Catalan Government presents its 2015 budget bill without a guaranteed parliamentary support

Barcelona (ACN).- The Government of Catalonia presented on Tuesday its budget proposal for 2015, which needs a spending of €22.48 billion but it only has €19.98 billion of revenue available. The Catalan Finance Minister, Andreu Mas-Colell, insisted that spending cannot be further reduced since no further budget cuts can be implemented without seriously damaging public services. In fact, the current budget keeps social spending levels of 2014, which represent 71.2% of the total budget for 2015. Non financial spending increases by 4.2% compared to 2014, mostly to fund the initiative to restore public employees' full salary, after it had been lowered by 7.1% for the last 3 years, while in the Spanish Government's public employees are receiving their entire salary. The 2015 budget posts an allowed 0.7% deficit, which represents €1.44 billion, meeting the deficit target unilaterally imposed by the Spanish Government. However, there is a €2.5 billion difference between spending and revenue that should be covered with €317 million from further privatisations and €2.19 billion from Spanish Government's pending debts and compensations. On top of this, Mas-Colell does not rule out the possibility of being granted a higher deficit target than 0.7% of Catalonia’s GDP, since the current one is "unfair", as it is not in line with the Catalan Government's spending responsibilities and austerity measures already adopted. Furthermore, revenue from the Spanish Government's funding scheme has been reduced by 10.7% between 2013 and 2015, a reduction of €2.02 billion, despite the fact that Prime Minister Rajoy will decrease taxes next year. However, despite having filed the budget proposal at the Catalan Parliament, the Catalan Government does not have enough guaranteed votes to pass the bill and will have to negotiate during the coming weeks.

The Catalan Government has filed the budget proposal at the Catalan Parliament but right now it does not have enough parliamentary support to pass the bill. The governing centre-right pro-Catalan State coalition CiU has 50 MPs, while the absolute majority is 68. The second largest group, the left-wing Catalan independence party ERC has 21 MPs and it shared a parliamentary stability agreement with the CiU until last October. However, after the President of the Catalan Government, Artur Mas, launched November 9's alternative participatory process to substitute the original consultation vote on independence that had been suspended by the Constitutional Court, the ERC stopped backing Mas, although they finally supported November 9's symbolic vote. This means they stopped backing the budget for 2015. In addition, the ERC stated that the budget for next year should be that of a state and not that of a Spanish Autonomous Community government, since early elections are likely to happen in the coming months, transformed into a ‘de facto’ referendum on independence.

Not enough parliamentary support so far

On Tuesday, the CiU announced they will negotiate with the ERC and the Catalan Socialist Party (PSC) – which has 20 MPs – to pass the Parliament’s first filter, which is the vote on the amendments to withdraw the bill. The PSC told a few weeks ago they were willing to negotiate the new budget if the CiU was putting aside its self-determination agenda and was willing to reach agreements on other areas. However the Catalan President is not willing to block self-determination demands. Now, the PSC is refusing the back the budget and they announced they would ask for its withdrawal since the new accounts “are full of fantasy”. 

The ERC stated on Tuesday that they would not vote for an entire new budget but they could envisage backing an extension of the current accounts, which would include a few amendments. However, they demand a clear commitment about calling early elections before giving their support.

The Spanish nationalist People’s Party, which runs the Spanish Government confirmed they will totally oppose the new budget, which is “unrealistic” and “fictitious”. They also said that the Catalan President, Artur Mas, is “a good organiser of demonstrations and vote simulations”, but “an awful manager”. The Spanish nationalist and populist party Ciutadans (C’s) stated that the new budget will be useless “if Mas is successful in its pro-independence journey”. C’s announced they will ask for the withdrawal of the bill, since many items are a fiction.

The Catalan green socialist and post-communist coalition ICV-EUiA also stated they will totally oppose the new budget since it prolongs “social injustice and budget cuts”. However, they asked for guarantees that public employees will finally have their full salary restored even if the budget is not approved. The alternative left and radical independence party CUP totally opposed the new budget because it is “a fiction”. They also criticised the Catalan Government for not prioritising building the new structures of the new Catalan State in the 2015 accounts.

Spending cannot be further reduced

On Tuesday, Mas-Colell explained the difficulties to match spending and revenue in the 2015 budget. He particularly insisted that the Catalan Government cannot undertake additional budget cuts without seriously damaging public services, since spending per inhabitant has been reduced to levels from 10 years ago. Furthermore, it has already gone through intense privatisation processes and therefore its room for manoeuvre in this area is limited. Additionally, the Catalan Government has used its limited taxation powers to raise taxes, which cannot be increased at a higher level in order not to damage the economic recovery and also for legal reasons, since the Catalan Executive's taxation powers are very limited. In fact, Catalonia already has the highest fiscal pressure in Spain and it cannot increase more without damaging its competitiveness compared to other areas within Spain. 

Therefore, according to Mas-Colell, the most feasible and the best way to balance revenue and spending is to claim pending debts to the Spanish Government and to ask for a fairer deficit target. The 3 main pending items are the €635 million from the Catalan tax on bank deposits that was suspended by the Spanish Executive and pending transfers from 2008 and 2011 that the current Spanish Cabinet refuses to pay. These transfers are €789 million from the Competitiveness Fund, which the People’s Party refused to pay despite it was part of the inter-territorial funding scheme, and €759 million from the legal compensation for non-built infrastructures, which was a temporary legal measure to be implemented between 2007 and 2013 to compensate for an historical lack of investment. The PP refused to pay it since it was a commitment from the previous Spanish Government, despite there being a law from the Spanish Parliament obliging them to do so.

On top of this, Mas-Colell stressed that the funds from the Catalan Government's funding scheme have been reduced by the Spanish Executive by €2.02 billion between 2013 and 2015; a 10.7% reduction despite the economic recovery of this year and the next one. In fact, the Catalan Minister has accused the Spanish Government of not sharing the positive effects of the economic recovery and instead of asphyxiating the Autonomous Community governments, imposing higher deficit targets and reducing their funds to recentralise powers. Furthermore, the Spanish Government's higher revenue from additional taxation has not been shared with the Autonomous Communities, which on the contrary had to pay higher taxes. 

Catalonia has undertaken a great budget adjustment since 2010

Mas-Colell insisted on the fact that the Catalan Government has undertaken the most important budget adjustment in Spain since 2010, Catalonia had a 9.1 billion deficit in 2010 representing 4.53% of its GDP and in 2015 it will post a 1.44 billion deficit, representing a 0.7% deficit. This represents a deficit reduction of 84.2%, equivalent to €7.66 billion. Furthermore, without taking into account financial interests, Catalonia would post €273 million of budget surplus in 2015, representing a 0.13% surplus. In 2010, such a deficit without financial interests reached €8.18 billion, equivalent to 4.08% of Catalonia GDP. Therefore, in 5 years, the Catalan Government will have had structural deficit by 103%, transforming it into a 273 million budget surplus.

Furthermore, the Catalan Government is directly responsible for 15.12% of Spain's total deficit reduction since 2010 despite it only manages 5.49% of the country's public money. The Spanish Government reduced its spending per capita by €113 between 2010 and 2013, while the Catalan Executive reduced it by €694 in the same period. In fact, the Catalan Government’s spending decreased by €5.24 billion in that period while that of the entire Spanish Government only decreased by €5.28 billion. The Spanish Government is responsible for more than 50% of Spain’s total public spending, despite it does not run the basic Welfare State policies, with the exception of the pensions and unemployment benefits. The Catalan Government exclusively manages healthcare, education (also at university level), social policies, prisons, police (except border control, anti-terrorism and international crime), judicial offices, agricultural policies, employment promotion and cultural policies, among others.