The measures of the Executive’s third aid package end with the general surcharge of 20 euro cents for fuel
The approval given by Congress this Tuesday to the anti-crisis decree approved by the government at the end of December includes a package of measures with 10,000 million euros, which extends to 45,000 million euros, all that will be paid to offset the costs of the energy crisis in the Spanish pocket. With the measures in place since January 1, the goal is “to double inflation”, as the President of the Executive, Pedro Sánchez, has constantly reiterated.
VAT on food
One of the main concerns of households in recent months has been how energy price increases have spilled over to food prices, with sharp increases now exceeding 15% and more than double that of headline inflation. such as sugar (+50.2%), oil (+31.5%), milk (+31%) or eggs (+27%).
The Executive has decided to address this situation with a VAT reduction that has been more relaxed than consumers expected. In concrete terms, this 4% tax on basic foodstuffs will be abolished from January to June. Among them bread, flour, milk, cheese, eggs, fruits, vegetables, legumes, potatoes and cereals. And the oil and pasta have been reduced from 10% to 5%.
Other products that are taxed at 10%, such as fish or meat, are not included in the plan. In addition, this tax cut, which the Executive says will save households €661 million, will automatically be canceled out if underlying inflation – excluding unprocessed food and energy products – falls below 5.5%. It is currently moving at 6.3%.
200 euro check
The decision also includes a demand from Unidas Podemos to institute a support check. Finally, it will be 200 euros for the 4.2 million families who, according to the government, earn less than 27,000 euros and have assets of less than 75,000 euros. The figure falls short of the initial aspirations of the purple formation, which has insisted in recent weeks that aid should amount to 300 euros and apply to middle-income earners (less than 42,000 euros a year).
The IRS has already cleared a space on its website to apply for the aid, though the link will not be active until mid-February and will be in effect until March 31 to request the check.
residence
It has been one of the great workhorses during “very tough” negotiations. And also the one that has caused the greatest tensions between government partners. With the future Housing Act completely stagnating, the Board will extend the 2% limit on the increase in rents in the annual update until December 31, 2023, when the contracts are linked to the CPI.
Likewise, the decree allows for an extraordinary six-month extension for leases ending before June 30, 2023, to prevent landlords from increasing the price of their new contracts.
The text indicates that during this period “the conditions established for the current contract will continue to apply”. But that doesn’t mean the rent will freeze; only that this new contract update, like the annual one, is capped at 2%.
In terms of housing, the government is also extending until June 30 several measures promoted in the latest royal decree laws within the so-called “social shield”, such as the ban on evictions or the launch of housing for vulnerable families.
Goodbye 20 cents for everyone
Nine months after its introduction, the cabinet has decided to end the universal surcharge of 20 cents per liter of fuel, one of the most costly measures for the treasury in recent months. The support will no longer be for all persons who will retain support for public transport in exchange. In concrete terms, the government has approved the extension of the 30% subway and bus subsidies, albeit only for those autonomous communities that contribute additionally to a reduction of at least 50%.
Given the decision of the management, there have also been moves by oil companies such as Repsol or Cepsa, who keep their discount of 10 cents per liter of fuel for all their loyal customers.
State aid will be limited to the sectors most affected by the crisis, such as transporters, farmers, shipping companies and fishermen. As detailed by the Department of Transport, the bonus for carriers will be divided into two phases: the first will consider a 20 cent reduction per liter consumed between January 1 and March 31, and the second of 10 cents between April 1 and June 30. This support is paid at the end of each month. In the case of farmers, this will be done by paying back the special hydrocarbon tax.
sectoral aid
Farmers will also receive a direct aid of 300 million to compensate for the increase in fertilizer costs. Sánchez also announced 450 million for ceramics and 120 million for fishermen.
extensive measures
The new plan aims to extend other measures by six months, such as the extension of the social allowance, the 15% increase in the minimum vital income and non-contributory pensions, as well as the tax reductions on the energy bill, for which, among other things, the VAT on the receipt reduced from 21% to the current 5%. The free Cercanías and Media Distancia tickets for frequent travelers have also been extended.
budget costs
The government estimates that the budgetary costs of the measures to alleviate the shock of the war against the Spanish economy amount to a total of 45 billion euros. A figure that has raised the alarm about its impact on government accounts, at a time when the reduction of the deficit and public debt remains one of the main commitments with Brussels in the recovery plan that gives access to European funds.
The executive branch has spent months defending its ability to pursue expansionary spending policies without jeopardizing the path to consolidation. And for now, it seems to be succeeding, supported by a historic rise in incomes largely explained by the effect of inflation on certain tax rates such as VAT or personal income tax, which also underpins the strong resistance of employment to the economic slowdown.
According to the latest public data from the Ministry of Finance, the state deficit was 2% of GDP in November, compared to 5.83% a year earlier. It is a gap of 26,500 million, much lower than the nearly 70,300 recorded 12 months earlier. Revenue rose to 237,298 million, of which taxes make up more than 80% of the total.
Source: La Verdad
I’m Ben Stock, a journalist and author at Today Times Live. I specialize in economic news and have been working in the news industry for over five years. My experience spans from local journalism to international business reporting. In my career I’ve had the opportunity to interview some of the world’s leading economists and financial experts, giving me an insight into global trends that is unique among journalists.
