Spanish Prime Minister Pedro Sánchez announced on Wednesday that his government will be extending its subsidies and discounts on public transport during 2024, among other measures, in an effort to counteract inflation and the cost of living.
Sánchez also announced that during the first trimester of 2024, VAT (IVA in Spain) on basic food products will remain at 0%, while other products such as pasta and cooking oil, will keep their reduced VAT of 5%. ALSO READ [from 5 January 2023]: Shops across Spain apply VAT reductions on essential foods.
He said the measures aim to ‘improve people’s lives’ at a time of uncertainty caused by Russia’s invasion of Ukraine and the Israel-Hamas conflict.
Taxes on electricity and gas, however, will increase gradually over the next six months, but only after ‘the winter period is over’, Sánchez said.
Sánchez’s government first put in place a series of measures to help households cope with soaring prices in 2022 after Russia’s invasion of Ukraine that year sent consumer prices soaring.
The extension of subsidies and discounts on public transportation means that frequent travellers who use state-owned operator Renfe, the Catalan Rodalies, or the medium-distance operator Avant will be able to continue using the services free of charge.
A 50% discount on many other public transport fares will also continue in 2024, as in 2023, with 30% being covered by the Spanish government.
The VAT rate on electricity will increase from the current 5% to 10% and will remain at this level throughout 2024. Before the energy crisis, the VAT rate on the electricity bill was 21%.
The special tax on electricity will be reduced in the first half of the year. In the first quarter it will be 2.5% and in the second quarter it will be 3.8%. Normally the tax is set at 5%.
The VAT on gas will also increase from 5% to 10% in January. However, it will return to its previous level of 21% in April.
Spanish inflation hit a record 10.8% in July 2022, its highest level since 1985, but has since eased. It stood at 3.2% in November although the cost of food continues to rise at a much faster pace.
The measures, which will cost state coffers around €2.5 billion in 2024, will not deter Spain from reducing its debt and public deficit, Sánchez said.
To help pay for them, the government will extend a controversial windfall tax introduced in 2023 on banks and energy companies by an extra year. The tax, which is set to raise about €3 billion this year, will now also be payable in both 2024 and 2025. ALSO READ: Spain seeks 4.8% windfall tax on banks, 1.2% on energy firms to beat cost of living crisis.
Sánchez boasted of tax cuts and support measures that will be implemented next year to consolidate public finances. He highlighted the government’s efforts to balance finances while creating jobs and maintaining social protection.
He also said that GDP growth and employment figures have also exceeded analysts’ expectations. ‘The European Commission predicted 0.8% growth in employment in 2023. Today we know that we will grow around 2%,’ he stressed.
Sánchez also expressed pride in the drop in electricity prices, highlighting the direct impact of the measures on the daily lives of citizens. ‘The figures speak for themselves and show the consistency and social commitment of this government,’ he said.
La mejor forma de crecer es con justicia social y plena inclusión para repartir los frutos del progreso.
— Pedro Sánchez (@sanchezcastejon) December 27, 2023
Así lo certifica España en este 2023, con datos y con evidencias pic.twitter.com/WwVHO4ErMm
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