The Spanish ESC analyses trends in income distribution in Spain and the redistributive role of public policy. The report, drawn up at the initiative of the various groups forming the Council, looks at trends in income distribution in Spain from various viewpoints taking into account the economic cycles in the period analysed (1985-2011). Income distribution is considered in its functional and personal aspects and also in regional terms. The report also examines public policies for redistributing income as regards spending on the welfare state as well as income policy.The first section, devoted to the functional distribution of income, notes that in the period analysed wage-earners lost some of their proportional share in GDP, which rose a little in expansive periods but fell sharply in times of crisis and job losses. On the other hand there was at the same time strong growth in salaried employment, with a rise of nearly seven million employees. The Council highlights the sharp rise in debt over the period for both families and companies, which invested heavily, also encouraged by interest rates being kept low and the cash surplus in the financial markets.The second section, regarding income distribution in personal terms, notes that in the 26 years under study, the disposable income of Spanish households doubled. It finds that there was a large drop in inequality, especially in the second half of the 80s, coinciding with a phase of economic expansion and growth of the welfare state. But in the recession of the early 90s inequality increased and did not decrease with the long period of growth that followed. The current crisis has considerably exacerbated income differences. The section also compares the distribution of income across the Spanish regions.The third section analyses public policies for redistribution over these three decades which saw the consolidation of a welfare state in Spain from a twin perspective of expenditure and income, considering the tax system's role in redistributing income across the population.The Council notes that the period under study was historically decisive in that a modern and wide-ranging welfare state was set up with a level of expenditure lower than in most European countries, though its development has been set back in the crisis. But disparities with other EU countries persist.The Spanish pensions system, characterised by its contributory, fairness and solidarity criteria and the wealth-sharing principle, is the public revenue programme with most redistributive potential. As regards unemployment coverage, as an automatic stabiliser of the economy and redistributive tool, it showed its potential effectively in the employment crises over the period. But its economic sustainability in the medium or long term is compromised by its close link to employment trends. The Council's Report also stresses that the underground economy and tax fraud undermine both the raising of revenue and the redistributive potential of tax policy. Accordingly the Council deems that in order to fund a welfare system equivalent to those of Spain's chief European partners and, generally, to give the Spanish public sector the capacity needed to intervene effectively for economic stabilisation, income redistribution, resource assignment and revitalisation of the economy, a sufficient level of revenue needs to be reached. In all events the Council judges that the unsatisfactory response by the Spanish tax system, which has become evident in the current difficult situation of Spain's economy, demands a debate on the need to undertake a reform with a broad consensus so as to stabilise the tax system with a view to increasing its capacity to raise revenue, its fairness in the spreading of the burden and its efficacy as regards the economy.
