Fedea warns that the regional financing draft perpetuates the 'status quo' and aggravates moral hazard

Given the draft of regional financing prepared by the Government, and 17 days after its discussion, the document brings modifications that unleash discrepancies in its design. A small print that provides a perpetual status quo, the door open to extra VAT and a new distribution by population, as warned by the Foundation for Applied Economic Studies (Fedea), whose director, Ángel de la Fuente, reveals a reform that maintains "a strong transfer of resources from the State to the CCAA that will aggravate the problems of moral risk that the latter already suffer and could leave the former in a precarious situation", a plan agreed with ERC to be voted on before the end of year.

In this context, the main conflict lies in the compensations, since "the status quo compensations not only would not be transitory, as would be desirable, but they will be updated indefinitely with the ITE for all communities." By shielding this mechanism, an imbalance occurs because "the design of the status quo clauses gives the system an inertia that tends to perpetuate the relative positions of the Autonomous Communities, preventing them from getting closer to the situation that would correspond to them by formula." Fedea warns that "if no one can lose positions in relative terms, no one can gain them either, which makes it very difficult to make the changes in the distribution of financing that would be necessary for reasons of equity."

Regarding VAT, the draft proposes "opting for the transfer of an additional VAT bracket up to a maximum of 90% in total" to pay for singular powers, an option that Fedea rejects because "it opens the way to the coexistence of two different regimes, which will increase to some extent the complexity of the system and make comparisons between territories difficult."

Furthermore, this route "would make it difficult to possible review the valuation of such skills to bring it closer from its initial cost-effective logic to formula financing", adding a different fund before which it is warned that "opening the door, as is done here, to different valuations for the same skills in different communities would seriously undermine the egalitarian logic of the model and should therefore be avoided", a design that "would fundamentally favor Catalonia".

Finally, the adjusted population is redefined through a two-stage adjustment "that seeks to help to some extent the CCAA that tend to lose weight in the population", although Fedea points out that "it would surely be better to use a moving average of the base adjusted populations for a gradual but continuous adjustment."