Germany announces nearly £60 billion of support to help with the cost of living

Germany announces nearly £60 billion of support to help with the cost of living

09/04/2022

The German Government has unveiled an initial €65 billion (£56.3 billion) plan to shield people and businesses from soaring energy prices and inflation.

Today’s announcement comes shortly after Russia suspended gas deliveries permanently, and as the cost of living rockets across the continent.

The measures in Germany include a one-off payment to help more consumers cover their energy costs, a planned price cap on the basic amount of energy consumption for families and individuals and a major public transport subsidy.

German Chancellor Olaf Scholz said that his coalition’s package would be paid for with a tax on electricity companies and by bringing forward a planned 15% global minimum corporate tax.

He declared himself ‘very aware’ that many Germans are struggling to cope with rising prices and said his government is prepared to help.

‘We take these concerns very, very seriously,’ Chancellor Scholz added.

In the UK, where the cost of living is rising more quickly than Germany, the plan is likely to pile pressure on the new prime minister to act to help households.

There have been whispers of Liz Truss – who is expected to be named Britain’s next PM tomorrow – planning a package worth more than £100 billion.

But today she refused to give details of what she intends to do to ease the problem – other than saying an announcement would come within a week if she wins.

The war in Ukraine has led to global inflation and fears of economic, social and political unrest.

But observers say the economic impact on Britain has been harsher compared with many other European nations and critics suggest other Governments have responded more decisively to the problems.

Referencing Boris Johnson’s suggestion that people buy a new kettle to save £10 a year, Labour MP Bell Ribeiro-Addy tweeted: ‘In Spain, train journeys under 300km are free until the end of 2022.

Chancellor Scholz continued: ‘Germany will come through this time as a democracy because we are very economically strong and we are a welfare state: the two together are important.

‘With every new windpark, we will become more independent.’

In addition to the previously announced one-off €300 (£260) payment to workers to help offset energy costs, the government now plans to offer payments to other groups – retirees will receive €300, while students will receive €200.

To keep energy costs lower for individuals and families, a ‘price brake’ on energy prices is also being implemented, with the Government saying it plans to offer a to-be-determined basic amount of energy to all at a lower rate.

The government will also develop a successor to its ‘€9 ticket’ – a nationwide ticket allowing unlimited travel on local and regional public transport.

Officials did not announce the new monthly price for the subsequent ticket, but the agreement released by the coalition pointed to suggestions of €49 (£42) or €69 (£60) – and said it aims to offer something in between.

Additional measures include higher subsidies for families with children, a reform of housing subsidies, and larger payments for low-income individuals receiving government aid.

The latest package means the country has spent €95 billion (£82.3 billion) on inflation-busting policies since the Ukraine war began in February.

In recent weeks, the government announced other actions to aid consumers, including the one-off €300 (£259.8) payment for workers and lowering VAT on gas from 19% to 7% until the end of March 2024.

Germany spent €300 billion (£259.8 billion) on propping up the economy over the two years of the pandemic.

Finance Minister Christian Lindner added that the €65 billion announced today could be increased if electricity prices rose further.

The windfall tax – dubbed a ‘coincidence tax’ to ease his party’s objections to the original term – would bring in revenue in the ‘two-digit billions’, he claimed.

In the UK, a windfall tax championed by Labour has been rejected by the Government.

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