Public finances
Business 21/02/2022

Barcelona maintains higher spending while Madrid deleverages

State offsets Madrid's capital effect with more transfers to Barcelona City Council

2 min

BarcelonaBarcelona City Council maintained high levels of public spending in 2020, while Madrid City Council continued the deleveraging process started a decade ago, according to official data recently published by the Independent Authority for Fiscal Responsibility (Airef).

The two cities have "a special treatment that makes them different," explains Albert Carreras, professor of economics at the UPF and secretary general of Economy of the Generalitat between 2013 and 2016. The two municipalities are the only ones in the state that exceed one million inhabitants, despite the fact that Barcelona has been hovering around 1.5 million for years, while the Spanish capital also maintains a stable population of 3.2 million, twice that of Barcelona. That is why they are also the only two municipalities in Spain with a municipal charter, so the treatment of Barcelona, from a fiscal point of view, is almost that of a "co-capital", according to Carreras.

Likewise, in comparison with other Catalan municipalities, Barcelona operates "in another league", says Carreras, with a much higher income per inhabitant and the capacity to carry out policies that other municipalities do not have the capacity to.

The spending of the Barcelona City Council has been higher than that of Madrid for years, a trend that continued in 2020, when, according to the executed budget of both cities, Barcelona City Council spent €1,636 per inhabitant, more than the €1,375 per inhabitant spent by Madrid City Council.

There are several reasons for these differences. On the one hand, there is a question of political priorities for the municipal government. For example, social spending and spending in areas such as health or education are higher than in Madrid.

On the other hand, each municipality has different competencies. For example, Barcelona's transport company, TMB, is managed by the Metropolitan Authority of Barcelona, a supra-municipal entity that is financed by contributions from the city councils that are part of it, including Barcelona. On the other hand, the Madrid City Council does not have to spend on the metro, since the company that runs the service is owned by the regional government. Finally, we must take into account the capital effect, which favours Madrid since part of its facilities –especially cultural infrastructures, such as museums or theatres– are funded directly by the State, while in Barcelona the municipal participation is higher.

All this would explain, in part, why Barcelona receives more funding from the State. The Spanish government gives "very large subsidies" to cover the costs of public transport, explains Carreras, so Barcelona receives them directly and in the case of Madrid they are given to the regional government. In 2020, Madrid received €525 of state funding per inhabitant, well below Barcelona's €723. This fact allows, in addition, local taxes to be lower in Barcelona than in Madrid.

Madrid's debt is decreasing

The main difference between the two city councils is debt. The Madrid City Council has been reducing its level of indebtedness at a remarkable rate for years, an effort that Barcelona does not have to make. In 2010 the Catalan capital owed more than €700 per inhabitant and has been reducing it to the current €485. Madrid, on the other hand, closed 2020 at €585 of debt per inhabitant, down from €2,298 in 2012.

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