The president of the Community of Madrid, Isabel Díaz Ayuso, promised last week, during the debate on the state of the region, improvements in practically all the infrastructure and services of the region, while announcing that she would continue to lower taxes. But the reality of Madrid’s narratives clashes with these intentions. The reports on budgetary stability of the Ministry of Finance show that Madrid has increased its spending in 2023 “by 12%, for the purposes of the spending rule.”
Madrid is therefore the second community that has done the most, behind Andalusia (13.4%), and the AIReF (Independent Authority for Fiscal Responsibility) assesses this “risk of non-compliance” with the new limits of the European Union in 2024 (EU), which were reactivated this year after being suspended since 2020 to promote recovery after the shock of the pandemic.
In the new Community fiscal framework, expenditure has become the key to measuring debt sustainability and the tax administration warns that “accounting expenditure in 2024 in the Community could grow above 5%”, exceeding the individual limit of 2.6% in force for that year.
According to Treasury data, the growth in spending in Madrid over the past year has been driven by the increase in the cost of debt, which has increased by 50%. This is almost 400 million more than in 2022, reaching 1,200 million euros that have been paid to creditors, in a context of rising interest rates by the European Central Bank (ECB) that has hit all administrations, companies and families.
In 2024, it is still unclear which items will increase the most. But experts warn against a general increase as a strategy to increase the level of spending for 2025, the year from which the European Commission will definitively monitor non-compliance with budgetary rules and will have established a new spending rule.
This “joy” of Ayuso’s executive in spending conflicts with its positions in the debate on regional financing and with the downward tax competition it has carried out in recent years. For example, subsidizing or completely reducing the taxes that the Common Regime Communities have transferred (inheritance and inheritance are the most important, as well as the regional section of the personal income tax). This “war” led the coalition government of Pedro Sánchez to design the temporary solidarity tax on large fortunes in 2022 to fill the income gap that the central state coffers were suffering. In 2023, Madrid recovered its assets, although the spending rule continued to skyrocket.
In the meantime, Ayuso has continued to eliminate taxes for an amount of 6.010 million euros, according to Más Madrid. Last Thursday, during the debate on the state of the region, the regional president announced a new battery of tax cuts, such as the extension to 50% of the inheritance bonus between brothers, uncles and nephews, and the extension of 35 years to the maximum age. to benefit from the deduction of personal income tax for the rental of a main residence, it is necessary to be 40 years old.
As detailed, within the framework of inheritance and gift taxes, from next year, the bonus for transactions between brothers and between uncles and nephews by consanguinity will be increased to 50%, compared to the current 25%. In this way, the Community of Madrid will be the first region to introduce this measure in both types of taxes for this degree of relationship.
In addition, a 100% bonus will be introduced in the event of sporadic donations between individuals of less than 1,000 euros, and the formal requirement to issue a public document to apply existing ones will be removed.
According to estimates by the regional government, these new tax cuts will benefit around 13,000 Madrid residents and will save almost 130 million euros per year. That is, a lot of tax savings but excessive spending.
On the other hand, it should be remembered that Madrid is the only autonomous community of common regime financed 100% outside the State. According to data from a report by the BBVA research service, the decision to go to the market independently, taken by Esperanza Aguirre in 2012 and maintained by all the presidents who succeeded her, meant that the region paid more interest than any other territory. for your debt. In 2022, the Community of Madrid could have saved half of the interest on the debt paid if it had been financed by the Autonomous Liquidity Fund (FLA), launched in 2012 by the then Minister of Finance, of the PP, Cristóbal Montoro. , to save the Communities from the economic crisis.
Ayuso, against “singular” financing for Catalonia
Ayuso has now rebelled against the new “singular” financing formula for Catalonia, which the government has not yet specified. However, at the end of 2023, when the government’s agreement with the partner parties of the investiture to cancel part of the debt owed to this community was already known, the regional leader of Madrid, although he does not agree with it, spoke in favor of “aid” the Generalitat Valenciana by alleviating its debt.
The excuse he then gave was that this sum had been “inherited” from the previous socialist government and that it was “unaffordable”. In a public event shared on this occasion with the president of the Generalitat, Carlos Mazón – recently elected – he even argued for “disqualifying” politicians who leave their communities in debt after having governed them. “What I don’t see well is that political leaders ruin the regions and that no one takes responsibility for it”, he said.
However, throughout these days, during the debate on regional financing, Ayuso has not stopped being very belligerent towards the will of the President of the Government to reach an agreement with all the Autonomous Communities. Last Monday, she stated at an event sponsored by the ABC Forum that the region “does not need any type of singularity, as others say, nor concerts” and said she was convinced that “times of attacks are coming” against Madrid, something she has always regretted. that the central government “mistreats” and “neglects”.
According to him, Madrid “loyally and rigorously exercises its financial autonomy enshrined in the Constitution.” And he added that it does so “without neglecting any obligation to our citizens or solidarity with the rest of Spain.” The president of the Madrid region – who initially called on the PP barons to rebel so that they would not respond to Sánchez’s call to address the issue bilaterally, because she suspects that with this strategy the only thing she wants is to “divide them” – changed her opinion a few days later and acknowledged that she was “no one” to tell her colleagues “what they should do.” However, he made it clear that when he goes to Moncloa, he will not consider reaching an agreement on “autonomous financing” individually.
At the same time, from Genoa – the PP’s state headquarters – they don’t even want to hear about the government president proposing to his regional presidents “a total or partial cancellation of their debts”.
This Thursday, in the midst of all these debates, Más Madrid forced the appearance at the plenary session of the Assembly of Madrid of the Minister of Economy, Finance and Employment of the Ayuso government, Rocío Albert. The person in charge of requesting explanations on “the financing of the debt of the Community of Madrid” is the deputy of this group, Alberto Oliver.
