The latest extension of the government’s social shield for 2024 is now in place after lengthy talks between coalition partners PSOE and Sumar. The package continues the tax relief measures that have been promoted since 2021 to cushion the economic fallout from Russia’s invasion of Ukraine and the pressures in energy markets.
Under the plan, free public transport and discounted fares on metro and regional buses will be available to frequent users of Cercanías, Media Distancia, and state bus services. Basic foods such as bread, eggs, and milk will enjoy 0% VAT, while staples like pasta and cooking oils will be taxed at 5%. A social energy bonus remains for vulnerable households, alongside caps on Butane cylinder prices and an extraordinary tax on banks and energy firms. In 2023, these measures reached 2.9 billion euros in total support.
Sánchez extends the social shield and points to growth amid critics
The administration’s defining move is a phased rise in electricity-related tax relief, with the value-added tax on electricity increasing from 5% to 10% through 2024. The Special Electricity Duty (IEE) moves from its current level of 0.5% to 2.5% in the first quarter and 3.8% in the second quarter. The Electric Energy Production Value Tax (IVPEE) will stay at 3.5% until March, then 5.25% until June. For natural gas, supply VAT will be 10% in the first quarter of 2024.
All these changes are projected to cost taxpayers about 5.3 billion euros in 2024. The figure includes 2.5 billion euros in relief and energy or food tax advantages funded by the Ministry of Finance, plus 680 million euros provided by the Ministry of Transport and concessionaire companies to support Renfe discounts. Bus services remain a state responsibility.
With a 6.9% increase in the Minimum Living Income (IMV), the total impact on taxpayers comes to around 6.4 billion euros. Government sources emphasize that the IMV increase is not counted among the anti-crisis measures. The Ministry of Social Rights, Consumption, and Agenda 2030 regards this aid as part of the social shield, alongside material guarantees, eviction postponements, and the Temporary Employment Regulation File (ERTE).
PP pushes for changes to the anti-crisis decree, calls for deeper VAT relief
In 2022, this aid required about 2.5 billion euros for the public purse but reached only a fraction of households living in poverty. The government’s plan is to broaden the reach by transferring this aid to autonomous communities willing to assume delivery, as seen in cases like Catalonia. Previously, José Luis Escrivá, then Minister of Social Security, estimated IMV applications could approach 3 billion euros in 2020.
Other extensions are non‑costly for taxpayers, such as suspending evictions for vulnerable households, waiving withdrawal commissions for elderly and disabled people at toll booths without housing options, and removing certain penalties for early repayment of variable-rate loans borne by banks.
Pensions are not part of the social shield package, since pension indices were not included in the measures launched to counter inflation and the Ukraine conflict. The cost of raising pensions with additional contributions is seen as substantial, with estimates around 7.3 billion euros for 2024, and if minimum and non-contributory pensions and the IMV are increased, the total could exceed 8.28 billion euros.
Fiscal discipline remains a priority
Even as resources are distributed from 2024, President Pedro Sánchez stressed in a year‑end press conference that the new measures fit within a broader commitment to fiscal consolidation. The government aims to bring the public deficit to 3% of GDP in 2024 and to reduce public debt to about 106% of GDP, highlighting that the economy and prices have improved over the past year thanks to royal decrees and other initiatives that saved citizens and companies more than 25 billion euros. The new package expands the reach of measures that began in 2022 or continued into 2023.
The plan also involves removing some crisis-related tax measures and calls for cooperation with the European Commission, which encouraged member states to adjust fiscal measures. While inflation and uncertainty from the war persist, the government acknowledges ongoing pressures on the economy and notes that the consumer price index remains a concern. Recent food price gains have cooled somewhat, but the overall inflation picture remains a challenge.