Airef warns Andalusia tax cuts could breach spending rule

Airef warned Andalusia on Wednesday that its tax cuts put the national spending rule at risk in 2026 and 2027. The watchdog expects them to reduce 2027 revenue by €280 million.

The draft is the first budget of the PP-Vox coalition led by Juanma Moreno. It has entered parliament after approval by the regional cabinet.

Tax cuts reduce expected income

Airef said the planned tax cuts go against its advice. It also said they weaken the region's position over the medium term.

The main changes are new relief on inheritance and gift tax. Rates on property transfers will also fall. Airef expects total tax receipts to drop by 4.5% as a result.

The watchdog told the Junta to avoid more steps that raise net primary spending for good. That advice includes lasting tax cuts and new costs without lasting funds.

The Junta still expects to balance its books in both 2026 and 2027. Airef takes a different view of how fast spending will grow.

Spending rises above the limits

Airef expects spending covered by the national rule to rise by 4.2% in 2026. The limit for that year is 3.5%.

For 2027, it expects a rise of 5.9%, against a 4% limit. The watchdog therefore expects the region to break the rule in both years.

Even so, Airef forecasts a surplus of 0.1% of GDP in 2026 and 1.1% in 2027. Without work linked to the early-2026 storms, those figures would be 0.7% and 1.2%.

A key issue is €2,496 million in budget credits. The draft seeks legal power to treat that spending as outside the national rule.

Airef said that legal cover does not exist at present. If the Junta spent the credits without it, covered spending growth would exceed 11% in 2027.

The region has told Airef that it would hold back those credits if the law did not change. In that case, the watchdog says the surplus would be about 1% of GDP.

Revenue, savings and debt

Airef expects 2027 revenue, excluding Recovery Plan funds, to rise by 9%. It would reach 18.9% of GDP.

It expects spending outside storm work and the Recovery Plan to rise by 6%. That would take it to 17.7% of GDP.

The Junta plans to end temporary measures, including a surgery waiting-list plan and a transport card top-up. Airef puts those savings at more than €50 million.

Other steps, mainly in healthcare, are expected to save more than €63 million. Storm repair work is forecast to cost €234 million in 2027, down from €1,330 million in 2026.

Airef also expects public debt to fall to 15.1% of GDP by the end of 2027. It stood at 17.9% in 2025.

The report supports the budget's broad balance but warns of a lasting gap. Its main concern is the mix of lower tax income and faster spending growth.

Sources: Airef report via elDiario.es and Diario de Sevilla