Local Renfe services will see a 1.9% increase in ticket prices.
2014 is going to be a year of many changes with regard to the fixing of prices. The Law of De-indexation, which was approved by the Cabinet of Ministers in December and which is now beginning its parliamentary process, comes into force this year; a new mechanism will be designed to determine the electricity tariff; and, for the first time, pensions will not be revalued in line with the Consumer Price Index but through a formula that takes into account the income and expenditure of the system. There is, however, something that will not change. January has brought increases in the price of basic products.
To begin with, the electricity bills in 14 million homes and one and a half million small businesses will rise by an average of 2.3 per cent during the first quarter. From April, it is possible that a new system will exist - the government is proposing monthly auctions instead of quarterly ones - and we will see whether electricity becomes more or less expensive. Spain has the third most expensive electricity in Europe, according to figures from the EC’s office of statistics.
Transport will also be more expensive. An expected rise in fuel prices combined with a fare increase that had already been decided by the Renfe railway company will result in an increase of 1.9 per cent on rail tickets for local (Cercanías), mid-distance (normal and Avant) and Feve services. In 2013, these tickets went up by three per cent, following a 10.9 per cent rise in 2012. According to Renfe, a normal ticket for the local rail service will go up by at least five cents, from 1.60 to 1.65 euros. Airport taxes - which the airlines pay but then recover from passengers through the ticket prices - will go up by a maximum of 2.5 per cent from 1st March, as the president of AENA, José Manuel Vargas, announced recently.
If travelling by train or plane will be a little more expensive, travelling by car won’t be cheap either. The toll charges on State-run motorways will go up by 1.85 per cent, although this will not affect those managed by the autonomous regions. For example, the Xunta de Galicia has announced that toll charges will remain the same in 2014. Another basic item, water, will also be priced differently all over the country: to give two examples, in Barcelona it will go up by 5.6 per cent while in Madrid it will go down by 0.1 per cent.
There could be some unpleasant surprises. Due to a decision by the European Union’s Court of Justice, the rate of IVA will have to be increased from 10 per cent to 21 per cent on certain health-related products such as spectacles, contact lenses, hearing aids, bandages, plasters and even diagnostic equipment and scanners, according to a report by the Institute of Fiscal Studies.
Another change to the rate of IVA will affect the notarial processes of financial transactions such as mortgages and the sale of shares. Until now, these have not been subject to IVA because they were classed as financial operations (upon which IVA is not payable), but Brussels has decided that they are not, and should be subject to IVA at 21 per cent.
Meanwhile, Telefónica has announced that it will not increase its monthly charge in January so this will remain at 14.38 euros. However, this does not mean that the line rental will remain the same all year, because in 2013 the company increased it by 2.9 per cent in April.
These increases are in contrast to the salary freeze approved by the government for civil servants in 2014 and the minimum salary, which remains the same at 645.30 euros a month. The collective bargaining agreement between unions and employers stipulated wage restraint with an increase of no more than 0.6 per cent if the CPI rises by less than one per cent - at the moment, the government expects it to grow by 0.7 per cent. On top of this, pensions will only go up by 0.25 per cent. These are no longer in line with the CPI but are updated according to a different formula.
It is not only pensions that will no longer be linked to inflation. The Law of De-indexation of the Economy that has been approved by the Cabinet of Ministers and sent to Parliament separates the prices of public services from the CPI and creates a new reference index for the private sector. Price increases in the public sector will have to be justified exclusively by rises in the cost of the service. In the private sector, increases will depend upon the wishes of the parties: if there is no explicit agreement, they will not be updated and if the pact does not specify a reference index, the new Guarantee of Competitiveness Index (IGC) will be used. This will be the same as the rate of inflation in the Euro Zone minus a corrective factor. The IGC will have a ceiling of two per cent (the ECB inflation target in the medium term) and a floor of 0%.
The public services affected bythis law represent approximately seven per cent of the family budget. While it is being passed through Parliament, an amendment to the Finance Law, which has already been approved, specifies a temporary regulation. Even so, this has not avoided increases in public services such as transport for 2014, although it has kept them below two per cent.