Spain’s leftist government announced on Tuesday a series of measures to help the most modest to face the impact of inflation in the food sector, including the total abolition of VAT on basic necessities.
Gathered for the last Council of Ministers of the year, and less than a year from the next general elections in Spain, the government has also decided to grant aid of 200 euros to the 4.2 million households whose annual income do not exceed 27,000 euros.
This package of measures, worth 10 billion euros, is the third of the year and brings to 45 billion since the beginning of 2022 the total aid decided by the Spanish government. Socialist Prime Minister Pedro Sánchez also negotiated with the European Union a temporary derogation regime to limit the price of gas intended to produce electricity, allowing Spain to contain its inflation to 6.7% over one year in November, the lowest rate of the 27 EU countries.
The measures taken on Tuesday are centered on food products, whose year-on-year rise reached 15.3% in October and November. During the next six months, “VAT will drop from 4% to 0% for all basic necessities”, such as bread, milk, cheese, fruit, vegetables or cereals, said Pedro Sánchez during a meeting. ‘a press conference. VAT on oil and pasta will drop, it will be halved, from 10% to 5%.
A reduced VAT rate on electricity and gas
In addition, certain measures taken during the year by the executive ending on December 31, the government had to decide this week on their possible continuation. Thus the head of government announced the extension for six months of a VAT rate reduced to 5% on electricity and gas. Similarly, the shutdown of basic services for the most vulnerable who cannot pay their bills will remain prohibited in 2023.
In the field of housing, Pedro Sánchez announced the extension for an additional year of the 2% limit on the increase in rents, normally adjusted annually by an amount equal to that of inflation. And evictions remain suspended for the next six months. This was a requirement of the radical left party Podemos, a partner of the Socialists in the government coalition, less than a year from the next general elections.
Subsidies for travel by employees going to work by train have been extended for one year, but the 20-cent discount on the price of petrol will cease, except for transporters, farmers, maritime companies and fisherman.
During his press conference, Pedro Sánchez estimated that the aid decided by the government had enabled Spain to record strong economic growth this year, which he estimated at more than 5%, which is higher than the previous forecast which was 4.4%.