The Government approves a check for 200 euros for 4.2 million households and lowers VAT on basic foods |  Economy

The Government approves a check for 200 euros for 4.2 million households and lowers VAT on basic foods | Economy

Everything is ready for the new battery of anti-crisis measures of the Government for the war in Ukraine. The plan includes new initiatives, such as the extension of rents that are about to expire or a check for families with incomes of less than 27,000 euros. Pedro Sánchez and Yolanda Díaz have had to intervene once again to close the agreement between the partners. The President of the Government and the Second Vice President and Minister of Labor met early this Tuesday at the Palacio de La Moncloa, before the start of the last Council of Ministers of the year, at the end of which the President appeared. The meeting has served to finish outlining the new aid package, approved this Tuesday and which will come into force as of January 1. The project will have an economic impact of more than 10,000 million, according to Sánchez. Among other measures, the reduction in energy taxes will be extended and the VAT will be reduced for some foods, with essential products being exempt from paying this tax for six months.

The negotiations between the PSOE and Unidas Podemos, in which the ministers of the Presidency, Félix Bolaños, and Social Rights, Ione Belarra, have also been involved, have not been easy and have lasted until the last moment. The main sticking point had to do with rents. The proposal of the minority partner of the Executive was “the freezing of rents”, which is actually an extension of the contracts that are in force. It has finally succeeded: similar to how it was done in the pandemic, those who run out of contracts between January 1 and June 30 will have the right to stay in the homes for six more months under the same conditions. This prevents them from having to sign a new contract in which the landlord can freely raise the price, although in principle it does not prevent the annual rent update (if so agreed in the contract), which could rise up to 2%. That is the ceiling that the Government once set for all current leases (which were normally updated with inflation) and that has now been extended, a decision that has not been discussed because there was consensus.

The rent freeze was a commitment that Díaz made in his day after meeting with the tenant unions. However, the measure does not affect those who, for whatever reason, sign a new contract, the price of which will be set freely between the parties as established by the Urban Leasing Law. In the measures on housing, United We Can also proposed a freeze on variable mortgages, for which it proposed that these update the installments with the Euribor at the end of June, when it was around 1%, compared to the current 3%. This measure, however, has not gone ahead, which would have meant a true amendment to the agreement that the Government, led by the first vice president, Nadia Calviño, recently reached with the banking employers to reform the code of good practices. The decree will contemplate the suspension of evictions of vulnerable families for six more months, a measure that was released in the pandemic and that, with some modification, has been extended since then, although it does not prevent all evictions, only those of some appraised cases. in regulation.

Along with the rents, the other big news is a new check that will reach millions of families. The amount of this direct aid, which aims to combat the ravages of inflation in households with the worst economic situation, will be 200 euros and will be aimed at households with incomes of less than 27,000 euros and whose assets do not exceed 75,000 euros. Sánchez has estimated that it will reach some 4.2 million households, taking into account that the average income per household in Spain (calculated with imputed rent) is somewhat higher than 35,000 euros per year and that there are almost 19 million households. The money will be received by bank transfer, when the households entitled to its collection provide the Tax Agency with a bank account number for it.

What has been approved therefore implies a disbursement of around 840 million and is somewhat less ambitious than the initial proposals of United We Can, although the party has shown its “satisfaction” with the agreement. The Secretary of State for Social Rights and economic man of that formation, Nacho Álvarez, had already announced in an early morning interview on RNE that the package of measures would bring news. “What comes out of the Council of Ministers today will not only be an extension of a royal decree-law that has worked very well to contain the price of inflation, but it will reinforce some of the crucial issues such as the one related to public transport , to the rent or that check that has to reach millions of homes in this country ”, he had defended.

One of those novelties has to do with the VAT on food. To alleviate inflation, the Government will exempt from VAT (formally they will bear a 0% tax) for “all basic necessity products”, Sánchez has indicated. This refers to the products that currently support the super-reduced rate of 4%, such as bread, flour, milk, cheese, eggs and fruits, vegetables, legumes, tubers and cereals that have the status of natural products (not some elaborated). In addition, pasta and oils will see their VAT reduced from 10% to 5%. This will be complemented with subsidies to farmers to compensate them for the rise in production costs (especially the increase in the price of fertilizers) and the Government will “watch”, said the president, that all these aids are transferred correctly to the price of food, a way of signaling that distributors will be prevented from taking a higher margin by maintaining the prices of products that, in theory, should become cheaper.

End of gasoline subsidy

What drivers will no longer be able to count on is the general bonus of 20 cents per liter of fuel. Since April 1, all the people who refueled gasoline or diesel at a Spanish service station found themselves with this subsidy, an indiscriminate solution (which made it very expensive) and which raised doubts because it also meant subsidizing something that pollutes. Countries like France, which had approved similar initiatives, had already announced the end of the era of fuel aid for the whole world. Now Spain follows the same path. In this transformation, the bonus will be maintained for certain professional groups, such as carriers or workers in the primary sector (agriculture or fishing). Although the way of receiving the aid will change: it will no longer be a direct discount at the pump, but a refund together with the monthly payments for the so-called professional diesel.

On the contrary, aid to public transport grows. On its day, the Ministry of Transport already announced the free throughout 2023 of frequent traveler passes for Cercanías, Rodalies and Media Distancia, the only measure that was already included in the Budgets, with an endowment of 660 million. It is about prolonging what is already in force, but also adding transport on the intercity bus lines managed by the State. And this Tuesday the solution finally adopted for urban and metropolitan transport managed by the Town Halls and communities (such as the metro, municipal buses, etc.) was also known. If until now the Government subsidized 30% of the subscriptions (which many Administrations complemented with an additional 20%, but it was not mandatory), now the State will maintain that 30% but conditional on the rest of the Administrations committing to put 20 % additional. This is a regulation that throws the ball into the roof of the Community of Madrid, which until now has shown doubts when it comes to extending its tranche of aid. Barcelona, ​​however, already expressed in its day that regardless of what the Executive did, the Metropolitan Transport Authority (in which the Generalitat mainly owns) would maintain its subsidies for season tickets.

And what remains the same are the reductions in taxes on the electric bill. VAT will remain at 5% (compared to the usual 10%), the generation tax is abolished and the electricity tax is reduced to a minimum. This lowers the electricity bill through taxes, a path that the Government began to explore as early as 2021, when prices began to skyrocket. Together, it is estimated that these measures have an impact on the collection of about 6,500 million. In terms of energy, the aid in the gas bill is also extended (the rate of last resort, which is subsidized so that it does not rise according to the price of the raw material) and the prohibition on cutting off supplies to vulnerable households is extended throughout 2023. The Executive has also prepared a package of 450 million for gas-intensive industries (basically designed for the ceramics sector in the province of Castellón) that will be complemented with a liquidity line of 500 million in favorable conditions through the Credit Institute Official (ICO).

The Executive has also agreed to extend the 15% increase in non-contributory pensions and in the minimum vital income, two measures that were expected and will be in force until December 31, 2023.

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