New extension of government’s ‘social shield’ for 2024 It is already here, and after long negotiations between coalition partners PSOE and Sumar, all the details are now known. The extension of the measures represents a continuation of tax cuts that have been promoted since 2021 against the economic consequences of the war in Ukraine and the tension in energy markets.
The government provides free public transport and discounts on metro and public buses for frequent users of Cercanías, Media Distancia and state bus lines; 0% VAT on basic foods such as bread, eggs and milk, and 5% VAT on pasta and oils; HE social bonus for vulnerable familiesthe limitation on increases in the price of butane cylinders and the extraordinary tax imposed on banks and energy companies, reaching 2.9 billion in 2023.
The big change introduced by the administration is a gradual increase in tax deductions on electricity bills, with VAT increasing from 5% to 10% throughout 2024 and the Special Electricity Duty (IEE) rising from the current 0.5%. 2.5% in the first quarter of the year and 3.8% in the second quarter; Electric Energy Production Value Tax (IVPEE) will be 3.5% until March and 5.25% until June. In case of supply VAT on natural gas will be 10 percent in the first three months 2024.
All these measures It will cost taxpayers $5.3 billion in 2024. This figure is the sum of the 2,500 million assumed by the Ministry of Finance through tax reductions and energy or food tax advantages, and the 680 million paid by the Ministry of Transport and concessionaire companies in exchange for discounts applied to Renfe. Bus lines are the responsibility of the state.
Considering the 6.9% increase in the Minimum Living Income (MIV), the impact on taxpayers reaches a higher figure, around 6.4 billion. However, government sources point out that the increase in IMV is not counted among the “anti-crisis measures”. HE Ministry of Social Rights, Consumption and Agenda 2030However, it considers this aid as a ‘social shield’, together with the material guarantee, postponement of evacuations and the Temporary Employment Regulation File (ERTE).
This aid meant an outlay of 2,512.8 million euros for the public coffers in 2022, but it reached only 20.8% of the population living below the poverty line that year. The Executive hopes that this will reach more and more potential beneficiaries and in this Cabinet approved the following: transferring this aid to autonomous communities willing to undertake itAs in the case of Catalonia. José Luis Escrivá, then Minister of Social Security, estimated that IMV applications would reach 3,000 million in 2020.
There are also extensions that do not have a direct economic cost to the taxpayer, such as tax suspension. evictions for vulnerable households the elimination of commissions for withdrawing cash from toll booths for the elderly and the disabled without housing alternatives, or the elimination of commissions for early repayment of variable interest loans borne directly by banks.
The revaluation of pensions is excluded from the so-called ‘social shield’ as it is not part of the legislative package launched by the Government to combat inflation and the effects of the war in Ukraine. The cost of increasing pensions with premium contributions to the estimated 3.8% for the whole of 2024 is 7.3 billion euros, and if the minimum pension, non-contributory pension and Minimum Vital Income (IMV) increase are added, this figure reaches 8.280 billion euros. million.
Commitment to reduce the current account deficit
Despite this resource distribution, which the government will implement from 2024, President Pedro Sánchez assured at the press conference after the last Council of Ministers this year that the new package of measures “is placed in the context of the Executive’s commitment to fiscal consolidation.” “The Spanish Government continues its commitments” Achieving a public deficit of 3% of GDP by 2024 “We also determined that public debt fell to 106%,” he emphasized.
According to the government, the development of the economy and prices has experienced improvements precisely in the last year, to which the royal decrees approved by the Executive contributed. More than 25,000 million Euros saved For both citizens and companies. However, the Executive decided to introduce a new package of measures, expanding the scope of some measures that came into force in 2022 or started their journey in 2023.
The commitment to reduce the public deficit and debt includes the removal of fiscal measures adopted to offset the effects of the energy crisis and requested by the European Commission from all member states. Sánchez assumes that uncertainty from war and inflation continues to put pressure on the Spanish economy, and the Consumer Price Index (CPI) is also in deficit. Food basket closed November with 9%This rate is almost three times the general inflation rate of 3.2%.