Spanish state pays people to live in Mallorca

Did you know the Spanish state essentially pays people to live in Mallorca? Crazy, right?

Most people are aware that Spain’s territory is made up of more than just the Iberian Peninsula. The country includes the Balearic and Canary Islands, as well as the less well-known autonomous cities of Ceuta and Melilla in northern Africa.

What many people certainly don’t know is that the residents of these non-Peninsular regions enjoy a subsidy on the cost of travelling to the mainland. The state pays 50% of their air fares and 25% of the cost of their ticket if they travel by sea (I’m not sure of the sense of these proportions from an environmental point of view, but that’s a separate issue). While budget cuts this year saw a proposed reduction in spending on these subsidies of 16.5%, from €395 million to €330 million, these savings will somehow be made without reducing the level of the subsidy itself.

Menorca: hell hole?

The policy is problematic in three main ways.

The first issue is what, anecdotally, seems to be an alarming incidence of fraud. All of the people I know in Barcelona who are originally from one of these regions have maintained their registration as residents there in order to be able to continue claiming the subsidy when they return (usually multiple times per year). Apparently, until recently you didn’t even need to show your residence document (padrón) to claim the discount; it was enough that your national identity document was issued in one of the eligible areas.

While my fraudulent friends admit the dubious moral status of their actions, they all staunchly defend the principle of the subsidy for genuine claimants. The aim of the policy is to compensate residents for the disadvantage they suffer of being cut-off from the mainland.

This brings us to the second problem I have with the subsidy: the inconsistency in the application of the principle that it seeks to uphold. There are lots of isolated populations in Spain’s interior which suffer from poor transport infrastructure. In fact, it is probably more difficult and expensive to get from a remote outposts in Castilla y León to Madrid or Barcelona, than from the Balearic or Canary Islands. As popular tourist destinations, the islands are relatively well-served by both national and international transport links.  Despite this, people in long-lost villages such as Santaverás de Campos aren’t paid a subsidy to run their cars. That’s just not fair.

Santaverás de Campos

My biggest objection, however, isn’t the fraud or the inconsistency of the policy, or even the fact that 300 million Euros a year are being handed to Ryanair and Vueling at a time when health and education spending is being cut. Even if fraud were eliminated and the treasury was overflowing, this policy wouldn’t make any sense.

I’m not against subsidies per se, but their function should be to intervene in a strategic, meaningful way to correct the undesirable consequences of the free market.

In my view, the national distribution of the population isn’t a good candidate for direct state intervention. Not only are people free to relocate to optimize their preferences, but their free movement has relatively few negative social and economic outcomes. The free market serves us well in this area.

Remote, less populated regions of every country already receive various forms of indirect subsidies. It costs the same amount to post a letter from an isolated village as from a large city, and utilities, infrastructure and services are (or should be) available everywhere. In this case, subsidies rightly ensure a basic standard of living, and access to essential health and education services, for all citizens.

Nonetheless, any given place will have its advantages and disadvantages, and citizens have the freedom to move according to their priorities. Menorca, for example, offers a high quality of life, excellent food, and a thriving tourism industry. I’m sure that if you were a nature-loving hotelier, or a windsurfing civil servant, you could be very happy there. If you want to work in finance or bio-engineering, or crave the buzz of a big city, then it probably isn’t the place for you. That’s the great thing about freedom of movement: you can leave.

Come to Barcelona: it’s fantastic!

For any island-dwellers are that unsatisfied with their lot, maybe the state could give them a free one-way ticket off the island, rather than paying half the cost of their flights for the rest of their lives! Something tells me that, given the choice, most would choose to stay where they are.