Franco gave away 1,500 homes in Sabadell with no income tax or VAT

Franco gave away 1,500 homes in Sabadell with no income tax or VAT

In 1963, the Spanish state handed over 1,500 homes in Sabadell. The question doing the rounds these days is an uncomfortable one: if income tax and VAT did not exist as we know them, where did the money come from? The short answer is that taxes did exist, but the structure of spending was radically different from today's. The long answer involves looking at the demographic pyramid, the number of government layers and the role of public land.

The Franco regime did not fund housing with a modern income tax, but with a combination of special taxes, social security contributions and state-owned companies that operated at a profit. There was no VAT, but there were levies on tobacco, alcohol and luxury goods. And the state owned stakes in Telefónica, Endesa, Iberdrola and Tabacalera which, according to the story being told, made money hand over fist because nobody was stealing.

How many layers of government paid for that housing?

The most repeated argument is not fiscal, it is structural. A single central administration, without today's 17 autonomous communities, drastically cut bureaucratic costs. On top of that came a young population with few pensioners: the demographic pyramid had an enormous base and very few people reached retirement age, so pension spending was almost symbolic compared with today.

Housing was not built with direct public money alone. The state organised the market: it decided how much, where and when. The private investor put up the capital and the builder put up what they were told. Land was handed over and the developer made up the thin margin through volume. A developer in the 1950s earned little per unit, but with access to financing could build an enormous number of homes.

The real cost of building a flat: 55,000 euros in 2006

Here comes the figure that stirs things up most. With free land, in 2006 a 90-square-metre flat could be built for 55,000 euros. Today, without free land, the same flat costs 130,000 euros in construction alone, due to the surge in costs. The difference is not just inflation: it is the price of land and the administrative burden.

The comparison with Europe is inevitable. Franco-era roads and railways were on a par with those of its neighbours, however third-world they may look today. In the 1980s, crossing into France made the infrastructure gap obvious. But the figure that really surprises is another one: in 1975, Spain had the highest life expectancy in Western Europe, at 73.44 years on average, ahead of France, Italy or the United Kingdom.

Why did the 1978 regime turn state companies into loss-makers?

The dominant narrative holds that the 1978 regime blew up the model. State companies that had previously generated profits became loss-makers, and privatisation began under Felipe González. Today the state owns fewer assets than in 1975 and carries an enormous debt. The conclusion drawn is that the problem was not spending, but who was running things and how much was being stolen.

The full breakdown of how that housing was funded, item by item, yields a surprising difference. The numbers are on the table, but the debate over whether it was sustainable or simply a demographic pyramid that had not yet exploded remains open.

What if the problem is not how much is paid, but who collects it and for what?