The Bank of Spain estimates that the government will allocate between €34,000 and €40,000 million in measures to deal with the energy and inflation crises arising from the war in Ukraine between 2021 and 2025 and, of this total, only between 15% and 20% has been targeted at the most vulnerable incomes, meaning that between 80% and 85% is of a generalised nature. The largest impact would be concentrated in 2022 (accounting for 1.3%-1.4% of GDP) and 2023 (accounting for 0.8%-1% of GDP).
This is shown in their latest analytical article entitled ‘Support measures in the face of the energy crisis and the upturn in inflation: an analysis of the cost and distributional effects of some of the measures deployed according to their degree of targeting’, in which he argues that alternative measures, focused on vulnerable households according to their income, would achieve similar levels of protection but with a lower budgetary cost and avoiding “distortions” in prices.
Specifically, it calculates that a transfer to vulnerable households (those whose income is less than 60% of the median income) of up to €860 would cost around €4.79 billion, almost half the €9.581 billion that the VAT rebate on electricity and food and the fuel rebate will cost.
Only less than 4% of vulnerable households would be affected by this measure compared to what they would obtain with the VAT reduction and the fuel rebate, so the Bank of Spain concludes that protection for almost all vulnerable households would be maintained with half the budgetary cost.
Together with this proposal, the body headed by Pablo Hernández de Cos carries out another simulation, in this case, by means of a €375 grant to each vulnerable household, this amount being equal to the average benefit received by the lowest incomes as a result of the three generalised measures that would be eliminated (reduction in VAT on electricity, food and the fuel rebate). The total budgetary cost of these transfers would be €2,095 million and would represent a budgetary saving of €7,484 million euros compared to the total budgetary cost of the three previous measures.
