2023-12-27 20:13:03
The new extension of the Government’s ‘social shield’ for 2024 It is already here and all its details are now known after a long negotiation between the coalition partners, PSOE and Sumar. This extension of the measures means the continuation of the tax cuts that were promoted since 2021 to counteract the economic consequences of the war in Ukraine and tensions in energy markets.
The Government maintains free public transport for frequent users of Cercanías, Media Distancia and state bus lines and discounts on metro and municipal buses; 0% VAT on basic foods such as bread, eggs and milk and 5% for pasta and oils; he social bonus for vulnerable familiesthe limitation on increases in the price of butane cylinders and the extraordinary tax on banks and energy companies, which in 2023 has raised 2.9 billion.
The big change introduced by the Executive is the staggered increase in the tax reductions on electricity bills, with an increase in VAT from 5% to 10% throughout the year 2024 and the Special Electricity Tax (IEE) will go from 0 .5% current at 2.5% during the first quarter of the year and at 3.8% during the second; and the Tax on the Value of Electrical Energy Production (IVPEE) will have a rate of 3.5% until March, going to 5.25% until June. In the case of supplies of natural gas, VAT will be 10% during the first three months of 2024.
All these measures will cost taxpayers around 5.3 billion in 2024, according to a Moncloa source. This figure includes the 2,500 million that the Treasury assumes through tax reductions and tax benefits on energy or food, plus the 680 million that the Ministry of Transport pays to compensate Renfe for the discounts applied and to the concessionaire companies of the state competition bus lines. The Executive does not consider in this section the 3,200 million euros that it will mean to increase the Minimum Living Income (IMV) by 6.9% in 2024.
This benefit meant a disbursement for public coffers of 2,512.8 million euros in 2022, although it only reached 20.8% of the population living below the poverty line that year. The Executive hopes that it will reach more and more potential beneficiaries and has approved in this Council of Ministers the transfer of this aid to the autonomous communities that want to assume it, as is the case of Catalonia. In 2020, the Minister of Social Security at that time, José Luis Escrivá, estimated that the implementation of the IMV would reach 3,000 million.
There are extensions that do not have a direct economic cost for the taxpayer, such as the suspension of evictions for vulnerable households without a housing alternative, the elimination of commissions for cash withdrawals at the counter for elderly people and people with disabilities or the withdrawal of commissions for the early repayment of loans at a variable rate, which are assumed directly by the banks.
The revaluation of pensions is left out of the so-called ‘social shield’, since they are not part of the legislative package launched by the Government to combat inflation and the effects of the war in Ukraine. The cost of increasing contributory pensions to 3.8%, estimated for the whole of 2024, amounts to 7.3 billion euros and if the increase in minimum pensions, non-contributory pensions and the Minimum Vital Income (IMV) is added, This figure amounts to 8,280 million.
Commitment to reducing the deficit
Despite this deployment of resources that the Government will implement from 2024, President Pedro Sánchez assured in the press conference after the last Council of Ministers this year that the new package of measures “is contextualized in the commitment of the Executive with fiscal consolidation”. “The Government of Spain maintains its commitment to achieve a public deficit of 3% of GDP during the year 2024 We have also marked a reduction in public debt to 106%,” the head of the Executive stressed.
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According to the Government, the evolution of the economy and prices has experienced improvements precisely in that last year, to which the royal decree laws approved by the Executive have contributed, which have resulted in savings of more than 25,000 million euros for both citizens and companies. However, the Executive has decided to promote a new package of measures with the extensions of some that came into force in 2022 or began their journey in 2023.
This commitment to reducing the public deficit and debt involves dismantling the fiscal measures that were adopted to compensate for the effects of the energy crisis and that the European Commission is demanding of all member countries. Sánchez assumes that the uncertainty due to the war and inflation continue to put pressure on the Spanish economy, with a Consumer Price Index (CPI) in the food basket that closed November at 9%almost triple the general inflation rate of 3.2%.
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