- Lastly, there is a need of more information on a quarterly basis in terms of borrowing requirements
and future commitments to analyse and follow the fiscal stance of the Territorial Governments.
As a consequence of these shortcomings, the Government is planning to introduce some changes in the
Law of Budgetary Stability with the following objectives:
- Reinforce the commitment to fiscal discipline by all levels of government and make it more
effective; - Redefine the balance budget rule over the economic cycle to avoid possible pro-cyclical
consequences and permit the counter-cyclical game exercised by the automatic stabilizers; - Improve the transparency of the economic transactions of all the levels of the government,
specifically with a view to strengthening their recording of these transactions according to ESA-95
methodology.
General Budget Law 47/2003 of 27 November (GBL)
In line with the LBS, the GBL sets a stability objective for the Public Sector, and establishes a regime
whereby budget management is bound by the ceiling set on non-financial State expenditures. It also
introduces multi year budget scenarios in surplus or in balance with a three year horizon, as framed by
successive Stability Programme Updates. These should set out the targets to be met, the means and
activities to be employed, an investment schedule for the three-year period and the indicators used to
track compliance. This multi year scenario provides both a guide and a check on the commitments that
may be assumed annually in the National Budget.
To avoid expenditures overruns, the GBL introduces a General Contingency Fund in the budget
equivalent to 2 percent of the annual spending ceiling, to meet unforeseen non discretionary expenditures
during budget execution, and stipulate that any increase in budgeted appropriations can only be funded
by drawing on this reserve.
The GBL connects the medium-term planning with performance budgeting. It prescribes the obligation
for the managers to formulate the budgets in terms of multi-annual objectives and report the achieved
results. To strengthen performance budget, the Central Government has started reviewing the quality of
their budget programs through a pilot project which includes the examination of six programs. The main
objectives of this project include looking at the adequacy of objectives and indicators, and checking the
existence of a proper link between financial management and performance budgeting.
Inputs (see Table 5 in Annex I)
Since the midst of 1990s Spain has experienced a successfully fiscal consolidation going from a deficit in
1996 of about 5 percent of GDP to a small surplus in 2003 of 0.4 percent of GDP. While the objective to
comply with Maastricht criteria to participate in EMU played an important role in the consolidation, the
analysis of the components of the adjustment indicates its structural nature (Table 2).
Although the bulk of the fiscal consolidation was based on the expenditures side, the good performance
in revenues collections contributed also to the process. The reduction in interest payment, due in part to
our EMU entry, played an important role in the adjustment of expenditures following cuts in personnel,
investment, and goods and services.
Since the enactment of our Constitution, Spain has been experiencing an in-depth process of political
decentralization affecting as much expenditure responsibilities as revenue powers, making our country
one of the most decentralised OECD countries.
Thus, during the two latest decades, Territorial Governments in Spain increased their presence within the
Public Sector now managing almost a half of the expenditures of the General Government. The
Autonomous Governments created in 1979 have played a significant role in the decentralization process,
assuming responsibilities during the period for health, education, active labour market polices, social
services, culture, and some public investment.