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is the calendar year (Art. 34, GBA). The principle of annuality is complemented by the medium-term budget principle embodied in the GABS and the GBA. The GABS requires the budgets for the State sector to be prepared within the framework of an MTBP compatible with the annual principle which governs the approval and the execution of the budget (Art. 4). The GBA specifies that management of the State sector is subject to the annual budget as approved by Parliament within the spending limits of the MTBP (Art. 27.1).

The GABS, along with the OAGABS and the GBA, incorporates the principles of budget stability, transparency, and efficiency or performance (Art. 3, GABS and OAGABS; Art. 26, GBA). Those acts require the preparation, approval and execution of budgets to be carried out within the framework of budgetary stability arising from the Stability and Growth Pact.6 The public authorities are required to include in the budgetary regulations the instruments and necessary procedures to ensure that the budgetary stability objective is complied with. Notwithstanding the powers vested in the SGCs, the government must ensure that budgetary stability objectives are observed at all times in the public sector (Art. 7, GABS). Exceptional situations of budgetary deficit must be justified by explaining the reasons which have led to it and identifying the revenues and expenditure related to it; a medium-term economic financial plan is required to be prepared in order to correct this situation.

The transparency principle requires the budget documents to include sufficient and adequate information to allow for verification of compliance with the budgetary stability principle (Art. 5, GABS). A performance-oriented budget is also an integral part of the budget system: budgets are required to be executed to secure their effectiveness, efficiency and quality (Art. 6, GABS). The principle of specificity is embodied in the GBA (Art. 42). It requires line ministries to use their budget exclusively for the specific purpose for which they have been allocated it under the State budget, as specified in the GBA (Art. 41). Accountability is also a well-recognised principle, guarded by the COA (see section 4.5 below).

3. Legal basis for the establishment and the powers of the actors in the budget system

3.1. The executive and the legislature

3.1.1. Overview

Spain is a unitary State and a parliamentary monarchy (Art. 1, Constitution) with three tiers of government: central government; the SGCs (regional tier); and provincial and municipal authorities (local tier). The King is the head of State (Art. 56). The King has many constitutional rights, although

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in large part symbolic (United Kingdom National Audit Office, 2001). He promulgates laws, summons and dissolves Parliament, proposes a candidate for the President and appoints or removes him from office, and appoints and dismisses members of the government on the recommendation of the President (Art. 62).

There is strict separation of duties between the executive and the legislature. Executive power is held by the President. The government exercises executive authority and issues regulations in accordance with the Constitution and laws (Art. 97). The government consists of the President, Vice-Presidents (one or several), ministers and other members as may be created by the law (Art. 98). The President directs the government’s action and co-ordinates the functions of the government (Art. 98). In contrast, legislative power is vested in the Parliament, which consists of two houses, the Congress of Deputies and the Senate (Art. 66). The Senate is the house of territorial representation – in principle, there are four senators for each province (Art. 69).

3.1.2. Role and responsibilities of the Council of Ministers and individual ministers

The function and the structure of the government are regulated by the Constitution (Arts. 97-107). The Constitution prescribes that the Council of Ministers is the supreme decision-making organisation of the government (Art. 107), and the OAOFCSA makes provision for its membership and its terms of reference. The Council of Ministers plays a fundamental role in the budget process. It approves the general directives for budget preparation and sets guidelines for the central government’s economic financial and monetary policy. It settles disagreements over appropriations between the Minister of the Economy and Finance (MOEF) and other ministers. At the conclusion of the preparatory stage, it takes decisions concerning amendments to tax provisions and approves the draft budget for presentation to Parliament. The Constitution establishes that the government is accountable to the Deputies for its conduct of political business (Art. 108).

3.1.3. Establishment of ministries and executive branch agencies

The Constitution states that the organs of State administration are set up, directed and co-ordinated in accordance with the law (Art. 103). The OAOFCSA specifies hierarchical organisational arrangements in ministries and executive branch agencies. However, the creation of a new ministry needs the enactment of its own establishing act. In contrast, the President has discretion to reorganise its existing ministries as long as it does not entail new staff and additional budgetary resources.

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The Constitution states that the budget is prepared by the government and the OAOFCSA specifies that the MOEF holds the main budgetary powers and responsibilities, including revenue, expenditure and macroeconomic forecasting in accordance with budget legislation. The MOEF is divided into a State Secretariat for Finance and a State Secretariat for the Economy. The former holds the main responsibility for the whole budget process, while the latter is in charge of proposing and implementing the general measures of economic policy of the government. Line ministries prepare bills and decrees within their area of responsibility and are charged with administering policies at national level.

The OAOFCSA established a classification for general government entities into two types: autonomous bodies with administrative functions and public entities providing market-oriented services of goods (Zapico Goni and Garces, 2002). The former play an administrative role and are fully regulated by general public law, while the latter play an entrepreneurial role and are regulated under private law, except for some specific functions explicitly governed by general public laws.

Pursuant to the OAGABS (Art. 5), the Tax and Financial Council of the SGCs (TFC) plays a key role in the co-ordination of the budgetary policy of the State and the SGCs with a view to achieving budgetary stability. The TFC acts as the co-ordination body between the State and the SGCs to ensure compliance with the guiding principles of the OAGABS (Art. 5). Pursuant to the act, the TFC took on new and highly relevant functions to ensure that the stability objectives assigned to the various public administrations are met effectively. The TFC submits a report on the stability objectives of all SGCs and decides on the adequacy of each of the measures included in the budgetary stability objectives (Art. 6).

3.1.4. Responsibilities of senior civil servants

The Constitution requires that a law lays down the status of civil servants, the entry into the civil service in accordance with the principles of merit and ability, the features of their right to union membership, and the guarantees regarding impartiality in the discharge of their duties (Art. 103).

3.1.5. Establishment and roles of parliamentary committees

The Standing Orders of both houses govern the establishment of parliamentary committees. The Congress of Deputies has 15 standing committees and other ad hoc committees, and the Senate has 16 standing committees and other ad hoc committees. Both sets of Standing Orders require each house to establish a standing Budget Committee, which is responsible for examining, amending as necessary, and approving the State budget (Art. 46,

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Standing Orders of the Congress of Deputies; Art. 49, Standing Orders of the Senate).

3.2. Role and responsibilities of sub-national governments

A process of decentralisation began following the adoption of the 1978 Constitution. With the transfer of health service provision to several SGCs in 2002, Spain became one of the most decentralised OECD member countries. Spain’s distribution of functions and its system of governance are close to those of a federal State (OECD, 2003a). The Constitution states that the SGCs, provinces, and municipalities enjoy self-government for the management of their respective interests (Art. 137). The State is now divided into 17 SGCs or regions; territorially it includes 50 provinces and about 8 000 municipalities.

The Constitution clearly states the jurisdiction of the State and the SGCs (Arts. 148-149). The State exclusively governs the following (Art. 149): 1) the regulation of the basic conditions guaranteeing the equality of all citizens; 2) international relations; 3) defence and the armed forces, and the administration of justice; 4) general finances and the State debt; 5) the basic legislation and the financial system of social security; 6) the basic legislation for environmental protection. In contrast, the SGCs may assume jurisdiction in respect of the following (Art. 148): 1) the organisation of their institutions of self-government, and changes in the municipal boundaries within their territory; 2) environmental protection management; 3) promotion of the economic development of the SGCs within the objectives set by national economic policy; and 4) social assistance, health and hygiene. Accordingly, the SGCs’ main responsibilities concern social services (excluding contributory pensions), health, labour market policy, education, culture and some public infrastructure. SGCs account for one-third of consolidated public expenditure and employ more than twice as many civil servants as central government (excluding social security) (OECD, 2003a).

The Constitution also declares the principle of the financial autonomy of the SGCs in conformity with the principles of co-ordination with the State Treasury (Art. 156). The budgets of the SGCs are required to be prepared on an annual basis and for the same period as those of the State budget, in accordance with the principle of budgetary stability. They must record all the revenue and expenditure of the bodies and institutions which are part of SGCs. The resources of SGCs are clearly stated in the Constitution (Art. 157): 1) taxes wholly or partially made over to them by the State; surcharges on State taxes and other shares in State revenue; 2) their own taxes, rates and special levies; 3) transfers from an inter-territorial clearing fund and other allocations to be charged to the general State budget; 4) revenues accruing from their property and private law income; 5) the yield from credit operations.