Catalan President Salvador Illa has defended Spain's proposed new autonomous financing model, arguing that reforming the system should also contribute to greater cohesion between the country's regions.

Speaking in an interview published on Saturday, September 19, Illa said there was broad agreement that the existing financing system needs to be reviewed and defended the proposed reform as a way of reducing differences in funding between autonomous communities.

Illa links financing reform to territorial cohesion

Illa said reforming autonomous financing is not only a question of distributing additional resources, but also part of maintaining cohesion across Spain.

He argued that the proposed system would reduce the gap in funding per adjusted inhabitant between the regions that currently receive the most and those that receive the least.

These are Illa's arguments in favour of the reform and should be distinguished from the continuing political disagreement over its distribution and design.

The proposal adds almost €21 billion

The Spanish Government's proposed model is estimated to provide €20.975 billion in additional resources to the autonomous communities in 2027 compared with the amount they would receive if the current system remained in place.

The proposal was approved by the Consejo de Política Fiscal y Financiera on September 4. The Ministry of Hacienda says the additional resources are intended to support areas including healthcare, education, social services and housing.

The €20.975 billion figure is a government estimate for the first year of the proposed model, rather than money already transferred to the regions.

The reform has not yet become law

Approval in the Fiscal Policy Council does not by itself put the new financing model into force.

The Ministry of Hacienda says the next stage is the preparation of the legislation, which must pass through the Council of Ministers and then the national Parliament.

The government has been aiming for the new system to begin operating in 2027, although the legislative process still has to be completed.

How the government says the system would work

The proposed model continues to use the concept of adjusted population when determining how funding is distributed.

The formula also takes account of factors such as population dispersion, territorial surface area, insularity and fixed costs.

The government says these elements are designed to better reflect differences in the cost of providing public services across Spain's autonomous communities.

Illa says no region would lose

Illa said the reform should be implemented on the basis that no autonomous community loses resources compared with the existing system.

He acknowledged that regions currently receiving more funding would see smaller increases than those that are currently less well funded, while arguing that all territories would gain additional resources overall.

The Spanish Government has similarly presented the model as one that would increase resources for all of the communities covered by the system.

Catalonia would receive additional funding

Catalonia is one of the main political focal points of the reform because the proposed system forms part of a broader agreement concerning the region's financing.

Government estimates published in January indicated that Catalonia would receive approximately €4.7 billion more annually under the proposed system compared with the existing model.

The government has argued that the additional resources should help finance public services while bringing Catalonia into a system that also increases funding for other regions.

Debate continues across Spain

The reform has faced opposition from a number of autonomous communities and remains politically contested.

When the proposal was approved by the Fiscal Policy Council on September 4, Catalonia and the Canary Islands voted in favour, while the other participating autonomous communities voted against it.

The disagreement centres on issues including how resources should be distributed, the treatment of territorial differences and the extent to which the new system should recognise specific regional circumstances.

What the proposal means for the Balearics

The proposed model also has direct relevance for the Balearic Islands.

A government estimate published in January calculated that the Balearics could receive around €412 million more per year than under the existing financing system.

The same proposal used insularity and new fixed-cost criteria to reflect some of the additional expense associated with providing public services in an island region.

Balearics has raised additional demands

The Balearic Government has nevertheless opposed the proposed system in its current form.

Ahead of the September 4 vote, the Govern called for changes including greater recognition of the islands' floating population and territorial characteristics. It also argued that the sea separating the islands should be taken into account when assessing territorial surface area.

The Balearics voted against the proposal at the Fiscal Policy Council.

A separate proposal promoted by the Balearic Socialist Party has called for a specific fund to address the effects of insularity and tourism-related pressures, although that is a political proposal rather than an established component of the financing system.

Illa calls for evidence in the debate

In his latest comments, Illa also responded to criticism of the proposed model.

He called for objections to the reform to be set out in concrete terms and argued that proposed alternatives should be presented clearly rather than relying only on general criticism.

His comments form part of a wider political debate over how Spain's autonomous communities should be financed and how differences in public-service costs should be reflected in the national system.

A reform that still faces a parliamentary stage

Although the Fiscal Policy Council has approved the proposal, its future ultimately depends on the legislative process.

The government must now turn the agreed model into legislation before submitting it to Parliament.

That means the details of the system can still be debated and potentially amended during the parliamentary process.

What happens next

The Spanish Government's objective is for the new financing system to begin operating in 2027.

Before that can happen, the proposed legislation must pass through the national institutions responsible for approving the reform.

For Catalonia, the Balearics and the other autonomous communities, the parliamentary process will determine the final wording and distribution rules of the system.

For now, Illa is defending the reform as a way to increase resources while reducing differences between regions, while several autonomous governments continue to call for changes to how those resources and territorial circumstances are taken into account.

A national debate with a Balearic impact

The debate over autonomous financing may be centred politically on Catalonia, but its consequences extend across Spain.

For the Balearics, the proposed €412 million increase and the treatment of insularity could be particularly relevant to the islands' public finances.

With the model still requiring parliamentary approval, the coming legislative process will determine whether the proposal advances in its current form or is modified before becoming Spain's next autonomous financing system.