134,336 million euros are the ‘pinch’ for which the autonomous communities have been fighting for eight years due to the inability to reform the financing system, which has been in force since 2009 and expired since 2014. It is the great battle of politics Spanish since basic public services such as health, education or dependency, among others, depend on this model. It is a convoluted matter and one of the few, if not the only one, in which transversal alliances are woven between the PP and the PSOE.
Questions and answers about the devilish regional financing system that the Government wants to reform
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The renewal of the system devised by José Luis Rodríguez Zapatero has been fallow since it expired in 2014. The imminence of the general elections plunged the model into lethargy, given that 2016 was inefficient in executive terms due to electoral repetition due to the inability to form a government . In his investiture debate, Mariano Rajoy announced the convening of a Conference of Presidents to address the issue. In the resolutions of that meeting held in January 2017, Rajoy promised to promote a new financing system.
The work began then and the committee of experts delivered its conclusions to the Government in July of that year, but the escalation of tension in Catalonia that led to the unilateral declaration of independence bogged down the matter. At the beginning of 2018, the Executive took up the matter again due to pressure from the communities. There was an exchange of papers and Rajoy promised the then Andalusian president, Susana Díaz, to convene a Fiscal and Financial Policy Council (CPFF) to address the matter. The forecast was to do it in that month of May, but the motion of censure that catapulted Pedro Sánchez to Moncloa ended that plan.
The new head of the Executive quickly recognized that he could not carry out the reform of the system in that legislature and promised to promote some improvements before the elections. The general elections of April 2019 and the repetition of November once again left the financing in a drawer, despite being a commitment of all the parties and a flag of the candidates in places such as the Valencian Community or Andalusia.
Elections, Catalonia and the pandemic
The COVID-19 pandemic slipped into the plan of the Minister of Finance, María Jesús Montero, who promised to present a “first skeleton” in November 2020. She finally made a proposal in December 2021 with a new calculation of adjusted population, which determines the distribution of resources based on demographic, social or territorial circumstances. But there was no rapprochement on the part of the different communities, which are the protagonists of crossed alliances, leaving photos such as the socialist Ximo Puig hugging the conservative Juanma Moreno Bonilla or a quote from Adrián Barbón, Alberto Núñez Feijóo, when he presided over the Xunta, and Alfonso Fernández Mañueco next to the Cantabrian regionalist Miguel Ángel Revilla.
The debate divides Spain into three main fronts. On the one hand, Galicia, Asturias, Cantabria, La Rioja, Castilla y León, Extremadura, Castilla-La Mancha and Aragón –with similar characteristics due to depopulation, aging or extension– claim that these criteria have greater weight when defining the distribution principles. What these territories want is for the system to be based on the “effective cost” of providing public services.
The ‘rich’ and overcrowded communities such as Madrid, Catalonia or the Balearic Islands are more in favor of the principle of ordinality, that is, that the distribution is made based on the number of citizens and that there is a higher percentage of personal income tax transfer by the State. On a middle path are the Valencian Community, Andalusia and Murcia, which are committed to the concept of “adjusted population”, that is, weighing the population criterion with certain adjustments -aging, young population for educational needs or dispersion-.
In these eight years, patches have been put on the system and the communities have had extraordinary injections in recent times thanks to the funds to face the pandemic that the Government activated and to European projects; but there is still no established mechanism to order the income of the autonomies.
If it does not come out, there will be no fiscal harmonization
Eight months before the municipal and regional elections, the Government is working on a new proposal to refer to the communities, but assumes that there will be no agreement and largely blames the PP, which it sees as “incapable of having a model”. “What they say in Madrid is radically different from what they say in Andalusia or Castilla y León,” state government sources.
The Government has once again placed the regional financing system at the center of the debate by framing there the fiscal harmonization with which it intends to end “fiscal dumping” between the communities due to the elimination of taxes such as Patrimony, which reduces income of the autonomies, but it leads to “unfair competition” in the face of economic advantages for certain sectors. The intention of the PSOE is to establish a minimum for the taxation transferred to the communities, but some communities such as Madrid or Andalusia (with their recent announcement to remove Patrimony) have already anticipated a judicial war.
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