Spain’s guaranteed minimum income scheme will come with €5.5bn price tag

Spain’s plans for a new guaranteed minimum income system are gaining pace, given the devastating effects on the economy being wrought by the ongoing coronavirus crisis. The coalition government, led by the Socialist Party (PSOE) with junior partner Unidas Podemos, is planning to introduce a scheme that will seek to benefit around a million households – some three million people – and will be means tested according to the type of family, the number of children in the household, and the family unit’s level of poverty.

The total cost of the system is estimated at nearly €5.5 billion a year, an amount equivalent to just over half the monthly cost of Spanish pension payments. This amount will gradually fall over time, as the guaranteed minimum income system absorbs other social benefits.

The executive is planning to launch the scheme in May, and the idea is for it to be a permanent system

The scheme is being designed by the Ministry for Inclusion and Social Security, which is led by José Luis Escrivá, who is the former head of Spain’s Independent Authority for Spanish Fiscal Responsibility, an agency for fiscal control that was created in 2013, and Finance Minister María Jesús Montero of the PSOE. They are working in close collaboration with other Cabinet members, such as Labor Minister Yolanda Díaz of Unidas Podemos, and Pablo Iglesias, the leader of the latter party who also serves as one of Spain’s deputy prime ministers and the social rights minister.

The executive is planning to launch the scheme in May, and the idea is for it to be a permanent system, as was laid out in the coalition deal reached between the PSOE and Unidas Podemos on December 30 of last year. The document envisioned “a general mechanism to guarantee earnings for families with no or low income.” The introduction of the scheme has been accelerated since the coronavirus epidemic took hold in Spain, prompting the shutdown of many businesses and the confinement of Spaniards to their homes.

The beneficiaries will be able to receive the payments while they are working during a period of several months

The basic system has already been defined, according to sources from the Spanish administration. It will be organized in terms of type of household, with 12 different basic classifications of family that take in any situations of extreme poverty.

The beneficiaries will be able to receive the payments while they are working during a period of several months, which is aimed at encouraging recipients back into employment, rather than dissuading job seeking.

Recipients will be subject to an analysis of all household income, and for the first time with such a scheme in Spain, a review of total assets. Together with a cross-reference of data from the Social Security and Tax Agency, the scheme will seek to avoid fraud and combat the underground economy right from the start.

Senior officials from the departments involved in the scheme have begun a series of meetings with regional and municipal governments, given that powers over social benefits are either shared between Spain’s 17 regions and the central administration or are concurrent. Local councils, meanwhile, will play a key role, given that they will act as a kind of single point of contact for all social benefits.

English version by Simon Hunter.