The President of the Government, Pedro Sánchez, appeared this Wednesday to present the eighth anti-crisis Royal Decree-Law, which was approved in the last Council of Ministers of the year and to take stock of 2023. Among other measures, the new package extends the reduction in VAT on basic foods until June and discounts on public transport throughout 2024, maintains the tax on extraordinary profits from banking and energy companies (although with exemptions in the latter case) and will raise the VAT on electricity from 5% to 10%, where it will stay all year. The VAT on gas will go from 5% to 10% in the first quarter, and then return to 21%.
“This Government will continue to make the agreement its reason for being,” stressed Sánchez, who stressed that the new Executive is willing to negotiate “until exhaustion,” as has happened in the last few hours. Without a doubt, the debate on the latest Royal Decree-Law with measures to alleviate the damage of inflation has once again strained the ideological seams of the coalition Government.
Regarding some specific measures, such as discounts on public transport or taxes on extraordinary profits from energy companies and banks, there has been an intense discussion, evidencing the different visions on economic policy that exist within the Executive. The negotiations between the cabinet of the President of the Government and those of the four economic vice presidents, Nadia Calviño, Yolanda Díaz, Teresa Ribera and María Jesús Montero, have dragged on until the last minute, according to different sources from all the parties involved.
Discounts on public transport
The price of public transport has been one of the keys to the new package of economic measures, after the President of the Government, Pedro Sánchez, assured in his investiture speech that free transportation was going to focus on certain groups. Specifically, in minors, young people and unemployed people.
Finally, a more far-reaching measure is maintained, which affects a greater number of users and throughout 2024, as proposed by Sumar and the Ministry of Labor of Yolanda Díaz.
Thus, free travel is extended for regular users of Cercanías, Rodalies and Renfe Media Distancia, in addition to regular public transport services that are the responsibility of the State. On the margins is transportation that depends on regional and local administrations. In these, the State will maintain the 30% subsidy, as long as the regional governments provide a 20% discount, to reduce the price of transportation, as a whole, by 50%.
From now on, the deadlines and specific situations must be known, depending on the territory and the procedures will have to be opened, as on previous occasions, for users to request their free passes that depend on Renfe.
Tax on extraordinary profits of energy companies
Another of the main disagreements about the new package was regarding whether or not to subsidize the tax on extraordinary profits of energy companies. In the agreement to form a Government, PSOE and Sumar agreed to continue this tribute that was born in 2022 as a response to the excess income obtained by electricity, gas or oil companies as a consequence of the energy crisis exacerbated by the Russian invasion of Ukraine.
This Tuesday, sources from the party led by Yolanda Díaz, second vice president and minister of Labor and Social Economy, regretted that the PSOE intended to include, “at the request of the PNV [uno de los partidos que apoyaron la investidura de Pedro Sánchez]”, bonuses to this tax according to the percentage of profits that companies achieved within Spain. “It was absurd, because many companies were exempt from paying the tax,” criticized the Ministry of Labor.
What the PNV has achieved is that both the energy tax and the banking tax are integrated into the tax system and “will be concerted or agreed, as appropriate, after modifying the Agreement and Agreement in force, respectively, in the Basque Autonomous Community and in the Foral Community of Navarre.
EAJ-PNV has also started from the coalition government, as it defended in a statement prior to Pedro Sánchez’s press conference, “an incentive for the energy sector for the strategic investments made in the face of the possibility of a slowdown in spending in transition ecological”.
The Executive has detailed that “the extension of extraordinary taxes on banking and energy entities adds a regulatory modification so that, as of January 1, strategic investments related to the green transition can be deducted and includes a commitment to review in 2024 as a permanent figure.”
Finally, the Basque party has agreed to extend the industry relief contract in 2024 (especially relevant for the automotive sector), “to facilitate the rejuvenation of staff and the training of young people.”
VAT increase on electricity
Regarding measures related to energy consumption prices, the fight has also been strong. Definitely, the Government will increase the VAT on electricity from the 5% to which it reduced it in 2021 to 10%, where it will maintain it throughout 2024. The VAT on gas will go from 5% to 10% in the first quarter, and then return to twenty-one%.
For its part, the special tax on electricity will increase to 2.5% in the first quarter, then to 3.8% in the second and will return to the original 5.11% starting in the third quarter. Meanwhile, the scales for the production tax will be from 3.5%, to 5.25% and, finally, 7%, in the same periods.
Sánchez also highlighted in his speech the measures planned for the industrial sector. These include a reduction to 80% of the electricity tolls that fall on electro-intensive companies. Also, provide “flexibility” when making changes to electricity supply contracts. Both measures are maintained for a period of six months.
Transfer of the management of the IMV to all the autonomous communities
One of the novelties that Sánchez has announced is the transfer of the Minimum Living Income (IMV) to all autonomous communities, “if they request it.” Until now, only Euskadi and Navarra had achieved this transfer, which “supposes that the regional governments are responsible for the processing, recognition and payment of this presentation!”
Euskadi was the first autonomous community to obtain the transfer of the IMV since this benefit was created in 2020 and was regulated by law at the end of 2021. In the region, it is complemented with the already existing basic income, the RGI, and the beneficiaries have a single window to go to, that of the Basque Employment Service (Lanbide).
It must be taken into account that the context is different from that of 2022 and that of this 2023. On the one hand, the new fiscal rules of the European Union (EU), which begin in 2024, force us to leave the deficit (the imbalance between public income and expenditure) below 3% of GDP (Gross Domestic Product). The cost of measures to alleviate the blow of inflation to companies, families and to the economy in general It rose to 22,000 million euros in 2022 (when the deficit was 4.7%) and has remained at 15,000 million in 2023 (with a deficit that will be around 3.9%).
By 2024, the goal is to leave the budget imbalance at 3%. A goal that, according to the fourth vice president and Minister of Finance, María Jesús Montero, leaves “margin to extend or activate the support measures if necessary.” But the specific figure of the package that was approved this Wednesday will be lower than the previous ones, which together exceed 3 points of GDP until now.
On the other hand, price increases have moderated in recent months, although inflation is expected to remain on average at 3.3% in 2024 (according to the latest projection by the Bank of Spain). That is, it remains almost at the same level as this year that is ending, precisely due to the progressive withdrawal of most of the shock measures.
The VAT reduction on food is extended
Not everything was insurmountable struggles in the coalition government. Early on Tuesday, the Executive itself assured that the Royal Decree-Law will maintain until June the VAT reduction from 4% to 0% on basic necessities (such as milk, bread, eggs, legumes or vegetables) and from 10% to 5% for oil and pasta. Without a doubt, food inflation is one of the main sources of concern in this latest phase of the price crisis.
Extension to the ban on evictions
One of the measures without budgetary impact, which has been known since this Tuesday, is the extension of the ban on evictions of vulnerable people, which the coalition Executive has agreed with EH Bildu to maintain throughout 2024. This measure is the main housing measure in the anti-crisis plan and is carried over from the shock plan that was launched in 2020 to limit the impact of the pandemic. Others, however, were eliminated months ago, such as the extension of rental contracts.
From that initial shock plan, the requirements were already indicated so that tenants in vulnerable situations could request an extension to the eviction or release, when it is impossible for them to find a housing alternative. The key is to demonstrate your situation of vulnerability, which must be accredited by Social Services and supported by a judicial authority. Income, as a general rule, cannot exceed the limit of three times the monthly Public Multiple Effects Income Indicator (IPREM), although it is modified and increased depending on the people in charge or their situation, if they are minors or They have declared a disability.
The Housing Law approved in May already includes measures to avoid the evictions of people in vulnerable situations when there is no housing alternative, but limits them to situations where the owner of the property in question is a large holder or large owner. That is, have more than 10 homes.
Last week, Bildu already reported that an agreement had been reached for the prohibition of cuts to basic supplies (electricity, water and gas) and the extension of the TUR4 regulated rate for community boilers, as recalled by the Basque party.
Measures regarding the financial sector
Sánchez has stressed that, in 2024, “commissions for cash withdrawals at the counter for elderly people and people with disabilities” will be eliminated and that “bank commissions or compensation for early repayment of loans at a variable rate” will disappear.
Furthermore, recently, the income threshold from which families can join the mechanisms designed to alleviate the rise in mortgage prices was raised from 29,000 euros to 38,000. Likewise, it was agreed with the bank to extend for one more year, throughout 2024, the free payment that was contemplated for clients with variable mortgages for early repayments or the transfer of loans at fixed rates. Also to those products at mixed rates, which have been gaining weight in recent months and which is a novelty compared to the previous code of good practice signed by the financial sector and the Executive.