Friday, November 30, 2007

Fair Shares For All?

A revealing report was published this week on the question of how income is distributed in Spain in relation to the wealth of each autonomous region. There has been much talk about how the system of devolving central government powers to the regions puts an end to the idea of solidarity across the country as the wealthy regions hold on to more of what they earn. Well the conclusion of this report is that this has not been the case; at least during the period 1991-2005.

The region which contributes most to the redistribution of resources is Madrid, followed in second place by Cataluña. However, not all of the richer regions are contributors; both Navarra and the Basque Country have special regimes which mean that they make no significant contribution. Maybe that's why they have such big houses? Despite this, the overall picture is one of a system that largely works; and shows that greater regional autonomy doesn’t necessarily have to mean an end to a policy of redistribution between rich and poor. Much of the wealth of Madrid and Barcelona is a product of the efforts of those who left their native Andalucia or Extremadura in search of better times, it seems only right that there should be some flow back to these poorer regions. Were it not so, then the gap between rich and poor would only get bigger.


Tom said...

Absolutely right. And how about sending some of those fatcat surpluses from Andalucia and the like to us hard done by in MAdrid and Barcelona?

Graeme said...

I'll settle for a good ham and a share of the aceituna harvest.

Rab said...

According to university professors in Barcelona, the report accounts for "shared services" apportioning a population-weighted share to all regions. However, this is not the case as the vast majority of the Civil Service of the Administración Central is based in Madrid. This is why Madrid comes up as a net contributor when in fact it is not. "Shared services" expenditure is apportioned to the regions when in fact stays almost exclusively in the capital.
If this is true, the report is quite flawed.

I am trying to get hold of the report myself and do the numbers over Xmas, anybody has a link to the report?

Graeme said...

Well there was a report cited in Público yesterday, but it's very out of date as it covers the period from 1991-96. There are factors which might exaggerate Madrid's contribution but the report is not just about Madrid - the overall picture is one of richer regions contributing more.

Cap said...

Don't forget that many companies have their Spanish headquarters in Madrid so their taxes are counted there, even though the business is conducted throughout the Spanish state. This adds to the "civil service" effect already noted, and indeed is even more significant in presenting Madrid as a net donor when the opposite is in fact the case.

The Spanish authorities continue to resist open accounting as they know that this would reveal the enormous imbalance, and the fact that Catalonia funds Spain, while receiving insults in return.

Graeme said...

Barcelona is also a major centre for companies, and I suspect that there will be plenty of companies paying taxes there who operate in other parts of Spain too. Maybe not so much as Madrid, but still a factor.

Even if you take Madrid completely out of the equation it is simply not true to say that "Cataluña funds Spain". But nobody on the nationalist side in Cataluña criticises the Basque Country or Navarra for having arrangements which make them wealthy recipients. I'm all in favour of transparency but lets apply it to all and not just use it so selectively.