The Fiscal and Financial Policy Council (CPFF) approved this Friday the Government's proposal to reform the autonomous financing system. The Ministry of Finance has managed to push forward the model with the territorial support of Catalonia and the Canary Islands, against the opposing vote of twelve communities and the absence of Madrid.
The voting allows the Executive to continue the processing of a reform that promises to provide 20.975 billion euros additional in 2027 to the communities of the common regime. However, the result also evidences the lack of territorial consensus: only two of the fifteen autonomous communities affected by the system have supported the proposal.
The territorial result of the voting was as follows:
- In favor: Catalonia and the Canary Islands.
- Against: Andalusia, Aragon, Balearic Islands, Cantabria, Castile and León, Valencian Community, Extremadura, Galicia, La Rioja, and Murcia —the ten communities governed by the PP that attended—, in addition to Castile-La Mancha and Asturias, governed by the PSOE.
- Absent: Community of Madrid.
- Outside the common system: Basque Country and Navarre, which have their own foral regimes.
Madrid publicly expressed its rejection, but its position cannot be counted as a formal vote within the Council because it decided not to attend the meeting. Therefore, the balance among the present communities was two favorable votes and twelve opposed.
Why it was approved despite the regional rejection
The arithmetic of the CPFF explains how the Government can present as approved a proposal rejected by the vast majority of the communities. The General Administration of the State holds 50% of the votes of the Council, while the other 50% is distributed among the autonomous communities. By having half of the weighted vote, the Government only needed at least one community to support its proposal to overcome the tie.
Finance had guaranteed the support of Catalonia, after the design of the model stemmed from the political agreement reached between the PSOE and ERC. The Canary Islands subsequently announced its favorable vote after agreeing that the resources linked to its Economic and Fiscal Regime would be excluded from the calculation of the system.
With those two supports, the Ministry was able to approve the proposal despite the opposing vote of twelve of the fourteen communities present. The result confirms the strong territorial isolation of the model, but does not legally prevent it from continuing its course.
The snub from Madrid did not prevent the voting
The Community of Madrid was finally the only autonomy that did not attend the CPFF. The Government of Isabel Díaz Ayuso had asked the other PP communities to support its boycott to try to prevent the constitution of the Council due to lack of quorum.
The call was unsuccessful. The other ten autonomous governments of the PP chose to attend and record their rejection through voting. The presence of these communities allowed the body to be constituted normally and to hold the vote.
Madrid conveyed its opposition electronically and described the procedure as a "charade," but that communication does not equate to a vote cast within the CPFF. The community remains, therefore, absent in the formal count, although politically it aligns with the rejection expressed by the other PP governments.
Castilla-La Mancha and Asturias also vote against
The opposition to the model was not limited to the autonomies governed by the PP. Castilla-La Mancha and Asturias, the other two socialist communities integrated into the common system, voted against.
Both governments believe that the proposal presents problems both in content and procedure for having been initially negotiated with Catalonia and ERC before being submitted to multilateral debate.
Castilla-La Mancha had requested that the central Government abstain from the vote so that the result reflected exclusively the position of the communities. Asturias, for its part, questions whether the distribution grants sufficient weight to aging, dispersion, and orography when calculating spending needs.
What the Council has really approved
The agreement of the CPFF does not imply the entry into force of the new system. It also does not equate to the definitive approval of a law.
What the Council has endorsed is the political and financial proposal that will serve as the basis for the Government to draft the necessary legislative projects. The Executive must now convert the agreed economic model into norms with the rank of law.
The reform proposes, among other measures, raising the autonomous participation in the IRPF from 50% to 55% and the corresponding VAT from 50% to 56.5%. The Treasury estimates that the communities will have a total of 224.507 million euros in 2027, 20.975 million more than with the continuity of the current system.
Andalusia would be the community that would receive the most additional resources, with 4.846 billion; followed by Catalonia, with 4.686 billion; Valencia Community, with 3.669 billion; and Madrid, with 2.555 billion.
The legislative path that opens now
After the pronouncement of the CPFF, the Treasury must prepare the draft bills that develop the reform. The planned process includes several stages before the text reaches Parliament:
- Drafting of the draft bills. The Treasury must transfer the figures, funds, percentages of allocation, and distribution criteria to the corresponding legal texts.
- First round in the Council of Ministers. The Government will approve the draft bills to formally initiate their administrative processing.
- Public hearing and reports. The texts must be submitted for consultation and gather the mandatory opinions and reports, including those corresponding to the Council of State.
- Second round in the Council of Ministers. Once the observations have been incorporated or evaluated, the Executive will approve the bills and send them to Congress.
- Processing in Congress. The bills will face the total debate, the presentation of amendments, their passage through the committee and commission, and finally, the vote in the Plenary.
- Passage through the Senate. The Upper Chamber may approve, amend, or veto the texts. Given the absolute majority of the PP in the Senate, it is foreseeable that it will introduce changes or veto the reform.
- Return to Congress. The Lower Chamber will have the final word and may lift the veto or accept or reject the Senate's amendments, with the majorities established for each type of norm.
The LOFCA requires reaching 176 votes
The centerpiece of the reform will be the modification of the Organic Law on the Financing of Autonomous Communities (LOFCA). As it is an organic law, its approval requires an absolute majority in Congress in a final vote on the entire text.
The Government will therefore need to gather at least 176 favorable votes. It is not enough to have more votes in favor than against or to surpass the process by simple majority.
Along with the LOFCA, it will be necessary to reform the Law 22/2009, which regulates the financing system of the communities of common regime and of the cities with autonomous status, in addition to adapting the tax allocation framework to each territory. These ordinary rules do not require an absolute majority, but their content is closely linked to the organic reform.
The new financing cannot be applied if the Executive manages to approve only part of the legislative package. The percentages of tax assignment, the leveling funds, and the new distribution criteria must have a complete regulatory fit.
Junts, the key to a majority that is not guaranteed today
The main difficulty is now in Congress. PSOE and Sumar do not add up to the 176 deputies necessary to reform the LOFCA, so the Executive will have to rebuild the investiture majority.
The support of ERC seems to be on track due to the prior agreement on the model. However, the Government will also need the support of other parliamentary partners and, presumably, of Junts. The independentist formation has so far shown its rejection of the proposal because it considers that it does not establish a sufficiently unique financing for Catalonia.
PP and Vox maintain their opposition. The negative vote expressed by Castilla-La Mancha and Asturias in the CPFF also adds political pressure on the socialist deputies from those territories, although the regional representatives cannot legally condition the voting direction of the parliamentary groups.
The Government intends to complete the processing before the end of 2026 so that the new model can be applied from January 1, 2027. This timeline requires sending the projects to Congress quickly and previously closing a parliamentary agreement that, after the CPFF vote, is still not assured.