El Financial Economic Plan corrects the 2025-2026 budget of the Cabildo of Tenerife after exceeding the legally defined spending limit, criticised by the Socialist Group in opposition. “The law allows it” and “the investments were more than necessary.” These are the two premises driving the island’s governing group in preparing the document. An extraordinary plenary session will take place tomorrow (12:00, Plenary Hall) to discuss the document’s details. The PSOE recalls that “we were warning and asking about this throughout last year, in light of the recovery of fiscal rules.”
Spending Limit
It is essential to clarify what the spending rule or limit is. It is a budgetary discipline instrument aimed at ensuring the long-term sustainability of public finances. It sets a limit on the growth of non-financial spending by administrations, preventing it from exceeding their capacity to finance it with stable revenues. This is why the document, under the responsibility of the island’s finance director Juan Caros Pérez Frías, must be prepared.
Works
In 2024, the island Corporation invested 117 million euros in works to purify the waters, acquire new buses, restore the major fire of 2023, and housing initiatives. The Financial Economic Plan aims to “continue these policies.” The island’s president, Rosa Dávila, who was formerly finance director in the Government of the Canary Islands, explains that the fiscal management of public administrations is governed by two main principles: budgetary stability, ensuring that spending does not compromise the medium and long-term sustainability of finances; and the spending rule, which imposes a maximum growth rate for computable spending, irrespective of available resources.
Compliance
“The Cabildo of Tenerife comfortably complies with the principle of budgetary stability, with a healthy fiscal balance and a solvent financial situation. In 2024, it responsibly exceeded the spending rule,” highlights Dávila. In this context, the Cabildo meets the parameters for average payment to suppliers (10.50 days), budgetary stability (33 million euros), and debt (16.18% compared to the 110% allowed by the State).
Management
Rosa Dávila is firm in defending her management at the helm of the Cabildo: “We have acted with institutional responsibility and political ambition, investing in the urgent and important: housing, water, transport and environmental recovery. And we have done so without compromising the financial health of the Cabildo, using its savings and within the legal framework permitted.” She argues: “The people of Tenerife would not understand if, with resources available, they weren’t used to improve their quality of life.” Dávila concludes: “The Cabildo has prioritised what is truly important: tackling investments that could no longer wait after years of low budget execution and administrative standstill that had paralysed the island.”
Forecast
For his part, the island’s finance director, Juan Carlos Pérez Frías, notes that the decision to breach the spending rule aligns with the provisions of the Budgetary Stability Law, which allows it as long as a Financial Economic Plan (PEF) is approved. “This plan is perfectly manageable by the Cabildo, which has fully sound accounts,” he points out. In this regard, he notes that the State has not yet incorporated the new European fiscal governance rules, which permit a more flexible and realistic application of the spending rule, already in effect in the European Union. This “inaction” forces “responsible” administrations, like the Cabildo, to make decisions that, under other legal conditions, would be completely ordinary. A fact: of this year’s 101 million euros surplus, only about 33 will be used to amortise debt, while the other 67 could be injected into strategic investments and projects for the island.
Fiscal Rules
“From 1 January 2024, the application of fiscal rules resumed,” points out PSOE spokesperson, Aarón Afonso, who recalls that “we were warning and asking about this throughout last year.” He notes that “despite being aware of this, the Cabildo of Tenerife breached one of the parameters set by the Organic Law on Budgetary Stability, the spending rule.” Specifically, he details, “exceeding by almost 15% the spending limit that it could undertake in the 2024 financial year.” The main cause of non-compliance, he stresses, “was the excessive use of the Remaining Treasury for General Expenses (RTGG), which is considered ‘reckless’ because it was an ‘extraordinary and non-structural resource’, against which ‘additional limits were not applied to contain its negative impact’.”
Discrepancy
This “financial discrepancy,” in accordance with the organic law, requires the Cabildo to present and approve a Financial Economic Plan (PEF), commonly known as an adjustment plan, to rebalance the accounts during this year, 2025, and the next, 2026.
“Serious”
The PSOE spokesperson considers it “especially serious” that during the budget execution of 2024, the Ministry of Finance’s Authorise platform “was warning in the quarterly execution” about the risk of breaching the spending rule and, despite these warnings, “the Cabildo of Tenerife continued to authorise and execute expenditure financed with treasury surplus without taking sufficient corrective measures.”
Fiscal Prudence
For Afonso, “this action calls into question the prudence and fiscal responsibility in budgetary decision-making by the current political leaders of the Cabildo of Tenerife.” It is noteworthy that the fiscal rules are fully in effect and the sixth additional provision of the Organic Law on Budgetary Stability will not be applied due to the political situation, as the General State Budgets were not approved.
