IVA on petrol to go from 18% to 21%

The Prime Minister, Mariano Rajoy yesterday announced in the House of Congress an increase in the rate of IVA to 21% and up 2 points on reduced IVA, making it 10%. The super reduced rate of 4% remains unchanged, which is the rate applied to necessities such as bread, milk, eggs. This along with other economic cuts is predicted to save 65 billion euros by the year 2015.

The changes will be bought in from 1st September, so as not to affect the tourist trade and brings Spain up 14 places of countries within the EU with the highest rate of IVA/IVA - now placing Spain at number 10 out of 27. My advice if you were thinking of making any large purchases then do so before the end of the summer. Some of the larger stores may decided to absorb the cost inorder to maintain sales but many retailers are struggling so may implement the changes as soon as they are officially decreed.

You will notice the price of everything go up - from restaurant bills to utilities and it is estimated that it will cost families on average an extra 415 euros per year.

Other cost saving measures that have now been passed include:  Suspension of Christmas bonuses to officials and public employees ... no doubt they will be thinking of striking at this news(!), a cut in the amount of unemployment benefit received after 6 months from 60% to 50% for NEW recipients - although entitlement will remain for 24 months... this is to "encourage active job search" apparently! Rajoy also plans to cut the number of councillors by 30% - that should make a fair saving. From 2013 you will not be able to claim tax relief on your mortgage ... so following in the UK´s footsteps and in addition on house purchases, the current special rate of 4% IVA will be increased to 10% - as if the housing market could get any worse this will certainly slow things down even more.

Another surprise announcement is that certain items and services are being moved to the top rate of 21% - from the current low 8%... this includes glasses and contact lenses - get down to Specsavers in Benidorm pronto,  cinema, hairdresser, discotheques, theatre, health products, funerals and cleaning services ... a real odd mix.

All utility bills to rise by 3%

Newspapers have already started scaremongering potential holiday makers, stating how expensive things will become in Spain. However, I looked at the euro exchange rate for this time last year and the rate was actually 1.13 (.88 pence) compared to today´s rate of 1.26 (.79 pence) - so if you look at the prices in sterling they are actually cheaper because of the stronger exchange rate. Due to the stronger exchange holiday makers will not even notice the 3% rise in IVA (VAT) - its just us poor residents that will.

Cuts have already been made to Education and Health ... I can certainly vouch for that. This morning I had to wait for 40 minutes to make a doctors appointment at the Centro de Salud as the website is down.... there were 10 people infront of me and only one lady at the desk - I felt sorry for her as everyone was venting their anger at her and it wasn´t her fault.