VAT. On the property front, Fratelli d’Italia’s proposal to introduce a flat-rate tax on shop rents is gaining ground, with a rate of 21 per cent that would fall to 10 per cent in metropolitan centres.

For families, there are plans to extend the ‘mums’ bonus’ and provide new funding for nurseries.

There is also the extension of the motor vehicle tax exemption to vehicles up to 133 kilowatts, though this is reserved for households with at least four children. Meanwhile, a proposal from Forza Italia on healthcare remains under discussion: a card worth between 300 and 500 euros for people aged over 75 on low incomes, to be used for dental treatment, prosthetics, consultations and tests not covered by the public health service, and for paying prescription charges. The ISEE threshold for eligibility is yet to be defined. There are, however, no plans to increase the Health Fund beyond the one billion euros already allocated.

Among other measures is a 480 million fund for recruitment and pensions for law enforcement officers. Just today, the military trade unions requested an urgent meeting with Prime Minister Giorgia Meloni to ask for more resources. For the agricultural sector, meanwhile, the possibility of using resources from the Common Agricultural Policy to mitigate the impact of fuel costs on businesses is being considered.

These political agreements must be finalised by the end of today. A number of income thresholds, the actual scope of the tax relief measures and, above all, the arrangements for the contributions required from the banking and energy sectors still need to be clarified. The majority is presenting a compromise to the Council of Ministers that distributes measures and outcomes amongst the parties: the IRPEF cut and incentives for recruitment, the tax amnesties requested by the Lega, the property tax relief supported by Fratelli d’Italia, and the social measures proposed by Forza Italia. All this within a financial framework that leaves little room for further demands.