Yesterday the Government presented its plan to curb inflation, help the sectors most affected by the crisis and regain political prominence. Economy and politics tend to go hand in hand, and in troubled times, even more so.
The long-awaited package of measures adds checks of 200 euros for families with incomes below 14,000 euros, a cut of up to 50% of public transport vouchers and the already announced reduction to 5% of VAT on electricity. An effort that is expected to be partially compensated with a tax on the profits of energy companies that will come into force in 2023, but already applying to the current year.
It is a panoply of measures that the President of the Government, Pedro Sánchez, presented claiming to be a defender of the middle and working classes, and warning sailors: "They are not going to break us." He said so when presenting the harshly negotiated package of measures with the government partner, Podemos, that he pressed to go further in some aspects, forcing contacts until the last minute.
The VAT cut on electricity was already announced, as well as the extension of the measures until the end of the year. The extension of the 20-cent discount on gasoline was taken for granted and ratified, which, by the way, continues to be applied without distinction of income, it works the same for the Ferrari as for the most modest utility vehicle. The difficulty of establishing an effective mechanism that discriminates according to income level is adduced.
The big news came first with the reduction in public transport that the second vice president, Yolanda Díaz, had made a flag of. A reduction of 50% of the monthly payment and of any multi-trip public transport ticket dependent on the State, and 30% of those that depend on the autonomous communities and municipalities was approved. The discount will take effect on September 1.
Secondly, an aid of 200 euros will be given to salaried, self-employed and unemployed people who live in households with incomes of less than 14,000 euros. It is a thoroughly negotiated measure between the two government partners, since Podemos demanded that it be 300 euros and that it include households with higher incomes. It has been left at 14,000 and it is estimated that it will benefit 2.7 million people.
Pensioners will not be able to opt for this aid because their benefits will already be updated according to inflation and in the case of non-contributory pensions, an increase of 15% of the amounts is incorporated.
Overall, the effort that the Government will make, adding the measures adopted three months ago and those of yesterday, should allow inflation to be contained by 3.5 points. In other words, if these initiatives were not adopted, prices would rise an additional 3.5% this year. For this, the measures that were approved yesterday have a cost of 9,000 million, between aid and tax credits. If those taken three months ago are added, the cost rises to 15,000 million.
This on the side of discounts and subsidies, convenient to moderate inflation and in many cases to make ends meet. Then there is the income aspect; whether the message repeated in recent days that the energy companies would pay their part of the bill had a translation. It is a long-standing objective of Podemos, but to which the PSOE, and Sánchez yesterday, very explicitly, also joined.
"What cannot be done is that some benefit at the expense of the majority... those who obtain indirect revenues from this price increase must contribute additionally to the collective effort", said the President of the Government when announcing a tax on energy companies. It is a new tribute, the format of which has not been specified, which will be conveyed through a bill that will be presented by the two government partners.
It will come into force in 2023, but the Government assures that it will already record the benefits of this year. In the Treasury they specify that they will place the accrual of the new tax on December 31, 2022, so that "the new tax would be payable as of January 1, 2023, but it would affect the 2022 financial year."
The idea of Podemos of an increase in Corporation Tax, where the Treasury saw little effectiveness, has been abandoned to seek a new figure. It appears that the experts will have to work hard to ensure that it does not interfere with other taxes, and that it is solid enough to withstand the foreseeable judicial appeals of those affected.