Sánchez’s Second Anti-Inflation Plan Comes Into Force Today

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The package of measures – valued at 9 billion euros and approved last Saturday by Pedro Sánchez’s government – to contain the impact of the inflationary spiral, comes into force today. The Royal Decree, with measures ranging from pensions to the butane cylinder, electricity generation and the gas market, was published in the BOE yesterday, Sunday. This was just hours after being announced by the Prime Minister following an extraordinary Council of Ministers:

Cheque for 200 euros. The measure with the greatest impact of this plan is not the most burdensome: the cost of the 200 euro cheque for vulnerable households will be 540 million euros. It is limited to households with an income of less than 14,000 euros per year (between all members) or with assets of less than 43,196 euros. Pensioners or recipients of the IMV are excluded, and to receive it, they must be registered at an employment office or pay Social Security contributions. Applications must be submitted to the Tax Agency before the end of September.

Electricity. The great novelty in the electricity system is the reduction of VAT on electricity to 5%, the super-reduced rate, which was already announced. The criteria are the same as those applied this year: for installations of less than 10 kW and as long as the pool price is above 45 euros. This measure has a cost of 1.2 billion euros in six months (based on a VAT rate of 21%). In addition, the suspension of the tax on electricity generation and the reduction to 0.5% of the special electricity tax are extended. It also extends the discounts of the social bonus, 60% and 70%, for vulnerable consumers and severe vulnerable consumers. It extends as well the reduction of the extraordinary income that, due to the marginal price of gas, is collected by large electricity companies which generate nuclear and hydroelectric energy, whose cost is fixed.

Gasoline and transport. The 20 cents per litre subsidy has been extended, as planned, for all consumers of motor fuels, regardless of income. The application of this subsidy for the whole year has an impact of 4,000 million euros. In addition, new requirements are established for road transport: as of Friday, road transport routes corresponding to a single shipment of goods will be required to specify the amount of fuel on the invoice. Likewise, the formulas used to adjust freight rates for fuel are revised. The impact of fuel on transport subcontractors was one of the factors that triggered the strike last March. For private individuals, a 30% reduction in the price of public transport passes dependent on the autonomous communities and a 50% reduction for Renfe multi-journey tickets or road transport concessions with a public service character are fixed.

Gas and butane. Although the price of butane canister cannot go up by more than 5% every two months, the price of hydrocarbons has increased by 33% in one year. The government is now freezing the price at 19.55 euros. In addition, the limitation on the rise in the regulated price of natural gas has been extended: in October and January (next reviews) it will not rise by more than 15%.

Housing. The 2% limit on the increase in the price of rents will be extended until December. Without it, tenants whose contracts are due for review could face rises in line with the CPI, currently at 8.7%. The rule that allows judges to suspend an eviction in the event that those affected by the eviction are people in a situation of vulnerability is also maintained.

Employment. The already existing prohibition to dismiss due to the energy escalation in those companies that have received aid is maintained.

Pensions. The BOE published yesterday, Sunday, makes clear the punctual and extraordinary nature of the increase in non-contributory retirement and disability pensions. From 1 July to the end of the year, they will register “an extraordinary increase of 1% on the amount that each beneficiary is entitled to receive during those months”, the text of the Royal Decree states. The 15% increase in the Minimum Vital Income, approved at the end of March, has also been extended until the end of the year.

Between the two measures, the government estimates that 800,000 households will benefit from the combination of both measures. According to Imserso statistics, non-contributory retirement and disability benefits reach some 460,000 beneficiaries. The Minimum Vital Income, according to the Ministry’s data, had 428,000 beneficiary households at the end of May, with 1.06 million people.

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The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.