Social spending and regional financing

In Spain, policies as basic and close to citizens as education, health, and long-term care (I'll call them social policies) fall under the jurisdiction of the regional governments. The strength and prestige of regional government administration, therefore, depend largely on their effectiveness in providing the corresponding services. However, these are policies that aim to guarantee citizens equal and dignified treatment on a universal basis. They contrast with housing and pension policies, which only aim to guarantee a minimum, above which provision will depend on citizens' income or worker contributions. These are policies, therefore, that consume a lot of resources, and therefore, the strength and prestige of the regional governments depend crucially on their adequate funding. If the former matters to us, we must be committed to achieving the latter.

In a (unitary) state, the level of social policy spending is determined by seeking a balance between the desire for maximum coverage and the reality of the overall tax revenue that a Parliament can approve. The principles of distributive justice recommend that taxation be progressive (those who have more contribute proportionally more), but with limits (those who have more before taxes should have more after taxes).

Obviously, not all citizens will absorb the same level of social (public) spending. Personal circumstances (health status, dependency, schooling, etc.) factor into these. Question: Can income level be a circumstance? Can we allow conditional copayments based on income? I would say yes, because it can be interpreted as an upward modification of tax progressivity. Another issue is that even without income conditionality, those who have more will be more likely to provide services privately.

In a federation—or similar—social spending is stratified into two phases. One goes from the global amount collected—by an agency or multiple agencies—to the availability of social spending in each member jurisdiction of the federation (distribution). The other goes from each member to its citizens. Regarding the first, it is worth emphasizing that we cannot mechanically apply the general model and treat the issue as if the members of the federation were citizens. We can allow for dependence on demographic characteristics (dispersion, density, age pyramid) or economic characteristics (cost of living) because they can be objective indicators of the cost of the needs to be met. But it would not be legitimate to condition based on per capita income (the richer a jurisdiction, the less it receives) because, all other factors being equal, this would violate the principle that, given a federal tax code, a citizen's contribution should depend on their income, but not on that of others. Regarding the second phase, the level of flexibility may be high in the organization, but not in guaranteeing the level of coverage established for the whole. At least on the downward slope. There may be some flexibility on the upward slope if the jurisdiction has the powers and resources.

Turning now to the Spanish discussion on the financing model, I would say that it should start from two premises: that the centrally established social coverage must be at the same level for all citizens, and that the regional financing system, in addition to allowing for it, must include a sufficient level of funds to cover expenditure components, such as infrastructure investments. I note that the debated principle of ordinality would be fulfilled without much difficulty because, if a degree of rationality prevails (is that asking too much?), the resulting investment spending would naturally be proportional to GDP—and, therefore, to taxes paid. The Catalan Statute prior to the LOFCA established that the fiscal transfer would be an average of what would correspond to the population and income. This lacked precision, but it was on the right track.

The current Spanish situation differs greatly from the approach described. The distribution has an air of arbitrariness. The current financing model should be modified to move toward a more generous and egalitarian reality in social spending. The Spanish government should tell us very soon how much additional resources it will channel. I think it should be around 2% of GDP, which should be reached over a period of years that would depend on economic growth. This is a fortunate figure because it could ensure that no autonomous region loses out, which seems politically indispensable. However, the Spanish government must also commit to two things. One, to channeling the additional funds appropriately via the financing model, not through the ministries. The other is that the financing model will be modified to ensure that everyone wins (per capita), but that the order of gains will be the reverse of the current order of mistreatment.