Spanish government reduces public transport tickets and cuts electricity VAT to tackle inflation

The Spanish government greenlighted on Saturday to extend the measures to tackle Ukraine’s war effects and current all-time high inflation until December 31. The aid, when first announced, was supposed to be in place until June 30.

The new initiatives include cutting electricity VAT from 10% to 5% and maintaining a 20 cent discount per liter of fuel. Another new measure will see public transport tickets' prices halved by 50% for national companies and a 30% reduction for those transports handled by regional governments and local authorities.

"This inflation crisis is international, in Spain inflation is really high, in May we registered an 8.3% increase in prices," Spanish PM Pedro Sánchez said at the start of his press conference on Saturday afternoon.

So far, the several measures in place have "halted price rises by 3.5 percentage points," he claimed.

The extension of the decree to tackle the effects of the Ukraine war will have a direct impact of "€9 billion, as €5.5 of them to protect families and companies, while the other €3.6 billion in loses after reducing taxes," the PM said. Between the first decree and the recently approved one, Spain will have invested up to €15 billion, which represents "more than 1% of Spain’s GDP."

Public transport prices halved

One of the newest measures announced is reducing public transport prices by half for both handled by the Spanish government, and by 30% for those under the regional governments and local authorities management. 

The measure will be in place from September 1 until the end of the year and could see a ‘Rodalies’ Catalonia’s regional train price go from €25.55 to €12.7.

Local authorities could also benefit from the reduction as it will be "paid by the Spanish government," so Barcelona’s public transport prices could also be lowered. Spanish PM Pedro Sánchez opened the door for regional and local authorities to complement the price reduction with a 20% extra reduction, bringing it to a total of half the current price. 

Other measures announced

With a price increase of electricity, some companies are earning "extraordinary benefits," so the executive will propose a new tax in Spanish congress to "protect the middle and working class," Sánchez told media reporters. 

The new tax will have to be voted in the Spanish congress as it cannot be approved by the government itself. The idea is to have the new bill in place since January 1, 2023. As the "interest of the majority is on top of the interests of a few," the PM said. 

The Spanish cabinet has also greenlighted increasing by 15% pension plans and non-contributive invalidity plans. "A rise of around €60 a month," Sánchez explained. 

Economic aid has also been offered to self-employed workers and low-income workers, as from July, they can request up to €200.