Finance

Government paying 15 million euros interest for late payments

The amount of interest paid equates to the cost for ending the Soller Tunnel toll system. | Jaume Rossello

Majorca Daily Bulletin reporterPalma28/02/2017 00:00

Last year the regional government paid 15 million euros interest for late payments to suppliers. This related more or less specifically to the health service and included around one million euros of outstanding payments dating back to 2011 and through to 2013, when the Partido Popular were in government. During that period there were regular missed payments owed to the Son Espases Hospital contractor, while other payments that attracted interest were for invoices for medical supplies to different hospitals and health centres.

The total interest payment is equivalent to what the Council of Majorca says it will pay to compensate the Soller Tunnel contractor, as and when the toll is done away with (this is due to be on 1 September). It is also not so far below the 20 million euros that the government is scheduled to pay for its social income scheme, while it is a quarter of the lower estimate for tourist tax revenue in 2017.

The 15 million was the highest that has been paid in recent years, but interest has been incurred for late payments since 2008. Under law the government is meant to pay within 30 days of an invoice being issued, but it has been defaulting in a systematic fashion since the early years of economic crisis.

A supplier is perfectly entitled to add interest if payment is late and also to take the government to court if it so wishes. And as is clear from the government's own information, there could have been numerous court demands. In 2015, the average time it took for payments to be made was 62 days. Last year this increased to just under 70 days.

It is the IB-Salut health service which is the principal culprit. Average payment time last year was 78.3 days, an increase from the 75.8 days in 2015. However, this average disguises the fact that in November 2015, only a few months after the formation of the current government, there was a peak of 117 days where the health service was concerned.

Such has been the government's failure to comply with payment deadlines that Madrid has threatened to pay suppliers directly and then subtract the amounts from financing to the regional government.