Explained: The measures Spain will maintain in 2024 to help with the cost of living crisis
The Spanish government recently approved a raft of measures to help alleviate the economic and social consequences derived from the war in Ukraine and the pandemic. Here's what you need to know about both the new measures and those that will be maintained in 2024.
On Wednesday, December 27th, the Spanish government announced a new decree that would extend some of the anti-inflation measures into the new year, including maintaining the VAT reduction on basic food items and continuing to offer free public transport.
As well as maintaining some of the measures from this year, the government has included a few new ones too, aimed at helping the most vulnerable to minimise the effects of the cost of living crisis.
Prohibition of carrying out evictions
One of the new measures included in the anti-crisis decree for next year will be the prohibition of carrying out evictions of vulnerable people without a housing alternative. The government said in a statement, "This and the three percent cap on rents agreed in the Housing Law represent two essential measures in the face of the difficult housing situation".
The government is also committed to creating a new line of guarantees for social housing and will put €4 billion towards the plan, aimed at increasing the social housing stock.
Elimination of bank commissions
This measure is one of the two new measures the government is introducing under its 'social shield' plan. It will affect those with disabilities and the elderly and means that they will not be charged any bank commissions for withdrawals at ATMs.
The government will also extend the suspension of commissions and compensation for repayment or early repayment of mortgage loans at a variable rate throughout 2024. This measure was jointly negotiated between the banking sector and the consumer associations to facilitate the payment of mortgages after the rise in interest rates and, as a consequence, the rise in the Euribor to almost four percent.
Free transport for everyone
The government has agreed to extend public transport bonuses to the entire population, not just to children, young people and the unemployed as was announced earlier this month. This means they will continue to offer a 30 percent discount on public transport as before, while each region will be responsible for adding a discount to extend this reduction. The condition is that they increase it to 50 percent.
Like this year, travel will be free for multi-journey tickets on the Cercanías, Rodalies, Media Distancia and Avant trains. It will work similarly to before, whereby you’ll pay a small deposit for a three-month ticket (€10 or €20 depending on the type of trains used), which will be returned to you if 16 journeys are made within that time.
The government has also extended the extraordinary and temporary subsidy for the review of rates and tolls on State-owned highways.
Extension of the VAT reduction on gas
The VAT reduction on gas bills will be extended for the first four months of 2024 until the cooler weather ends. It will go from 5 to 10 percent between January and March and from April it will return to the normal 21 percent rate it had before the energy crisis.
Pedro Sánchez confirmed a "gradual increase" in tax rates that, in the case of VAT on gas, will "recover normal values" once "the winter stage" has been overcome.
In addition, the VAT reduction on pellets, firewood, and ecological substitutes for natural gas from biomass will be extended for a few more months up to 10 percent up until the end of June 2024.
The VAT reduction on food will continue
The Royal Decree-Law on the reduction of VAT on basic food items will continue until June 2024. Like during 2023, this will include a reduction of 4 to 0 percent for essential foods (such as milk, bread, eggs, pulses and vegetables) and from 10 percent to 5 percent for oils and pastas.
VAT on electricity will increase, but discounts will remain
The government will increase the VAT rate on electricity from 5 to 10 percent, which it was reduced to in 2021. It will remain that way throughout 2024. Despite the increase, the VAT on electricity will remain far below the normal rate of 21 percent, which it was before the crisis.
Revaluations of pensions
Pensions are due to be reevaluated and updated according to inflation and the cost of living. It will come into force this Monday, January 1st. This measure was one that Sánchez had already confirmed for 2024.
The government has also updated the provision of the Minimum Living Income (IMV) and other non-contributory pensions, such as those for disability, retirement and orphans caused by violence against women.
Extension of the social bonus and prohibition of cutting energy supplies
Vulnerable consumers will still be able to contract basic supplies of electricity, water and natural gas, even if they can’t afford to pay for them. This measure will stay in force for at least six months, and the bonus discounts will also be applied.
Electricity bonuses will continue at 65 percent for vulnerable consumers, 80 percent for severely vulnerable consumers and 40 percent for households with low-income workers, as well as the limitation on increases in the price of the regulated gas tariff and butane gas bottles.
The tax on banking and energy companies will be maintained
The banking tax will continue to be included in the package of anti-crisis measures for 2024, without changes.
This temporary tax is levied at 4.8 percent on the interests and commissions of all companies that invoiced more than €800 million in 2019, and affects all the activity that they carry out in Spain. The tax on energy companies will also continue with a commitment to review the tax figure in 2024 so that it might become permanent.
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On Wednesday, December 27th, the Spanish government announced a new decree that would extend some of the anti-inflation measures into the new year, including maintaining the VAT reduction on basic food items and continuing to offer free public transport.
As well as maintaining some of the measures from this year, the government has included a few new ones too, aimed at helping the most vulnerable to minimise the effects of the cost of living crisis.
Prohibition of carrying out evictions
One of the new measures included in the anti-crisis decree for next year will be the prohibition of carrying out evictions of vulnerable people without a housing alternative. The government said in a statement, "This and the three percent cap on rents agreed in the Housing Law represent two essential measures in the face of the difficult housing situation".
The government is also committed to creating a new line of guarantees for social housing and will put €4 billion towards the plan, aimed at increasing the social housing stock.
Elimination of bank commissions
This measure is one of the two new measures the government is introducing under its 'social shield' plan. It will affect those with disabilities and the elderly and means that they will not be charged any bank commissions for withdrawals at ATMs.
The government will also extend the suspension of commissions and compensation for repayment or early repayment of mortgage loans at a variable rate throughout 2024. This measure was jointly negotiated between the banking sector and the consumer associations to facilitate the payment of mortgages after the rise in interest rates and, as a consequence, the rise in the Euribor to almost four percent.
Free transport for everyone
The government has agreed to extend public transport bonuses to the entire population, not just to children, young people and the unemployed as was announced earlier this month. This means they will continue to offer a 30 percent discount on public transport as before, while each region will be responsible for adding a discount to extend this reduction. The condition is that they increase it to 50 percent.
Like this year, travel will be free for multi-journey tickets on the Cercanías, Rodalies, Media Distancia and Avant trains. It will work similarly to before, whereby you’ll pay a small deposit for a three-month ticket (€10 or €20 depending on the type of trains used), which will be returned to you if 16 journeys are made within that time.
The government has also extended the extraordinary and temporary subsidy for the review of rates and tolls on State-owned highways.
Extension of the VAT reduction on gas
The VAT reduction on gas bills will be extended for the first four months of 2024 until the cooler weather ends. It will go from 5 to 10 percent between January and March and from April it will return to the normal 21 percent rate it had before the energy crisis.
Pedro Sánchez confirmed a "gradual increase" in tax rates that, in the case of VAT on gas, will "recover normal values" once "the winter stage" has been overcome.
In addition, the VAT reduction on pellets, firewood, and ecological substitutes for natural gas from biomass will be extended for a few more months up to 10 percent up until the end of June 2024.
The VAT reduction on food will continue
The Royal Decree-Law on the reduction of VAT on basic food items will continue until June 2024. Like during 2023, this will include a reduction of 4 to 0 percent for essential foods (such as milk, bread, eggs, pulses and vegetables) and from 10 percent to 5 percent for oils and pastas.
VAT on electricity will increase, but discounts will remain
The government will increase the VAT rate on electricity from 5 to 10 percent, which it was reduced to in 2021. It will remain that way throughout 2024. Despite the increase, the VAT on electricity will remain far below the normal rate of 21 percent, which it was before the crisis.
Revaluations of pensions
Pensions are due to be reevaluated and updated according to inflation and the cost of living. It will come into force this Monday, January 1st. This measure was one that Sánchez had already confirmed for 2024.
The government has also updated the provision of the Minimum Living Income (IMV) and other non-contributory pensions, such as those for disability, retirement and orphans caused by violence against women.
Extension of the social bonus and prohibition of cutting energy supplies
Vulnerable consumers will still be able to contract basic supplies of electricity, water and natural gas, even if they can’t afford to pay for them. This measure will stay in force for at least six months, and the bonus discounts will also be applied.
Electricity bonuses will continue at 65 percent for vulnerable consumers, 80 percent for severely vulnerable consumers and 40 percent for households with low-income workers, as well as the limitation on increases in the price of the regulated gas tariff and butane gas bottles.
The tax on banking and energy companies will be maintained
The banking tax will continue to be included in the package of anti-crisis measures for 2024, without changes.
This temporary tax is levied at 4.8 percent on the interests and commissions of all companies that invoiced more than €800 million in 2019, and affects all the activity that they carry out in Spain. The tax on energy companies will also continue with a commitment to review the tax figure in 2024 so that it might become permanent.
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