The Chairman of the Parliamentary Budget Office (PBO), Giuseppe Pisauro, testified (in Italian) today before the Budget Committee of the Chamber of Deputies during a hearing on the “Territorial Distribution of Public Resources for Regions”.
The interregional redistributive impact of the public finances is generally estimated using an indicator known as the “fiscal residuum”, which is essentially represented by the difference between revenues generated in a particular region and expenditure on services rendered by any government entity in the same region. A negative fiscal residuum indicates that the public budget generates a redistributive flow out of that area to the rest of the country; if positive, the redistributive flow from the rest of the country is directed to that area.
Much of the redistribution between territories is the result of the interaction between national spending programmes ‑ whose ultimate beneficiaries are individuals based on characteristics independent of the beneficiaries’ area of residence (e.g. age, health status, income) ‑ and how these programmes are funded, through a tax system based on the principle of ability to pay. Fiscal residua for a region or any other territory are the sum of the fiscal residua of the individuals residing in that area. The territories as such do not bear the tax burden and benefit from public spending, but rather it is individuals who do so. Reducing the size of regional fiscal residua would require the redefinition of the division of taxation among levels of government and a corresponding reduction in the level of benefits provided at the national level, supplemented by differing levels of local benefits. In this case, place of residence would become a relevant characteristic for the differentiated treatment of individuals.
The information currently available on interregional flows is highly uncertain, making an unequivocal assessment difficult. There are two main official sources available for calculating fiscal residua: the Bank of Italy’s analyses of regionalised public finances and the regional public accounts database developed by the Agency for Territorial Cohesion. Both sources allocate the revenues and expenditures of general government entities to the regions, using different criteria. The values of fiscal residua calculated in these two systems may therefore differ significantly, although they generally agree on the sign of the redistribution from and to the various regions.
The data confirm that regional per capita revenues are roughly proportional to regional per capita GDP (they are higher in richer areas), while the distribution of regional expenditure is much more uniform in relation to changes in regional per capita income. Consequently, regions with higher GDP have negative residua (revenues exceed expenditure), while lower GDP regions have positive residua (expenditure exceeds revenue).
An examination of per capita expenditure net of interest spending by macro-region reveals that that, given national expenditure of 100, in the North the value is 126 for the special-statute regions and 99 for the ordinary-statute regions. The latter is similar to that for the Centre if we exclude Lazio (134). Finally, in the South, the corresponding values are 88 for ordinary statute regions and 91 for special statute regions.
The objectives of territorial redistribution and the narrowing of territorial gaps in terms of development potential are addressed by cohesion policies funded partly by EU resources and partly by national funds. These policies, which support capital spending in the South in particular, have not, however, prevented the virtually constant decline in such expenditure since 2001, the exceptions being the final years of Community programming cycles, in particular 2009 and 2015. The reduction has also involved the Centre-North, where the decrease since 2010 has been slightly greater than that in the South.
The recent petitions advanced by the regions of Lombardy, Veneto and Emilia Romagna to initiate consultations with the government in order to obtain the enhanced autonomy referred to in Article 116, paragraph 3, of the Constitution (“differentiated federalism”) are in themselves neutral on the fiscal and financial levels. However, if the request for new functions is connected with a request to retain a proportion of the taxes collected in the territory that is not commensurate with the historical state expenditure for which devolution is being sought, thereby making differentiated federalism more like the model adopted for the special-statute regions, this would obviously reduce the currently observable interregional flows.