Spanish Public Budget: Phases, Principles, and Fiscal Balance
The development of the General State Budget (PGE) in Spain follows four key phases:
Preparation
In Spain, the budgeting process is the responsibility of the Government and the Ministry of Economy and Finance.
Discussion and Approval
Once developed, the budget proposals are presented to Parliament for approval.
Implementation
For implementation, the budget is separated into:
- Public Expenditure: The figures presented in the budgets are considered maximum and limiting.
- Revenues: These indicate the amounts expected to be collected.
Intervention and Control
The State General Comptroller tracks expenses and revenues, forwarding the results to Parliament at the end of the fiscal year.
Basic Principles of the PGE
- Principle of Competition: The Government produces the budget, and the Parliament approves it.
- Principle of Universality: The PGE includes all revenues and expenditures of all state agencies.
- Principle of Unity: All items are listed in a single budget.
- Principle of Specialization: Amounts in the PGE can only be spent on their assigned purposes.
- Principle of Temporality: The budget refers to a specific fiscal year.
- Principle of Publicity: Budgets are public, allowing citizens to follow their discussion and approval.
Budget Documentation
- Red Series: Legal documents, including the Budget Law.
- Yellow Series: Documents explaining the sections in the red series.
- Green Series: Documents that do not require management endorsement.
- Gray Series: Documents providing extended data and information.
Public Expenditure
Public expenditure is the set of payment obligations by the public sector. It is divided into:
Current Expenditure
These are dedicated to providing public services such as education, health, justice, and national defense. They include:
- Purchase or rental of goods and services from private companies.
- Compensation of employees.
Investment Costs
These cover needs not met by private companies due to large investment requirements, such as roads, jobs, and airports.
Other Expenses
These are expenses without direct compensation:
- Downloads: Payments to individuals, such as unemployment benefits.
- Subsidies: Payments to businesses to reduce production costs.
Public Revenue
Public revenue consists of funds that enable the public sector to meet its objectives and expenses. These include:
Regular Revenue
These are obtained regularly over a fiscal year and come from:
- Direct Taxes: Levied on the taxpayer’s income at the time of collection or generation.
- Indirect Taxes: Levied on the taxpayer’s income at the time of its use, due to specific acts of consumption.
- Activity of Public Enterprises: Profit from the difference between income and expenses.
Fiscal Balance
The fiscal balance is a key objective for any government to avoid economic debt. The ideal situation is:
Surplus Budget
This is when the public sector can finance all its projects and use the surplus to reduce debt (I > GP).
Budget Deficit
This occurs when the State must meet the needs of citizens even when revenues are insufficient, often leading to borrowing (I < GP).
Public Debt
Public debt instruments include:
- Treasury Bills: Duration exceeding one year, with no interest but sold at a discount.
- Bonds: Duration of 1 to 5 years with a fixed interest rate.
- State Obligations: Duration longer than 5 years with a fixed interest rate.
Types of Deficit
Structural Deficit
This deficit persists regardless of the economic cycle, often requiring governments to issue public debt.
Cyclical Deficit
This deficit depends on the economic cycle. During a recession, economic activity declines, increasing unemployment and reducing tax revenue. During an expansion, the deficit tends to decrease and may become a surplus.