The Spanish government is to reduce VAT on some of the key basic products in the shopping basket, and will also continue its rent freeze so that the price of rental housing cannot rise more than 2% for the 12 months until 31st December 2023. These are the main developments announced this Tuesday by the Spanish prime minister, Pedro Sánchez, in the press conference following the last cabinet meeting of the year. The measures will come into force on January 1st.
For six months, VAT will be eliminated - from the current 4% to 0% - on essential food products, such as bread, baking flour, milk, cheese, eggs, fruit, vegetables, vegetables and legumes, potatoes and cereals. It will also drop from 10 to 5% on oil and pasta.
In addition, the Spanish executive will provide a one-off payment of 200 euros to families with an annual income of less than 27,000 euros. This assistance is expected to reach 4.2 million families.
Among current measures that will be extended, Sánchez has announced the continuation of the public transport price reductions introduced in September: specifically, free train travel for regular trips on suburban Renfe trains, and a 30% discount on urban and interurban public transport in territories where regional and municipal governments complement it by a further 20% up to 50%.
Reduced VAT on electricity and gas bills will also carry on for another six months, falling from 10 to 5% for individuals and companies that have up to 10 kilowatts power contracted with the Special Tax on Electricity reduced to 0.5%. In addition, the maximum price of a butane bombona or cylinder is frozen.
Fuel price assistance only for professionals
On the other hand, new assistance on fuel prices will be aimed at professional in transport-oriented sectors and not to the public in general. Specifically, professional road transporters, farmers, shipping companies and the fishing sector, will be able to receive a 20 cents per litre discount on professional road transport and this will be returned at the end of each month, while farmers will receive the same amount, but through the refund of the special tax on hydrocarbons.
The suspension of home evictions for households classified as vulnerable will also be extended for six months, while the limit of a 2% increase in the annual rental price update is extended until 31st December 2023. Nor will it be possible to cut off essential utilities for the next six months. The continuation of the 2% cap on rent price increases was agreed between Sánchez and the vice-president and labour minister, Yolanda Díaz (Unidas Podemos), in a meeting before that of the cabinet.
The measures agreed, after negotiations between the government partner parties, PSOE and Unides Podemos, will come into force on January 1st. All up, the so-called "social shield" has a budget of around 10 billion euros for the total of the measures, which reaches 45 billion euros when added to previous packages.