Insufficient, but an improvement
BarcelonaThe Spanish government has announced the main lines of a new model of regional financing In general terms, this represents an improvement over the current system. However, it is not a profound structural reform nor a truly unique model for Catalonia, but rather an update with positive elements but also significant limitations. It is a general system for all the autonomous communities, with some optional features designed, to some extent, for the Catalan case, but applicable to other territories.
Among the positive aspects, it is worth highlighting, firstly, that the proposal partially corrects the underfunding suffered by the Mediterranean communities, which are the most disadvantaged by the current system. Catalonia, the Valencian Community, and the Balearic Islands would benefit from a distribution more closely aligned with their actual spending needs. In this sense, the new model seems to be moving in a more equitable direction. As expected, no community loses out, and almost all gain, although, also predictably, no one will thank us for Catalonia's poor fit for prompting action from the central government. Quite the opposite, in fact.
Also positive are some of the elements of autonomy and optionality introduced for the autonomous communities. The possibility of collecting a portion of VAT based on the specific performance of SMEs in each territory, the option to replace the transfer of non-homogeneous powers with an additional percentage of the same tax, or the creation of a potential climate fund could particularly benefit regions like Catalonia or the Valencian Community, with a significant presence of SMEs and high exposure to the challenges of the transition. Furthermore, the power to abandon the advance payment system and receive resources in sync with the central government is a measure that could improve the treasury management of regional finances.
Regarding the principle of ordinality, the new model appears to approach it, but without explicitly guaranteeing it. Ordinality does not appear as a premise of the system, nor does it seem to be enshrined in future legislation; rather, it appears as a possible outcome derived from the parameters used in calculating resources. This implies that if these parameters change in the future, the results may also vary. Lacking further information and the possibility of replicating the calculations in detail, it is prudent to avoid categorical statements.
Outstanding issues
Key issues remain unresolved, such as the management and collection of taxes generated in Catalonia—with personal income tax (IRPF) as the primary focus—in which the central government seems unwilling to cede real sovereignty beyond a "network management" model whose meaning is unclear, with limited participation from regional tax agencies. The role of the investment consortium with the central government also remains to be defined.
The special funding agreement reached at the beginning of the legislature between the PSC and ERC falls far short of this proposal. The paradigm shift envisioned then has not materialized, perhaps because expectations were too high. Not even sufficient progress has been made in transparency: Catalonia's contribution to territorial solidarity remains unclear. The new model is a step forward, but still insufficient.
It's important to remember that the regional financing system is only one part of Catalonia's fiscal deficit problem. Even in the best-case scenario, this reform would only address a limited portion. The country's strategic objective should be to reduce the fiscal deficit to more acceptable levels, comparable to those of the most recognized federal states, something this model does not guarantee.
However, we must ultimately undertake the inevitable political reflection stemming from this fragile situation and the historical moment we are living through. The road ahead will be fraught with difficulties. If this agreement (or an improved one resulting from the upcoming negotiations) is not reached, what is the alternative scenario? If the change of model is not implemented by the end of this legislative term (assuming it runs its full term), will we be in a better position in the new one that emerges from future elections? Place your bets, but I, the undersigned, have my own.
