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Date Published: 27/12/2022

ARCHIVED - Spanish government finalises new crisis plan: fuel bonus is scrapped and VAT on food reduced

ARCHIVED ARTICLE -

The new ‘social shield’ in Spain will likely eliminate the fuel discount but offer financial aid towards the price of groceries

<span style='color:#780948'>ARCHIVED</span> - Spanish government finalises new crisis plan: fuel bonus is scrapped and VAT on food reduced

The Spanish government is applying the finishing touches to its promised crisis plan designed to deal with the economic consequences of the war in Ukraine. Dubbed the ‘social shield’ (‘escudo social’) and due to be agreed upon on Tuesday December 27, the measures will involve a cash bonus to help vulnerable families with the rising cost of groceries and will see the 20 cent per litre fuel allowance scrapped for all but professional drivers.

The negotiations have already hit some stumbling blocks, with several of the political parties urging the government to increase the aid on offer. Although proposals to freeze rental prices and mortgage repayments appear to have been roundly rejected, the social shield will introduce a number of novel measures to help combat the rising cost of living.

Food prices

One of the biggest concessions is a VAT reduction on many staple grocery items. This tax is currently charged at two different rates: at the higher end of 10% for non-essentials, and this will be reduced to 5%; and at the reduced rate of 4% for basic necessities like milk, eggs, fruit and vegetables, which will be further reduced to 0%, eliminating VAT altogether.

Another option being considered is a one-off cheque of 300 euros that could be used in supermarkets across Spain.

Current measures that will be extended

It’s been confirmed that the 2% limit for increasing rents will be maintained, as will the 15% increase in non-contributory pensions, as well as the reduction in taxes on gas and electricity.

In addition, the current legislation barring vulnerable families from being evicted and from having their electricity cut will be extended into 2023.

Fuel bonus

Arguably the most contentious issue off all, it looks increasingly likely that the universal 20 cent per litre discount on fuel will be eliminated, since the measure fails to benefit the most vulnerable. According to the Minister of Economy, Nadia Calviño, come January 1 this fuel bonus will probably only be offered to “the sectors that may be most affected”, such as professional drivers and the agriculture and livestock industries.

200 euros per month for families

The government will also provide a welcome 200-euro flat cheque for any families with children under 3 years old who have annual earnings of less than 27,000 euros and do not own assets worth more than 75,000 euros. This move, which is aimed at the least well off and neediest in Spanish society, is expected to help 4.3 million households.

Public transport

In addition, the Spanish government has promised to extend the free rail travel scheme for Cercanías, Rodalies and Media Distancia trains, as well as 50% off the price of a railcard for Avant trains.

Here’s how to travel for free on Spanish trains

On top of this, there will be free coach travel available in 2023 between certain Spanish cities, and the urban bus discounts of 30-50% will also be extended.

Help for businesses

As well as all these measures, which directly affect consumers and ordinary citizens living in Spain, the government will provide extra financial support for key struggling industries, including the agriculture sector and those manufacturers who rely heavily on gasoil or electricity.

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