Reform of the funding model is absent from the campaign

The 23J elections are the fifth general elections in which the parties must write their proposals to reform the financing model that ended in 2014 in their electoral programs, and they did it again, but without any privacy. It is something that already happened in the regional elections in May and gave way to the general elections today when it was practically not in the debate. So much so that in the government agreements of various independent parliaments, finance reform is almost never shown.

It is the PSOE that devotes the most space to this issue in its platform for 23-J, and commits itself to approving “within a maximum of one year a new system of regional financing that will guarantee the necessary resources.” The proposal passes “a model based on the principles of equity, solidarity, financial autonomy, shared financial responsibility, financial sufficiency, and institutional loyalty.” The concrete idea they offer is that “the new paradigm will recognize the higher cost that certain variables—population, area, protected population, isolation…—cause in the provision of services”. PP is committed to negotiating with “all societies” on the basis of “sufficiency and sustainability” with “fair distribution”. It also proposes to abolish the Self-Liquidity Fund (FLA). Sumar asserts that he will promote “immediate reform” on the basis of ensuring adequate resources, strengthening autonomy and clarity of fiscal responsibility. Vox wants to “modify certain tax regulations to ensure the fundamental equality of Spaniards in transferable taxes”.

The Ministry of Finance submitted a proposal for distribution by population, which was rejected

It is necessary for the ERC to “demand a new financing system that ends the arbitrariness of the current financing system”. And from the Junts, the Junts are required to “apply the principle of normal order”, compensating the Generalitat for the insufficient resources it has suffered since 2014 and incorporating the “cost of living” variable into calculating the resource needs of each territory.

Despite these mentions in the programmes, the issue of the funding model has not been up for discussion for the past 15 days.

Experts believe that it is a process that should proceed from the communities towards the central government. not the opposite. Ana Herrero, a professor at UNED, warns that “Catalonia has always been the locomotive of funding and has been involved in other battles for some time now”. “If Catalonia makes no claims, most other communities feel comfortable,” adds the regional finance specialist.

Anthony Castells has led the recent change in the financing system

Anthony Castells led the recent change in the financing system as Minister of Economy of the Year for the PSC. “You don’t have to create a new model every five years. The model needs to be fixed, not reinvented,” says Castells. Why do you think reforming the model is not in the election campaign of the generals or in the programs of the parties? I do not know but it is no longer discussed in the regional campaign. “I think nothing will be done if Catalonia does not take the lead in the reform process,” Castells replies.

During the now-ending term of the legislature, the Ministry of Finance for the first time in recent history put forward a proposal to partially overhaul the financing system with a new modified population model. It was December 2021 and almost all communities found fault with that. This proposal was detrimental to Catalonia because it did not take into account the specification required of the Generalitat to include, for example, the cost-of-living variant with Junts restoration in its programme.

Regime change has a political cost

Resources are distributed according to population, but not as it appears in the record, rather it is ‘adjusted’ by a series of criteria such as the percentage of old, young, or immigrants and the size of the population’s dispersion. Society can receive an amount in excess of what corresponds exclusively to the number of residents. Or vice versa. In this way, it is a priori achieved to balance the distribution of resources according to real needs. The criteria for making this distribution are what the Ministry of Finance tried to change a few months ago. no avail.

After allocating resources, three funds are activated with a high degree of arbitrariness that seek to have all societies gain something compared to the previous model, benefiting the poorest as well as the richest.

Changing these rules means that there are more winners and losers, or more winners than not. A model in which everyone wins equally is not possible. For this reason, it is difficult to make an adjustment to the system because of the political cost that would be incurred on the losing societies or those that earn less. Most likely, we’ll have to wait for the next campaign.