IV. SPAIN

which is applicable to all public administrations regardless of their legal status. It had the effect of strengthening fiscal discipline at a time when such discipline was not as firmly entrenched as in some OECD member countries. The act provides for an appropriate improvement in the information concerning budget outcomes and increased transparency requirements at all levels of government (OECD, 2001). The GABS included marked changes in the budgetary procedures of the State, including: 1) central government expenditure is to be limited by setting a spending ceiling consistent with the medium-term budget scenarios, and 2) fiscal discipline will be mostly underpinned by monitoring and peer pressure: sanctions will be enforced should these entities fail to comply with their budgetary commitments. The OAGABS extended this reform to local governments at each level.

Having established a general framework for budgetary stability, further reform was made in order to apply the guiding principles of the GABS. The General Budgetary Act 11/1977 and its accompanying Royal Decree 1091/1988, which had provided a framework for budgets, accounting and expenditure control in the public sector for 25 years, were abrogated and replaced by the amended GBA, adopted in 2003. The new GBA aims to introduce (by 2005) a performance-based budget management system. All these measures are an integral part of the process of modernising public finance. Although the 1977 GBA and its subsequent amendments represented some improvement, there was the need to go further in revising the legal framework.5

The OAOFCSA brought new forms of institutional organisation and control that were inconsistent with the forms of organisation and control envisaged in the 1977 GBA. Autonomous bodies and semi-commercial public entities, which were newly established by the OAOFCSA, needed to be incorporated into financial management legislation (Zapico Goni and Garces, 2002). Also, substantial regional decentralisation took place after 1980 (OECD, 2003a), which changed the main role of central government and led to the need to establish a new legal framework between levels of government. For instance, in the health sector, the central government’s role was changed from being a direct supplier of health services to one where it co-ordinates the different regional health systems so as to guarantee equality of access to basic medical care throughout the country and to stimulate the regions to improve efficiency of public spending.

2. Principles underlying budget system laws

All important budget principles are included in the various laws relating to the budget system. The Constitution requires the State budget to be drafted annually and to include the entire expenditure and income of the State sector (Art. 134, the principles of annuality, universality and unity). The budget year