- The Independent Authority for Fiscal Responsibility (AIReF) issued nine new recommendations in the third quarter of 2024 aimed at strengthening compliance with the expenditure rule, improving transparency and adapting publication schedules to the budget cycle
- According to the Law, General Government (GG) authorities are obliged to follow AIReF’s recommendations or explain their reasons for deviating from them
- The Government undertook to partially comply with the recommendation on the expenditure rule but rejected the rest of the recommendations, including the recommendation to provide AIReF with more information in the endorsement process or to do so in two stages
- The National Statistics Institute (INE) agreed to bring forward some of its publications but not all those recommended by AIReF
- AIReF updates its interactive tool that facilitates the monitoring of the recommendations with the information from the third quarter
The Independent Authority for Fiscal Responsibility (AIReF) published the monitoring of the recommendations issued to the General Government in the third quarter of 2024 on its website today, a period in which it made nine new recommendations aimed at strengthening compliance with the expenditure rule, improving transparency and adapting the publication schedules to budget cycle. In its responses, the Government deviated from the recommendation to provide AIReF with more information during the endorsement process.
AIReF issues recommendations in its reports that are governed by the “comply or explain” principle, the main tool it has to satisfy its mandate. This principle establishes that GG authorities are obliged to follow the recommendations or explain the reasons for deviating from them. In the third quarter of 2024, AIReF issued nine new recommendations. Bearing in mind that the same recommendation can be addressed to more than one GG authority, 43 recommendations were issued: 34 to the Ministry of Finance (seven of its own and 27 as the supervisory body for Autonomous Regions (ARs) and Local Governments (LGs), one to the Ministry of Economy, Trade and Enterprise, two to INE and six to LGs.
The Ministry of Finance undertook to partially comply with the recommendation on the expenditure rule and INE agreed to bring forward some of its publications. However, the rest of the recommendations made to the Ministry of Finance and INE, as well as those addressed to the Ministry of Economy, were rejected. At the local level, of the six LGs that received recommendations, the Chartered Council of Gipuzkoa and the Island Council of Majorca expressed their commitment to monitor implementation in order to comply with the expenditure rule.
Transparency
In the Report on the Endorsement of the Medium-Term Structural-Fiscal Plan 2025-2028, AIReF recommended to the Ministries of Economy and of Finance to provide more information on the budgetary and fiscal measures incorporated in the macroeconomic scenario or, if not, to carry out the endorsement process in two stages: one with the inertial macroeconomic outlook without fiscal measures and another after finding out the details of the measures. Both Ministries replied that they rely on current projections and coordinate the process to integrate these measures into the macroeconomic scenario. They also stressed that they were still working to provide the information requested by AIReF. As regards the two-stage endorsement process, they stated that this does not comply with the regulations. AIReF, conversely, considers that the information on the measures is essential to draw up a macroeconomic outlook that is consistent and coherent with the fiscal scenario. In fact, on several occasions AIReF has recommended the signing of an agreement or memorandum of understanding to improve the exchange of information.
In order to adapt the publication schedules to the budget cycle, in the Report on the Macroeconomic Forecasts of the Draft Budget for 2025 of Castile-La Mancha, AIReF recommended providing INE with the means to produce Regional Accounts estimates ahead of schedule and to make it easier for the ARs to prepare macroeconomic forecasts and budgetary planning. INE replied that, even if it had more resources, publication could only be brought forward to October, which it considers insufficient. However, AIReF believes that the Higher Council on Statistics should take note and bring the publication forward.
Furthermore, in the endorsement of the macroeconomic forecasts of the MTP, AIReF recommended that INE should assess the feasibility of bringing forward the dissemination of the main results of the Spanish National Accounts or reintroduce an additional estimate of the Quarterly Accounts. INE replied that the current schedule is the only one that guarantees full consistency and coherence of its results, although it proposed to provide the Ministry of Economy with a first approximation, as up to date as possible, on September 1st each year. Regarding the reintroduction of an additional estimate, it explained that this is not carried out in any peer country and that it would be detrimental to users due to the confusion of the revisions. AIReF, for its part, proposes to INE that an assessment be made of both proposals by the standing committee or plenary session of the Higher Council on Statistics.
Expenditure rule
To strengthen compliance with the expenditure rule, AIReF recommended to the Ministry of Finance in the Report on the 2024 Budgetary Execution to activate the preventive measures of the Law on Budgetary Stability for all the ARs and 13 of the LGs assessed as being at risk of non-compliance. It also recommended that the Ministry appear before Congress to explain the growth of net expenditure of the Central Government, potential deviations and the measures planned to ensure compliance with the expenditure rule.
The Ministry argued that it already carries out continuous and exhaustive monitoring of the deficit, the rate of change of expenditure and the evolution of the ARs and LGs. It also highlighted the positive impact on its accounts of the instalment payments from the Regional and Local Financing Systems and the 2022 settlement. AIReF considers that the first recommendation has been partially complied with, given that the Central Government is expected to comply with the expenditure rule, but it clarifies that the updating of the revenues of the ARs and LGs does not affect the calculation of the expenditure rule. AIReF also considers that the risk of non-compliance with the expenditure rule persists in all the ARs and in some of the LGs.
AIReF also made a recommendation to six LGs to monitor budgetary execution and adopt measures to correct growth in expenditure. Only Gipuzkoa and Majorca expressed their commitment to comply, while the rest deviated from this recommendation for different reasons: San Andrés de Rabanedo argued the lack of approval by the plenary session of the waste treatment rate, Alcorcón attributed non-compliance to the existence of extraordinary and non-recurring expenditure, Vitoria-Gasteiz stated that it complies by excluding the expenditure financed by means of its cash surplus from eligible expenditure in accordance with a chartered regulation, and Jaén referred to events whose entry into force will not have an impact in 2024. AIReF clarified that the Law on Budgetary Stability does not allow expenditure financed with a cash surplus to be excluded from eligible expenditure.
AIReF also made a recommendation to the Ministry of Finance to publish a guide for calculating net expenditure in accordance with the new fiscal framework. In its response, the Ministry pointed out that the new rules allow budgetary targets to be set using different indicators and considered it premature to draw up manuals. However, AIReF believes that the fundamental aspects are already known and sees it as crucial to have a guide in this first year of application.
AIReF also recommended that the Ministry should resume publishing the evolution of eligible expenditure for the purposes of calculating the national expenditure rule for the Central Government, the ARs (with individual breakdown) and the LGs. The Government deviated from the recommendation, explaining that it publishes the economic and financial information provided for in the Law on Budgetary Stability, the Law on the Creation of AIReF and EU provisions. However, AIReF considers it advisable to resume publication in order to facilitate the monitoring of compliance.
Recommendations tool
AIReF has updated its interactive tool on recommendations with the information for the third quarter. This tool generates a file for each recommendation with all the details of the recommendation, such as the reason for the recommendation, the report in which it is included and the response from each GG authority. It also offers statistics on the recommendations by the area to which they refer, category and status. It allows the information to be filtered by GG authority and time period and offers other data such as the average response time of each GG authority and the compliance commitment ratio.
