1. Rights, public expenditure and earmarkings.

Here I will proceed to make some considerations on the question of the relationship between rights and public spending, which is provided for annually in public budgets. This is a field that has received little academic work and few judicial decisions in Spain.

However, as highlighted by Holmes and Sunstein in a book on this subject, all rights can involve a cost (the right to vote and to stand for election and electoral expenses, the right to property and expenses for the corresponding registers and their security…).

However, it is also true that there are ways of satisfying rights (including social rights) that do not involve public expenditure, such as, for example, good regulation, delimiting other rights on the basis of their social function or imposing public service and universal service obligations, in the case of services of general economic interest, to guarantee general interests and constitutional rights.

The traditional and current situation in Spain and other countries (conceptual and legal separation between rights and public spending) has been considered a serious problem, which can make a right a dead letter in reality. A fine analyst of the issue and critic of this historical separation is Professor Horacio Corti, currently Defensor General of the City of Buenos Aires, who has devoted several important works to the issue and has presented his ideas in Spain at a conference held at the University of Barcelona.

With regard to social rights in particular, we must start from the obligations of means established by the International Covenant on Economic, Social and Cultural Rights (ICESCR), ratified by Spain in 1977, which as an international treaty must condition the interpretation that the public authorities, including the Spanish legislator, make of constitutional rights (art. 10. 2 CE).

In its articles 2 and 11 the ICESCR includes references that oblige the Spanish public authorities to adopt the appropriate measures for the effectiveness of this rights.

Article 11 of the ICESCR states that:

“Article 11

1. The States Parties to the present Covenant recognize the right of everyone to an adequate standard of living for himself and his family, including adequate food, clothing and housing, and to the continuous improvement of living conditions. The States Parties will take appropriate steps to ensure the realization of this right, recognizing to this effect the essential importance of international co-operation based on free consent.”

These necessary measures, according to the doctrine, the Committee on Economic, Social and Cultural Rights, the body in charge of monitoring compliance with this covenant^[1], and the national jurisprudence that has interpreted the constitutional rights themselves in the light of this article 11, imply the existence of legal obligations of means of a “tripartite typology” to respect (not to violate or hinder their exercise), protect (which requires states to take measures to prevent third parties, for example private parties, from interfering with the rights) and fulfil (which obliges public authorities to do what is necessary to overcome the obstacles that prevent the full enjoyment of the right in question).

Art. 2 specifies the standard of these legal obligations of means, stating that:

“Article 2

“1. Each State Party to the present Covenant undertakes to take steps, individually and through international assistance and co-operation, especially economic and technical, to the maximum of its available resources, with a view to achieving progressively the full realization of the rights recognized in the present Covenant by all appropriate means, including particularly the adoption of legislative measures.”

The Committee on Economic, Social and Cultural Rights has emphasised, in its General Comment No. 3 of 1990, that any deliberately retrogressive measures in this regard will require the most careful consideration and must be fully justified by reference to the totality of the rights provided for in the Covenant and in the context of the full use of the maximum available resources.

It should be noted, for example, that in the area of housing, according to Professor Marcos Vaquer, state budget spending on affordable housing, a major need of the people, fell by 55% in the seven years of the Great Recession, from 2008 to 2015, in a sector where public investment was already below the European average before the onset of the crisis and is now also below the EMU average.

In other words, in accordance with international law, which binds the interpretation of the Spanish Constitution of 1978 (hereinafter, SC), social rights are to be continuously promoted, in accordance with the existing possibilities and the different lawful political options existing in each democratic society.

So much so that the opposite measure to such promotion, regression, needs to be carefully considered and, if adopted, fully justified, taking into account the interconnectedness of rights (e.g. education in relation to equality or housing in relation to physical and psychological integrity, for example) and in accordance with the full use of available resources.

If this is not done, the decisions adopted by a State party to the ICESCR would violate the international treaty and would be subject to the corresponding control by the Committee that protects it, regardless of whether, in the Spanish case, a violation of the obligation of art. 10.1 EC is alleged, as well as the obligation to give “sufficient reason” for the loss of social conquests, in accordance with the decision of the Spanish Constitutional Court (hereinafter, STC)  81/1982 and the limits existing in our SC (for example, legal security, non-discrimination, proportionality or interdiction of arbitrariness).

But these legal obligations of means are different from the so-called earmarking, which are still relatively unknown in our law and in our public management.

 1.1 What are earmarkings?

Earmarking or budgetary pre-allocation is a public management technique whereby a percentage of public expenditure is set aside for the realisation of people’s rights.

A widespread modality is the reservation of a percentage of future annual public budgets, which can be calculated as a percentage of GDP, for specific sectors (health, education or others).

 

Source: World Health Organisation

 

1.2 Where have they been used?

 They have been used in many countries, in relation to areas such as health or education (and in the EU, assigning budget amounts to EU countries for support for specific programmes in the Cohesion Policy and the Common Agricultural Policy).

The OECD has studied earmarkings in a number of countries:

 

Source: OECD

 

 

For its part, the World Health Organisation has studied them in the field of health:

Fuente: OMS

Source: WHO

 

2.3 Are there precedents in Spain?

 Although it cannot be said to have been a particularly used technique in Spain, there are precedents. For example, art. 14 of Decree 336/1988 of 17 October 1988, approving the Catalan Regulation on the assets of local authorities, not formally repealed, states that (the translation is mine):

“Article 14

14.1. The municipal land patrimony in municipalities where it is compulsory or optional is assigned to urban development management for the immediate preparation and disposal of building plots and the reservation of land for future use. It is also governed by its specific legislation and is integrated into that of the local authority as a separate asset.

14.2. The town councils of the municipalities referred to in the previous paragraph must make specific provision in their budgets for the establishment, conservation and expansion of the municipal land assets. The amount of expenditure may not be less than 5% of the total appropriated in chapters I and II of the general revenue budget“.

 In the area of housing, the recent Human Rights Plan of Catalonia states that (the translation is ours):

“It is imperative to increase public spending on housing and to ensure, from a legislative point of view, the availability on a compulsory basis. To this end, it is recommended to make use of the technique of budgetary pre-allocations, already used in other countries. The determination of the amount of public expenditure should take into account present and future housing needs on the basis of the insufficient and even decreasing investment in housing policies in recent years. ”

“In order to resume the promotion of social housing, it is necessary that sufficient public funding lines, linked to budgetary pre-allocations, are established in advance”.

“It is necessary to incentivise, through the establishment of a sufficient earmarking, the exercise of the right of first refusal by the Administration on the transfer of homes acquired in foreclosure processes, as an effective instrument to increase the stock of social housing throughout the territory, which, in addition, makes it possible to guarantee a social mix”.

The Human Rights Structure of Catalonia (EDHC), formed by the Catalan Ombudsman and the Human Rights Institute of Catalonia, delivered the Human Rights Plan of Catalonia (2020-2023) to the Catalan Government and Parliament in December 2019. This plan foresees a mechanism for monitoring compliance with the actions it contains and gives the EDHC the role of supervising this compliance, together with the country’s human rights entities, especially those that have participated in its elaboration.

 

1.4 Are Earmarkings feasible and effective in Spain in terms of entitlements?

 At the international level, earmarking has been analysed both in its positive and problematic aspects.

For example:

Source: World Health Organisation

 

But in this brief commentary we do not deal with the pros and cons from a political or public policy perspective. We will restrict ourselves to a legal view, which, moreover, focuses on the state sphere.

In a highly decentralized country like Spain, can a state law referring to a right provide for budgetary pre-allocations from a legal point of view? If so, would they bind the budgetary legislator?

The first question can have a different answer, depending on who the pre-allocation is addressed to. It may be to the state budget legislator, to the regional legislator or to the local councils.

In the first case, a state law pre-allocating expenditure in relation to the state budget legislator himself, there does not seem to be any constitutional problem in this respect. An earlier law of Parliament would address itself to a later law, to come, the annual budget law, by trying to subject the latter’s discretion to certain parameters.

A different question from constitutionality would be the effectiveness of the attempt to establish an abiding link. Indeed, from the point of view of legal technique and the relationship between norms, a later norm of equal rank can repeal an earlier law (art. 2.2 Spanish Civil Code).

It could be argued, however, that this would not be the case, as the state law referring to a specific right would be a lex specialis, a special law due to the subject matter, to be respected by the subsequent legislator.

On the other hand, our Constitutional Court has been extraordinarily lax with regard to the binding nature of the annual budget law so far, a position that has been the subject of dissenting dissenting opinions and doctrinal criticism. A clear example is the decision of the Spanish Constitutional Court (hereinafter, CC) 49/2015, of 5 March.

In this decision, Royal Decree-Law 28/2012, of 30 November, was considered to be in accordance with the SC, which left without effect for 2012 the updating of pensions, of all pensions, without distinction of amount, in the event that the Consumer Price Index (CPI) was higher than the forecast and on the basis of which the revaluation of the pension was calculated. The CC’s decision (the subject of a dissenting opinion by two Justice, with two more, as described above), states that the absence of revaluation was not retroactive and was therefore in accordance with the SC. It establishes that the revaluation of pensions was not obligatory for the annual budget law, but that it is the law that converts a simple expectation of rights (provided for in the substantive sectoral regulations) into an acquired right. Hence, when the Decree Law was issued in November 2012 that froze pensions without increasing the CPI, the SC said that it did not have retroactive effects, as it was the budget law that granted the right.

The aforementioned dissenting vote speaks of perplexity and concern, rightly so, we believe, because if this line is persevered with, rights would be handed over to the budgetary legislator of the day, who, to paraphrase Corti, will decide whether prisons are clean or pensions are kept decent depending on whether there is money, having no legal obligation to allocate money for such purposes linked to constitutional rights.

Such an interpretation, the absolute freedom of the budgetary legislator with regard to public spending on rights, which does not derive from the constitutional text, we insist, in reality supposes, to quote Corti again (the translation is mine):

“The Constitution is not only a constitutional law, it is also a law of the state. The constituent power not only manifests itself in an original way with the enactment of the Constitution and in a derivative way by reforming it, but it also makes itself present annually through the enactment of the budget law. The very fact of designating such a decision as a “law” is nothing more than the remnant of an outdated habit, since laws are subordinate to the constitution. In this case, on the other hand, it is sui generis, supra-constitutional decision, by which the constituent power comes to the fore to determine the extent to which respect for basic rights extends”.

We believe that this cannot be possible and that, instead, it is necessary to recover, applying it to these cases of regression of rights, the jurisprudence of the Spanish Constitutional Court itself, which has pointed out as (the translation is ours):

“dignity must remain unaltered whatever the situation in which the person finds himself, constituting, consequently, an invulnerable minimum that any legal statute must ensure, so that the limitations imposed on the enjoyment of individual rights do not entail a disregard for the esteem which, as a human being, the person deserves” (STC 57/1994, FJ 3 A).

This route has already given rise to decisions in the contentious-administrative sphere in Spain, such as the ruling of the High Court of Justice of Galicia of 12 April 2013, which has obliged the necessary public expenditure to be made available in order to make a constitutional right a reality, in this specific case, the right to health.

With regard to the abiding link between the regional legislator and the local regulator, we do know, in accordance with the doctrine of the CC, that there is no state spending power, i.e. the possibility of carrying out promotional activity with public expenditure if the state lacks competence over a matter.

In relation to each right, it should therefore be checked whether there is State competence on the matter, as we know, as well as other State competences that affect it (in Spain, articles 149.1.1 SC, 149.1.13, etc.). At this point, it would be necessary to analyse the possible interplay of these articles, for example, Article 149.1.13 SC and the bases of the economy, which have been interpreted by the CC in an expansive manner up to now, as is well known.

We can assume that, in any case, a drafting of a state law referring to a right with generic reference to obligations of means in accordance with the ICESCR should not present any competence problems.

With regard to the earmarkings themselves, if they represent a floor (not a ceiling) for rational and proportionate regional and local spending, they could also pass the test of constitutionality on the basis of the aforementioned articles, such as 149.1.1 SP and 149.1.18, because, in short, all rights, if they are to be guaranteed, have a cost.

The case of the Third Additional Provision of the Statute of Autonomy of Catalonia, analysed in the well-known STC of 2010 on the Statute, is, we believe, different from what is being presented here, since it deals with a debate on the binding of the state budget legislator by a Statute of Autonomy.

Indeed, the Provision stipulates that State investment in Catalonia in infrastructure, excluding the Interterritorial Compensation Fund, will be equal to the relative share of Catalonia’s GDP in relation to the GDP of the State for a period of 7 years. These investments may also be used for the release of tolls or the construction of alternative highways.

The CC pointed out in its 2010 ruling that it does not bind the State in the definition of its investment policy, nor does it undermine the full freedom of the Cortes Generales to decide on the existence and amount of such investments, specifying that the aforementioned paragraph is “constitutional” if it does not have “directly binding effects for the State”.

 

1.5 Retaining what is not spent annually? The distinct problem of budget execution

 

Finally, a different approach to pre-allocations of public spending on social rights would be the preservation of the unspent but foreseen in the annual budget for later execution.

It would be about overcoming the “concept” of: if it is not used, it is lost. But it must be borne in mind, as is well known, that budget appropriations must be managed within the budget year, in accordance with the principle of annuality enshrined in the Constitution (art. 134.2) and specified in the LGP (art. 34).

However, as is also known, there are two cases in which, for duly justified needs, and in the cases established by law, there are exceptions: in the case of the commitment of appropriations for future years (multiannual expenditure) and in the advance processing of expenditure files.

From this framework, it should be considered whether this is a public management problem, not a regulatory one, or whether, on the contrary, it is necessary to introduce in the future some other flexibility in the regulation for a better management to make rights a reality, which would mean modifying the General Budget Law.

 

2. Some final reflections

 

The binding of earmarkings would find its secure anchorage in an inclusion in the Spanish Constitution with a possible reform of art. 134 or 135 SC, as we have argued elsewhere. It is the Constitution that could effectively bind the budgetary legislator and put an end to his absolute sovereignty, the result of a tradition and way of thinking that is not relevant here, but which is the object of various doctrinal criticisms.

Thus, among the cases in which constitutions around the world impose budgetary pre-allocations, we can now highlight, for example, those of Brazil and Ecuador:

In the case of Brazil, the 1988 Constitution, in its art. 212, states that (translation is mine):

“The Union shall spend annually not less than 18% and the States, the Federal District and the municipalities at least 25% of tax revenues (…) on the maintenance and development of education”.

For its part, Ecuador’s 1998 Constitution, art. 71, indicated that (translation is mine):

“No less than 30% of the total current revenue shall be allocated in the budget for education and eradication of illiteracy”.

Now its 2008 Constitution, in its 18th Decree, establishes that the budget:

“Allocate progressively in annual increments of at least 0.5% of GDP until 6% of GDP is reached for initial and baccalaureate education.

And in its WP 22 that budget allocations shall not be less “than 0.5% of GDP up to 4% in health”.

Below the constitutional level, the rule that the subsequent law of equal rank repeals the previous one (art. 2.2 Spanish Civil Code), together with the highly debatable case law of the CC on the role of the budget law, augur practical difficulties of abiding linkage (unless the lex specialis derogat generali rule, already mentioned, is imposed), although not of constitutionality, clearly if the pre-allocation is so with respect to the general State budget in a State law referring to a constitutional right.

As for the state binding regional and local spending limits, various constitutional articles (those referring to specific state competence, others such as Art. 149.1.1 SC or Art. 149.1.18 SC, for example) can support them, as long as they are designed in a rational and proportional manner as a minimum guarantee for citizens and the budget.

As regards the inclusion of state legal reminders of international obligations of means or mandates without precise amounts to regional and local budgets, we do not believe that they present any problems of constitutionality.

Moreover, both these and the pre-assignments can open the door to future legal discussions on the non-compliance of these and, therefore, help to clarify a field such as the one presented here, which is still in a very immature state, despite its great relevance.

There has been much debate in recent years about the ceiling on public spending under art. 135 SC, as is well known, but there is still no similar debate in Spain about the need to ensure a floor for it, which would make constitutional rights a reality, beyond rhetoric.

This reflection is particularly necessary now, given the arrival of the Next Generation European funds and their use in the field of social and territorial cohesion, in relation to rights such as education and housing.

 

3. Relevant materials

 References to experts and judicial decisions used in the text are taken from:

PONCE SOLÉ, J., “Reforma constitucional y derechos sociales: la necesidad de un nuevo paradigma en el derecho público español”, Revista Española de Derecho Constitucional, núm. 111, 2017, available online at: Reforma constitucional y derechos sociales: la necesidad de un nuevo paradigma en el derecho público español | Revista Española de Derecho Constitucional (fecyt.es).

A similar but more up to date reflection can be found in the chapter by the same author:

“Taking Social Rights Seriously? The Spanish Case”, included in a forthcoming book by Hart Publishing entitled Contesting Austerity: A Socio-Legal Inquiry, edited by Anuscheh Farahat and Xabier Arzoz.

The Human Rights Plan of Catalonia can be consulted in Spanish here: Pla de drets EDHC_cast_def.pdf (sindic.cat)

OECD citations are from the document available in open access here: OECD iLibrary | Earmarked funds (oecd-ilibrary.org)

The citations to the World Health Organisation are to these two documents, available in open access here

WHO – Earmarking for health

And here

WHO | Arguments for and against earmarking

 

NOTAS

[1] As is well known, this body is made up of 18 independent experts with recognised prestige and competence in the field of human rights, who monitor compliance with the ICESCR and issue observations on the basis of the reports of the states parties to the Covenant.