Sánchez's “social shield” benefited the rich more than vulnerable families

For Pedro Sánchez, his Government has been “the most social” in history and the one that “has protected the most vulnerable households the most.” This is what he and his ministers have made public on countless occasions since the pandemic hit the economy fully in 2020. And this seemed clear after the deployment of aid, discounts and social plans to date to try to minimize the covid crisis. . However, the data provided yesterday by the Institute of Economic Studies (IEE) say the opposite or, at least, they put an end to a good part of that approach. They have done so with the report “Business freedom in Spain. Economic Freedom Index 2024″, in which they confirm that the The coalition government's public transfer policies have “mostly” favored the highest income brackets.

Because? Because the 31% of this type of monetary transfers from the State to households – which would include elements such as the social bonus, the minimum vital income, the reduction in VAT on food, the reduction in the price of gasoline, the tax cut on the receipt of electricity and, above all, public benefits, such as unemployment or pensions– has been concentrated in the 20% of the population with the highest incomesthe highest percentage of all sections, much higher than the 19% average recorded in OECD countries.

«The design and implementation of this type of policies could be generating a greater inequality of opportunities and would go against some of the objectives that pursue this type of policies referring to equity and social justice,” explained the president of the IEE, Íñigo Fernández de Mesa, who is committed to “improving the policy of redistribution of wealth” taking into account that these measures have reduced the risk poverty only 9.5 percentage points in Spain – according to 2021 data –, far from the 20 points that has been reduced in other European countries, “a figure that makes these social policies evident.”

In this sense, and in order to improve equity in redistribution, the study points out that «if this type of benefits were reduced to the highest-income sector of the populationin a percentage similar to the average recorded by OECD countries, a significant improvement in spending efficiency would be achieved». According to their calculations, reducing monetary benefits to the richest population from the current 31% to 19% of the OECD average would mean a decrease in public spending that wouldwould be equivalent to around 2% of GDPwhich “would improve the equity of the aid system and generate an improvement in spending efficiency.”

Based on the terms of efficiency of this expense, the CEOE think tank maintains that “an inefficient redistribution implies an inadequate allocation of public resources destined for aid programs and social transfers”, because they are diverted towards high-income groups. by universalizing aid“wasting opportunities to use these resources in other priority areas, such as relieving fiscal pressure or reducing debt.”

Therefore, Spain is among the advanced countries where the percentage of the population with the highest income receives a higher volume of transfers, only behind Portugal and Italy. Spain's position is “significantly” far from both the European Union and the OECD average, which implies that «our redistributive policy generates less equality of opportunities» and “undermines the efficiency” of the public spending programs that are developed with these transfers, “additionally deteriorating our budget balance and compromising, to a greater extent, the sustainability of our public finances,” said the general director of the IEE, Gregorio Izquierdo, who insisted that the Spanish tax system has “an inferior redistributive capacity” compared to other European countries “for one thing.” greater inefficiency of the tax system and social benefits». A situation that intensified during the pandemic crisis, especially in 2019 and 2020, the result of a redistribution policy “that is not selective, which perpetuates and hinders upward mobility for those who find themselves in disadvantaged situations.”

The IEE report also concludes that «Spain has a poor position in terms of economic freedom among developed countries»occupying position 55 out of 184 in the global ranking, very far from the top positions and in a relatively low situation when compared to developed economies, penalized by “the excessive size of the State, which has been oversized since the pandemic, due to the imbalance of our public finances and due to the increase in fiscal pressure.

Spain, with a value in the Economic Freedom Index (ILE) 2024 of 63.3 points, maintains position 31 out of 38 in the OECD ranking, with a score almost 10% lower than the average of developed countries , and 23.7% lower than that of Switzerland, the OECD country that presents best practices in the area of ​​economic freedom. «The Spanish economy is clearly far from most developed countries and has remained stagnant in the evolution of this index during this last period». In comparison with the European Union, Spain does not benefit much either since it has fallen one position compared to last year, currently occupying position 23 among the 27 community countries.