The Spanish government is preparing to approve a new package of measures at the last council of ministers this year. This anti-crisis aid is intended to alleviate the impact of the war in Ukraine, and the ongoing inflation,
This will involve €7-10 billion. The decree combines the extension of some already ongoing initiatives together with the approval of new ones. However, its negotiation is still a challenge, as there is friction between the two government partners on some issues. Sources on both sides admit that the plan has not yet been finalised and negotiations continue this morning.
Anti-crisis aid package
The most novel aspect will be the approval of a cheque to help the most vulnerable families alleviate the effects of inflation. However, the final amount and size of which are yet to be determined. Also anticipated is the disappearance, after nine months, of the 20 cents per litre discount on petrol and diesel. On the other hand, it is expected that tax cuts on electricity bills will continue. The measures will take effect on 1 January and be in force throughout 2023. A year marked by municipal, regional and general elections!
Here is what is known about the new package the government is finalising:
Energy tax cuts
The reduction of VAT on electricity from 10% to 5% will be extended. The suspension of the production tax and the reduction of the electricity tax to the minimum allowed in Europe will also be maintained. There are several solutions to reduce electricity bills. Some of them have been around for a long time, even before the war in Ukraine, as the rise in electricity prices began to affect the finances of many households as early as spring 2021.
The latest figures from the Spanish Tax Agency estimate the impact of this measure to be around €6.5 billion in 2022. However, the government thinks the final cost for next year will be lower as energy is expected to become cheaper.
End of petrol subsidy
Since 1 April, anyone filling up with petrol or diesel at a Spanish petrol station received this subsidy. A measure that was justified at the time because it was difficult to set up a system more targeted at vulnerable households and raised many doubts within the executive branch itself. France, which adopted something similar at the time, recently announced the end of the general fuel rebate. In Spain, the situation will be similar. For certain professional groups, such as hauliers or primary sector workers, it will be maintained. This support could cost around €1.5 billion. For these professional groups, the rebate will be settled at the end of the month.
For private drivers, there will be no choice but to pay for fuel at the set price. Petrol, including the subsidy, was already cheaper than a year ago, when it had not yet been boosted by the war, but it was at historically expensive levels. But diesel is still more expensive.
Cheque for families
To cushion the impact of the disappearance of the petrol subsidy and support with shopping, the government has put forward a cheque to help households. The proposals for the cheque range from a variable cheque depending on the vulnerability of families to a fixed cheque of €300 which could reach 10 million families. Or perhaps a cheque of €200, which would reach more families. This issue is still being negotiated between government partners.
Lower VAT on food
Although Spain is currently the EU partner with the lowest inflation, growth in the consumer price index CPI is still very high (almost 7% in November, while the European Central Bank’s target is 2%) and food prices are particularly high. Last month, food prices rose by more than 15% year-on-year. This was very close to their historical high, which is linked to another of the solutions being discussed: reducing VAT on some products. The Executive’s idea is to apply the heavily reduced rate (4%) to a range of basic items, which would reduce inflation while making these items more accessible to households.
Also read: Spain wants a healthy shopping basket at a fixed low price
Rents and mortgages
Housing has again become a stake in the negotiations. There is an agreement on limiting rent increases to 2%. This is an initiative that has been under way since the first decree in March. However, the property sector is not happy about it, and the cost to the executive is nil. But it affects only tenants who have a contract and whose rent is increased once a year. This is legal, as long as it is agreed. Unidas Podemos on Monday called for additional measures such as a rent freeze which, as during the pandemic, would mean that tenants whose contracts expire would be given the right to continue living in their homes for another year under the same conditions. And to set the cap on variable mortgage growth at the end-June Euribor, when it was around 1%, as opposed to the current 3%.
In October, the government announced the extension of public transport measures, with free travel passes for frequent travellers on Cercanías, Rodalies and Media Distancia services; and some trips with discounts of 50% off the usual price. Free travel will be extended to tickets for multiple journeys on intercity bus lines under state jurisdiction. The 2023 budget estimated the cost of these initiatives at about €660 million.
The government is still determining what will happen to urban transport. This is by far the most widely used daily transport, which is not under state jurisdiction. That is, municipal bus routes and the metro. Since September, when the first public transport measures came into force, these means of transport have benefited from a 30% state subsidy on season tickets. In many cases this is supplemented by local and regional authorities. All options for 2023 are open: remove the 30% subsidy, extend it or even extend it.