The Canary Islands Government Council has approved this Wednesday to establish a limit of non-financial expenditure in the Autonomous Region Budgets of next year of 10,089.7 million euros, which is 991.4 million more than in 2022 and a percentage growth of 10.9%.
The Budgets will allow, in this way, to maintain the intensity in the provision of essential public services, especially conditioned by the impact of inflation; activate support measures for the most vulnerable sectors, and contribute to the revitalization of the Canary economy by betting on investment, pulling demand and, therefore, employment.
The increase in spending is possible due to the "exceptional" growth of resources that will reach the Canary Islands from the Autonomous Financing System (AFS), amounting to 1,246.4 million euros more than in the current year: 703.4 million euros of increase due to the settlement of the year 2021 and 543 million more for the amounts on account, in this case for 2023. These increases were already largely foreseen in the Plan and Budget Scenarios for the triennium 2023-2025 approved by the Autonomous Executive in April of this year.
The agreement adopted by the Government points out, in any case and in view of the recommendations made by the Independent Authority for Fiscal Responsibility (AIReF), that the Budgets will be made "avoiding increases in expenditure or reductions in revenue with a structural character in order not to deteriorate public finances in the medium term", a risk that is aggravated by the exceptional suspension of fiscal rules.
In other words, it is about avoiding the consolidation of expenses whose financing is not guaranteed when the extraordinary flows of income expected in these coming years disappear and the fiscal rules are reactivated.
With regard to the forecast of tax revenues of the Canary Islands Financing Block (CIFB) and given the existing economic uncertainties, the General Directorate of Planning and Budgets has chosen to use the pessimistic scenario contained in the report of the Vice-Ministry of Economy and Internationalization of the Government of the Canary Islands of last July. That is, the one that foresees a growth of the real GDP of 3.6%.
In addition, to the exceptional amounts of the AFS and own tax revenues are added the ordinary resources of the European Union (EU) and the extraordinary Next Generation EU funds, although these have been calculated according to what is guaranteed as of today, at the time of the approval of the spending ceiling.
In this sense, the Government points out that "the elaboration of this spending limit, in any case, has been made under a scenario of uncertainty, in which the measures that have had to be adopted to face the Covid pandemic are still partially maintained, and now are added the consequences that the invasion of Ukraine by Russia is causing in the geopolitical and economic context, and its effects in inflationary terms on the European economy through an unprecedented rise in prices in energy, raw materials and food", which affects not only families and businesses, but the public sector.
The limit of non-financial expenditure is established, in addition, with the fiscal rules suspended, but the obligation of the Average Payment Period to Suppliers (APPS) and the reference of the public deficit rate for the autonomous communities that has set the central government remains: -0.3% of GDP, half that in the current year.
