The high inflation and the general increase in prices together with the stagnation of wages is having devastating consequences for the pockets of households, which cannot afford the purchase of basic products. With a notable loss of purchasing power, families the volume of their shopping basket it has fallen as much as 9%. And it is not surprising, especially when the average price of food has risen by 15.3% year-on-year.
Now, the Government has just announced a new package of social measures to deal with the economic situation that includes leaving basic food without VAT and granting a check for 200 euros to low-income families. The speech: “protect the middle class.”
No VAT on basic foods. With these measures of the new anti-crisis package, the Government wants mark a turning point. In this case, lowering the price of the shopping basket that has skyrocketed in the last year. The Council of Ministers has approved leaving basic food items free of VAT: milk, eggs, fruit, vegetables, bread, tubers or cereals. These foods that had a VAT of 4% will no longer have it. And the VAT on oil and pasta is also lowered from 10% to 5%.
In total, the decree will mobilize 10,000 million euros, in line with the previous package that exceeded 9,100 million.
Why not a cap? Reducing VAT was promoted by the Ministry of Agriculture despite the fact that the Ministry of Economy and Finance had initially objected, considering that the fiscal margin was scarce. But in the end an agreement was reached since a generalized reduction was totally rejected and because it was difficult to apply other solutions, such as establishing the same discount of 20 cents on a liter of fuel for food or capping prices. The concern was that this cap could collide with the rules of free competition, while a discount would leave out local businesses.
In fact, they have also been left out of the decree other formulas such as looking for agreements with large food surfaces and distributors to agree on discounts or implement a tax on the benefits of food distributors, as claimed by Social Rights.
A new feeding check. But not only the drop in VAT will be the only measure to reduce the shopping cart. It is also intended to alleviate the loss of purchasing power of families by giving a check to help purchase food for the value of 200 euros for incomes of less than 27,000 euros per year and with assets of no more than 75,000 euros. From Podemos, the main promoters of the measure, they anticipate that it will reach “close to 5 million families.”
A much more expensive shopping basket. The war in Ukraine has turned European economies upside down, especially in trade. According to the latest data from the INE, the rise in food prices is 15.3% year-on-year. In staple products such as milk the increase is 30%, in oil another 30% and in the case of eggs 26%. Others such as flour, butter or sugar have experienced increases close to 40% year-on-year.
This has made Spaniards reduce their annual shopping basket by 9% since last year, according to data from the food consumption report of the Ministry of Agriculture, Fisheries and Food. The demand for meat has fallen by 12.4% in one year. Chicken and pork, 13.8% and 10.0% respectively. The dairy sector falls 6.5%. And special mention to oil, with a drop of 8.5% in demand and an increase in the average price of 36.4%. And of course, many have had to rethink their purchases, while white brands also double their price.
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