UPDATE: All the cost-of-living crisis measures for 2023 in Spain

12:40 (December 27) – The government today agreed a package of measures designed to keep inflation low and to help households cope with rising prices.

The measures are:

1. A reduction in the rate of VAT

The VAT rate on all items that attract the current rate of four per cent will be reduced to zero, and a basket of basic items like pasta and olive oil will see the VAT rate fall from ten to five per cent.

2. Fuel discount

The fuel discount scheme has been extended for a further six months, however, it is to be discontinued for private individuals. Only professionals in transport, agriculture and fisheries will continue to benefit from the scheme.

3. Property rental

The cap that prevents rental rates from being increased by more than two per cent annually will remain in place and will be reviewed annually in line with the inflation rate. Any contract that expires between now and July will have the rental price frozen, that is no increase in the rental.

4. Public transport

The free transport scheme currently in place will be extended for a further 12 months.

5. Direct financial support

Households with an income of less than €27,000 could be eligible for a monthly cheque of €200, essentially anyone who does not meet the Minimum Vital Income level or who is a Spanish pensioner. That measure is expected to cost the government in excess of €1.3 billion with more than 5.5 million Spaniards thought to be eligible for direct assistance.

More details will follow once the legislation is published, particularly in regard to the foods that will benefit from a VAT reduction.

10:40 (December 27 – Agreement has been reached on the social shield bill that goes before the House of Deputies this morning, which removes the 20 cents a litre petrol price support for the average consumer.

Accompanying the removal of the petrol prices support is a reduction in the VAT price on a number of essential items and basic foods like pasta and olive oil. According to El Confidencial on Tuesday, December 27 the VAT will drop from 10 to five per cent on these items.

The two per cent rise in rental rates will continue for the foreseeable future, whilst vulnerable families will receive direct support of €200 per month, provided they do not receive the Minimum Vital Income or are pensioners. Itis thought that those with a household income of less than €27,000 will benefit.

Free season tickets for commuter and medium-distance trains will also be extended for 2023, as will be long-distance bus passes of government-operated services.

10:09 (December 27) – The Spanish government has approved changes to the “social shield” that will see the removal of the 20 cents per litre support introduced in response to the energy crisis.

The government announced on Tuesday, December 27 that fuel support will only be available to “professional drivers” from the new year, effectively heading off any potential strike action from the transport sector.

Fuel prices have fallen to within five per cent of where they were prior to the invasion of Ukraine.

Agreement has, however, yet to be reached on further support for the less well-off in the country despite negotiations running well into the evening on Monday. In contention is the amount and scope of the aid to be provided, as are the qualifying criteria.

The left had proposed measures such as freezing rents and mortgages, a 50 per cent reduction in public transport costs and a voucher of €300 to cover the cost of a shopping basket. But not everyone is in favour, with some wanting reduced assistance (PSOE) and others like Unidas Podemos a single check of €500 to cover all costs.

The PSOE under Pedro Sânchez are said to be unwilling to freeze rents but has instead suggested a cap on the increase of two per cent that would also apply to new rentals. They are also keen to reduce the shopping basket assistance below the €300 level as they are to reduce the number of people who might benefit below the eight million households originally proposed.

Sadly, political squabbling has held up many reforms in recent days and weeks with an economic package, animal welfare, housing and the gag law all being delayed. With municipal and regional elections in mid-2023 and national elections this time next year, political squabbling also threatens the survival of the ruling coalition.

Pedro Sánchez has said that he hopes 2023 will be different and that the agreement to remove the 20 cents a litre petrol support for private individuals will be the start of many much-needed reforms.

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