As if it were a self-fulfilling prophecy, the Fiscal Authority (Airef) has warned of an unprecedented increase in public spending by some of the largest local corporations in the country. Among the Spanish cities of Madrid and Barcelona, to the rest of other new entities: Alicante, Córdoba, Palma, Valladolid, the councils of Valencia and Seville, the Cabildo Insular de Tenerife, the Consell de Mallorca and the Provincial Council of Gipuzkoa . The independent, in a study published this Thursday, recommends these entities carry out a “structural analysis” of their disbursements since 2019 and, above all, avoid new increases that are not backed by permanent financing.
The two recommendations are contained in the Complementary report of individual evaluation of the Budgets for 2023 of the Local Corporations, in which Airef analyzes the accounts of the 24 largest entities in the country —the 16 municipalities with more than 250,000 inhabitants, the five councils with the largest budgets, and the three provincial ones— and concludes that, on average, they have increased their spending computable in 2022 and 9.4%. This unprecedented figure is added to the increase of 7.2% the previous year and the rise of 4.7% in 2020. Since 2019, the rebound has been almost 23%.
“The growth of 2022 is especially relevant and above average in the municipalities of Alicante, Madrid, Valladolid and Vigo, the Provincial Council of Bizkaia and the Consell de Mallorca”, in addition to the Island Council of Tenerife, where it has been 40 %, specify the report. It is followed by a great distance, with an increase in disbursements of around 15%, Alicante, Valladolid and Vigo. In 2021, the largest increase was recorded by the Seville Provincial Council: therefore, computable spending grew by 137%.
Airef details that these results are mainly due to the expansion of current spending, recurring disbursements that, if stabilized at these levels, would imply a “deterioration of the balance of large local corporations and a risk to sustainability.” In addition, it occurs in a period that is as turbulent as it is delicate for public finances, with fiscal rules suspended since the outbreak of the pandemic in 2020. Instead, the Government has set reference rates that are not mandatory. With these wickerwork, the institution led by Cristina Herrero —like organizations such as the Bank of Spain— said from the outset that this paralysis and economic uncertainty made it even more necessary to design a medium-term fiscal strategy, a recommendation that the Treasury has unheeded
“In the current context of the absence of fiscal rules, the growth in computable spending observed in large local corporations, close on an annual average to 7% since 2020, are much higher than those allowed in years of existence of fiscal objectives,” says the Responsible for overseeing public accounts. In 2022, the municipalities have more buckets of 1,500 million disbursements with savings obtained in previous years. He decides, resources that are not tied to a permanent source of financing.
“Therefore, Airef recommends those local corporations that have registered higher spending increases in past years to avoid spending increases or revenue reductions of a structural nature whose permanent financing is not guaranteed, and to carry out an analysis of the structural nature of the increase in spending registered since 2019”, he concludes in his report.
forecasts
The companies that are part of the study have cut almost 80% of their surplus between 2018 and 2022, equivalent to about 1,900 million. This year, the figure will rise to 90%. In the case of Las Palmas, Madrid, Valencia and the Seville Provincial Council, the reduction in positive balances has been more than 10 points in the same period. With a view to 2023, Airef forecasts that Barcelona, Madrid, Valladolid and the Seville Provincial Council will incur a deficit, filtering out the effect of the liquidations of the 2020 financing system. If it is included —this year the impact will be positive—, They will only have Barcelona and Seville Provincial Numbers.
The body has also published this Thursday the particular reports on the budgets of the communities for the year 2023, in which it estimates a deficit of 0.3% of GDP for all the autonomies. The percentage is similar to the reference rate set by the Treasury, but two tenths higher than the entity’s previous estimate, due to the worst closing of 2022. Only four communities will end the year with a gap between income and expenses greater than 0.3 %: Castilla-La Mancha, Catalonia, Murcia and the Valencian Community.
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