Council opinion on the 2017 Stability Programme of Spain
This document includes the following recommendations in the corresponding reform areas
1. GROWTH AND COMPETITIVENESS
1.1 R&D and the knowledge society
- To strengthen productivity and competitiveness, Spain would benefit from further promoting research and innovation. Yet, innovation performance has been declining and is now at a lower level than in 2007, while the country's gap to the EU average has increased over time. Low innovation performance coincides with declining private R&D expenditure and points to weaknesses in the research and innovation governance framework.
- The State Agency for Research responsible for managing central government research and innovation funding has become operational in early 2017. Until now, there is no systematic multiannual planning of support programme budgets. The effectiveness of support programmes is not systematically evaluated to enhance their design and implementation.
- Due to a lack of incentives and the rigidity of university governance, public-private cooperation also remains weak and the mobility of researchers between public and private sector is low.
- Coordination across government levels is not optimal, and as a result national and regional policies do not operate in full synergy. It is needed to strengthen its governance across government levels.
- Ensure adequate and sustained investment in research and innovation.
- Weak education outcomes negatively affect the longer-term potential for productivity growth in Spain. Despite significant improvements over the past years, the early school leaving rate remains among the highest in the EU.
- Address regional disparities in educational outcomes, notably by strengthening teachers' training and individual students' support.
- Spain has the second highest grade repetition rate in the EU, which increases the risk of school drop-out, lowers attainment expectations and weighs on education costs.
- Employability of tertiary graduates remains comparatively low.
- The reduced mobility of students and academic staff, limited traineeships' opportunities, lack of incentives and the rigidity of university governance remain obstacles to cooperation with business on education or research.
- Increase labour market relevance of tertiary education.
2. COMPETITION AND REGULATION
2.3 Red tape and business environment regulation
- Easing the barriers for businesses to be created, operate and grow, would therefore result in increased investment and productivity
- Coordination between relevant public administrations, including at sectoral conference level, requires more efforts. This is essential to ensure that existing and forthcoming legislation at all levels effectively tackles unnecessary market entry barriers, including for new business models in the collaborative economy.
- In the retail sector, dual authorisations for retail establishment continue to unnecessarily restrict market entry.
- Market access requirements foreseen in the vehicle-with-drivers services sector legislation and the short-term rental accommodation services legislation at regional level may unnecessarily hamper the balanced development of the collaborative economy.
- Ensure a thorough and timely implementation of the law on market unity for existing and forthcoming legislation.
2.4 Professional services
- Regulation of professional services remains comparatively restrictive. Protectionist rights (‘reserved activities') are granted selectively to some service providers, excluding others with relevant similar qualifications.
- In a large number of professions there is a mandatory membership requirement in a professional association. The level of restrictiveness is higher in Spain than the EU-weighted average for civil engineers, architects and tourist guides.
- The draft professional services law envisaging, among other things, rationalisation of professional association membership has still not been adopted. This reform also defines increased transparency and accountability of professional bodies, opening up unjustified reserved activities and safeguarding market unity in the access to and exercise of professional services in Spain.
3. LABOUR MARKET
3.1 Labour market regulations
- Transition rates from temporary to permanent contracts are very low in comparison to the EU average
- Some features of the Spanish labour market may still discourage hiring on permanent contracts, including uncertainty in case of legal dispute following a dismissal, along with comparatively high severance payments for workers on permanent contracts
- Spain has not yet developed a comprehensive plan for fighting labour market segmentation, following the 2014 agreement between the government and social partners.
- Take measures to promote hiring on open-ended contracts.
3.2 Active labour market policies
- There is scope to improve the provision of extended services to jobseekers, in particular the long-term unemployed and beneficiaries of income guarantee schemes.
- Cooperation of public employment services with employers could be enhanced, notably by increasing the share of vacancies handled by the employment services.
- Reinforce the coordination between regional employment services, social services and employers, to better respond to jobseekers' and employers' needs.
5. FISCAL POLICY AND PUBLIC ADMINISTRATION
5.1 Economic governance
- Lack of regulation of lobbying have not been the object of a specific follow up yet
5.2 Fiscal consolidation and fiscal reform
- Spain has relatively low VAT revenues. This is mainly due to Spain extensively applying exemptions or reduced rates on various products and services
- Spain's revenues from environmentally related taxes are among the lowest in the EU. Taxing pollution and resource use can generate increased revenue and bring important social and environmental benefits
5.3 Reform of the public administration
- Spain still lacks a clear and consistent public procurement policy framework that ensures legal compliance, a high level of competition and economic efficiency, namely through effective ex ante and ex post control mechanisms, enhanced transparency and coordination across contracting authorities and entities at all government levels.
- No tailor-made preventive strategies to mitigate corruption risks have been developed at those government levels nor is there a shared preventive strategy across government levels.
- Lack of legislation to protect whistle-blowers has not been the object of a specific follow up yet
- The degree of independence of the recently established Office of Conflicts of Interest has not been the object of a specific follow up yet
- The protracted judicial procedure for corruption cases could result in impunity in complex corruption cases for which the time limits would not be sufficient for building cases
6. WELFARE STATE
6.3 Other welfare state reforms
- There is scope to enhance the regional public employment services cooperation with social services, so as to improve the provision of extended services to jobseekers, in particular the long-term unemployed and beneficiaries of income guarantee schemes.
- Disparities persist in the eligibility conditions of income guarantee schemes and in the link between activation and protection across regions and schemes. Certain categories of vulnerable households are left out of the income guarantee arrangements.
- The limited effectiveness of the income guarantee arrangements is partly explained by large disparities in adequacy and access conditions of the regional minimum income schemes and by the fragmentation of the national benefit system into multiple schemes addressing various categories of jobseekers and managed by different administrations. Fragmentation introduces discontinuity in the support given to those in need of it and hampers the delivery of integrated pathways.
- Family benefits are poorly targeted. Moreover, when taking into account the impact of tax credits, the tax-benefit system is overall slightly regressive.
- Childcare use strongly increases with family income, suggesting barriers to access for low-income parents.
- The provision of long-term care services is improving, but it differs across regions and current needs are still not met.
Related reform areas
- 1.1 R&D and the knowledge society
- 1.4 Education
- 2.3 Red tape and business environment regulation
- 2.4 Professional services
- 3.1 Labour market regulations
- 3.2 Active labour market policies
- 5.1 Economic governance
- 5.2 Fiscal consolidation & reform
- 5.3 Reform of the public administration
- 6.3 Other welfare state reforms