Catalonia not able to fight poverty within the ‘autonomic framework’, report finds

The Catalan Ministry for Economy and Tax Office presented this Thursday ‘Economy note 103: Analysis and tools to tackle poverty and inequality’. The document includes 19 extensive articles from around 30 experts, technicians and academics and stresses that the ‘autonomic framework’ regulating the economic and social policy of the Catalan Government does not leave ‘enough room’ to cope with poverty and inequality. In this sense, Catalan Vice President and Catalan Minister for Economy and Tax Office, Oriol Junqueras, said that this situation has forced him to prepare a budget for next year ‘that is neither the one Catalans deserve nor what they need’ because it does not correspond to the ‘economic and fiscal effort’ made by the citizens. The Secretary for Economy, Pere Aragonès, stated that the findings of the study constitute another reason for independence. ‘We want a state to be able to tackle inequalities’, he said.

The document confirms that ‘the restrictions on powers and availability of income of the current autonomic framework limit the scope of Catalan Government’s public policies’. The report mentions, for example, the tax system and notes that ‘the current tax design should be reconsidered so that it has a more redistributive nature’. However, the text points out that ‘the Catalan government is unable to make this changes, because the major taxes are managed by the [Spanish] State’.

In this regard, Aragonès opened the event by ensuring that the preparation and publication of the study also aims to explain why the Catalan Government ‘wants a Catalan state to deal with inequalities’ in a more effective way. The general director of economic analysis, Natàlia Mas, also stressed that this desire ‘offers a unique opportunity to discuss what should be the economic and social priorities of the new State’.

‘Despite us striving to make the budget better, it is never what the people need and deserve. It is not what they need because it requires more resources in many extremely important areas, and it is not the one they deserve because we make a fiscal effort much important than the resources the Catalan Government has’, explained Junqueras.

Regardless of the difficulties, the Catalan Vice President ensured that the economy ‘will continue to devote the highest percentage possible’ to fighting poverty. ‘The budget proposal we are working on focuses on the attempt to solve entrenched poverty, which the macroeconomic recovery has not addressed’.

Budget for 2017 to be ‘the most social ever’
After extending the budget for 2015 due to pro-independence radical left CUP’s veto to the proposal for 2016,the Catalan Ministry for Economy and CUP have agreed to put to vote the budget for 2017, which Junqueras considers ‘the most social ever’.The draft increases social expenditure by 989 MEUR in comparison to the amount allocated for this purpose in 2015. 391 MEUR will be allocated to education, 407 MEUR to the Health System and 191 MEUR to the Work and Social Affairs Department. Thus, the amount assigned to social expenses for 2017-2018 totals 24.4 billion euro which represents nearly one million more than in 2015 and 611 million more than in the last bill, rejected by CUP last June.

Moreover, the draft is set to include tax reforms as well as the introduction of new taxes especially oriented toward avoiding property speculation. Amongst these, the document which CUP’s National Board will have to put to vote this Saturday, foresees the increase of tax on property transfers which are worth more than 1 MEUR. This will allow the Government to collect 27 MEUR more in 2018. The draft also foresees the creation of a new tax on non-productive assets which will affect legal entities which have properties and vehicles which are not used for any economic activity.

Poverty in Catalonia
In 2015, the risk of poverty in Catalonia affected 19% of the population, 1.9 points less than in 2014. This rate is lower than the Spanish average (22.1%), but higher than the EU (17.2%). In terms of inequality, Catalonia would be the 11^th most unequal country in the EU and Spain is the 7^th according to the Gini index, which measures inequality.

The study also notes the correlation between the price of houses and the poverty index. Between 1997 and 2007, wages increased by 51%, whereas the price of homes did so by 287%. The housing system in Catalonia is among those with the highest proportion of private ownership of property (almost 98% of the total). In contrast, the average of homes owned by the State or social entities is around 15% in the EU. In fact, in Austria and Germany it is close to the 25%, and in the Netherlands it exceeds 30%.

Regarding the economic recovery, the document says that it is enabling a significant reduction in unemployment. However, the risk of poverty faced by workers in Catalonia is still very high (11.2%), one of the highest in the euro zone (which has an average of 9.5%) and the EU (average of 9.6%). This shows that structural problems related to high unemployment, high temporary and long-term unemployment persist, despite the recovery.

The study also refers to the elderly and states that the crisis has had a real impact on them. It emphasises the economic consequences resulting from investment in preference shares (80% of the people affected are older than 65 years), the consequences of energy poverty (16% of elderly people cannot keep their homes well-heated) and the non-deployment of the Law of Dependency. It also stresses that older people have been key in cushioning the impact of the crisis on members of their families: in 2010, 23.8% of elderly helped relatives financially.

Recommendations to address inequalities
The document stresses that ‘it is necessary to review in-depth the social benefits so that they are more flexible and adaptable to the new forms of poverty’. ‘Some of them are inaccessible, outdated or arrive at the wrong time’, it states.

In this regard, one of the articles of the study proposes to create a Basic Income in Catalonia and believes that ‘it is possible to finance it’. Indeed, the authors advocate for an ‘unconditional monetary allowance for all people’ of €7,471 per year for adults and €1,494 per year for children under 18. This income ‘would replace all the current benefits’ of lower amounts, representing ‘a saving of €92,222 million, according to 2010 data’. The authors believe that it is possible to finance the income if in Spain ‘everyone pays a single rate income tax of 49%’. These measures, according to the text, would reduce the inequalities and would be a ‘driving force for the emancipation of young people’.

Catalonia to create an observatory of poverty
Pere Aragonès explained that the study serves also as a ‘first step’ to create a permanent observatory of the indicators of welfare and poverty in Catalonia. The aim is to ‘monitor poverty and inequality’ from the Ministries for Economy and Tax Office and Employment, Social Affairs and Families. The Secretary for Economy detailed that the two Ministries are working on the ‘design of a table of indicators of social progress to complement economic variables such as GDP’. The aim is to obtain data that helps to take ‘political decisions and improve the Government action’.