Spain to cut electricity tax by half to ease inflation pain

Spain will cut the value-added tax on electricity from 10 percent to five percent to shield consumers from soaring inflation fuelled by Russia's invasion of Ukraine, Prime Minister Pedro Sánchez said Wednesday.

Spain to cut electricity tax by half to ease inflation pain
Sánchez's government already slashed the VAT rate on electricity to 10 percent from 21 percent in 2021. (Photo by Pau BARRENA / AFP)

The announcement comes after Sánchez’s Socialists were thrashed Sunday in a regional election in Andalusia, a longtime party stronghold.

Sánchez told parliament the VAT reduction, from 10 percent to five percent, would be approved at an extraordinary cabinet meeting on Saturday “to continue to protect citizens from the effects of the war.”

His government last year slashed the VAT rate on electricity to 10 percent from 21 percent to ease the impact of electricity price rises on consumers.

The latest tax cut will be part of a package of measures which will be adopted on Saturday to help consumers deal with rising inflation, which hit 8.7 percent in May, its highest level in decades.

The government did not provide further details on what measures will be adopted.

It adopted a first multi-billion euro emergency package to cushion businesses and consumers from soaring energy prices in March.

Labour Minister Yolanda Díaz has proposed slashing the price of monthly public transit passes by 50 percent and offering €300 ($315) to people hit hardest by rising prices.

READ MORE: Spain eyes €300 handouts for most vulnerable and further fuel reductions

“Inflation is hitting families hard. … The government has acted quickly and decisively, but it is still not enough,” she tweeted.

Spain’s main opposition conservative Popular Party won Sunday’s election in Andalusia in a landslide, capturing 58 seats in the 109-seat regional parliament, its first ever absolute majority in the southern region.

The Socialists won just 30 seats, its worst ever result in Spain’s most populous region.


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Why the UK’s Royal Navy ships are being built in Spain

Spain's internationally renowned shipbuilders will help make three new supply ships worth €1.8 billion for the British Navy.

Why the UK’s Royal Navy ships are being built in Spain

Navantia, Spain’s state-owned shipbuilding company, will play a key role in the construction of three new British Navy supply vessels.

The Team Resolute consortium, of which Navantia’s UK subsidiary is a member along with British firms BMT, Harland & Wolff and Appledore, was awarded the €1.8 billion (around £1.6 billion) contract to make three 216-metre auxiliary ships that will carry supplies and ammunition to British Navy aircraft carriers, destroyers and frigates.

The ships will be among the largest in the British fleet, smaller than only the Queen Elizabeth aircraft carriers.

In Spain, the shipbuilding work will take place at the internationally renowned Navantia shipyard in Puerto Real in Cádiz. Navantia have previously built ships for the Saudi Navy, and in 2016 built two ships for the Australian Navy, though they were mostly built in Navantia shipyards in Ferrol, Galicia.

Navantia’s president, Ricardo Domínguez, said in a statement that “It is an honour for Navantia and Navantia UK to participate in this programme, which will benefit from our excellence in shipbuilding and our programme management and technology transfer capabilities.”

Construction in the UK will take place at the Harland & Wolff shipyards in Belfast and also in Appledore, on the Devon coast.

According to the contract, production should begin in 2025 and the three ships, which will each be the length of two football pitches, should be operational by 2032.

Xiana Méndez, Spain’s Secretary of State for Commerce, described the contract as “excellent news” for Spain, stressing the strength of Navantia’s international portfolio not only for the clear “economic effects” but the “strategic alliances” it allows Spain to foster on the international stage.

The contract makes Navantia one of several important Spanish companies currently operating in the United Kingdom, along with energy company Iberdrola, Telefónica (O2), the Iberia Express airline, which is part of IAG, as well as transport infrastructure group Ferrovial, which operates at Heathrow airport, and airport operator Aena, which runs Luton airport.

READ ALSO: CONFIRMED: Deal on UK licences in Spain agreed but still no exchange date

Navantia’s role in the shipbuilding consortium is certainly encouraging for Spain’s relationship with Britain in the post-Brexit world. Spanish newspaper La Vanguardia reported the news with the headline: ‘Navantia beats Brexit.’

Spanish Armada?

It has not been received quite as positively in the United Kingdom, however, with shadow Defence Minister Chris Evans claiming that the outsourcing of parts of the construction process to a Spanish firm serves to “create a new Spanish Armada, over 430 years since the last one lost.”

“It is also highly unusual for warships to be built abroad due to security implications” he added. “This is about creating British jobs for British workers, with British ships, using British steel.”

Defence Minister Alex Chalk defended the contract and Navantia’s involvement, suggesting that “some components are built overseas” and that in “in modern engineering designs it was ever thus.”