Spain invests 40% below average in Catalonia

BarcelonaEvery time that Spain’s incumbent Finance Minister presents the new budget, it is always analyzed from two points of view. Firstly, from a sectorial perspective, to find out which spending areas are a priority and, secondly, from a territorial perspective. Year in and year out, Catalan parties and social agents complain about the lack of investments budgeted for Catalonia by the Spanish government, which is always clearly below average in relation to variables such as Catalonia’s population. This is a fact that helps to explain the fiscal deficit that the nation repeatedly suffers from, some 8% of its GDP on average, according to Generalitat calculations. Nevertheless, this exercise is not often done in relation to compliance with the budgeted amounts, despite the fact that in the past few years this has been easier to do thanks to a report on public investment by region, which is issued biannually by the central administration. Last week this report on the 2015 data was released, and it shows that Catalonia was well below the average in spending actually carried out. Specifically, the Spanish government invested €99.50 per capita in Catalonia, only 61% of what it spent on average, which was €163 per capita for the whole of Spain.

These data --which exclude the Basque Country and Navarre so as not to distort the results as these regions enjoy a special financing agreement-- are more comprehensive starting in 2015 than they have been in previous editions. Since 2009 --when the reports were first issued-- they only used to include direct investments by ministries, and organizations and agencies that reported directly to them. But starting in 2015 they also include the entire public sector, which makes much greater public investments than just the Spanish government-- and this includes organizations such as Adif and Renfe (trains), as well as Spain’s Ports Authority. As a result, the findings are much more accurate.

And what does this review show? That only four regions received investment per capita that was lower than the Spanish average. Bringing up the rear was the Canary Islands, where Madrid invested €68.50 per person; it´s worth noting, however, that although it forms a part of Spain’s common financing regime, this region enjoys certain exceptions to the general system, such as being allowed to collect an indirect general Canary Island tax --as a substitute for VAT-- so as to boost its revenue and improve the regional services. Close behind it, however, are the Catalan Countries--Catalonia, Valencia, and the Balearic Islands--, with a chronic deficit in financing and investments received. This means that the three territories together often push for a reform of the system and call for the construction of pending projects, like the Mediterranean Railway Corridor-- demands that bring together leaders of many parties in the three regional parliaments.

Thus, the Spanish government and its public sector only invested €93.90 per capita in Valencia, €99.50 in Catalonia, and €106.80 in the Balearic Islands. These amounts are clearly well below the Spanish regional average. In fact, Madrid, the fifteenth community in per capita investment, was slightly above average with €171.20 per capita. And at the other end of the spectrum were Castilla y León, highly favored by spending decisions of the Spanish government, with €553.20 invested per capita, up to five and a half times more than in Catalonia. Other regions that are well above the average are Cantabria (€346.90), Galicia (€315.70), and Asturias (€238.90).

This summary includes only public investment and, as such, does not take into account other expenditures such as social services or the salaries of public employees-- which also helps us to understand the fiscal deficit or surplus of the territories. Nevertheless, it is precisely these figures that are especially important in times of crisis for the economic stimulus that they bring to a region, as they allow for the development of important infrastructures and the concurrent boost to workers and businesses in the area, especially in struggling sectors such as construction. And it is specifically Spain’s Public Works Ministry and public companies connected to transport that invest the most --in the case of Catalonia, Public Works spent 131 million of the 152 million that the ministries invested here in 2015.

In any case, the criticism that Spain receives year after year for its investments in Catalonia, coming from Catalan social agents and political leaders, falls short of the mark if the focus is put on the investment actually made when all is said and done. In fact, the Spanish government budgeted for investments of 1.04 billion euros in Catalonia, but actually delivered only 736 million, or 70%. The reality is that, in 12 of the 15 regions included in the common financing regime, the investments actually realized were lower than the budgeted amounts, in two it was almost identical to the forecasts, and in only one case was it higher. This was the region of Madrid, where the Spanish government budgeted investments of €856 million and delivered €1.092 billion worth, some 27.7% higher than budgeted initially.