May 21, 2020 / 3:43 PM / 4 days ago

Spain to fight poverty with income scheme for 2.5 mln people

MADRID, May 21 (Reuters) - Spain plans to spend 3 billion euros ($3.29 billion) a year on a scheme to provide most of its poorest citizens with a minimum income aimed at bringing poverty down to the European Union’s average from the highest rate in western Europe.

Social Security Minister Jose Luis Escriva told Reuters the cabinet is expected to approve the first nationwide, non-universal income support programme next Tuesday designed to reach 850,000 households, or 2.5 million Spaniards.

The minority leftist coalition government also wants to improve the efficiency and fairness of income distribution in a nation that has long lagged most of Europe on that front and whose economy is reeling from the coronavirus crisis.

The scheme, under which households with children will have preference in terms of eligibility, will set a minimum income level for an adult of about half the minimum wage, which now stands at 1,108 euros per month. That income will rise depending on how many children or dependents a houshold has.

The exact details of income and requirements have not yet been approved.

“The aim of this minimum income scheme is to try to eradicate extreme poverty, which is a major problem in Spain,” said Escriva, a former banker.

“In terms of redistributional effects we might exceed other comparable schemes in Europe, because our scheme is more modern, more focused and it should be more effective in terms of redistribution,” he said, adding that it can complement some very low wages, expecially those in the informal sector.

SPAIN LAGS EUROPE

Escriva said the measure could help rein in the informal economy, which according to the International Monetary Fund accounts for around 20% of GDP, since users will be obliged to give their data to tax authorities.

Spain has the largest share of population at risk of poverty in western Europe, 21.6% according to latest EU data, and the fifth largest in the bloc, where the average is 16.9%. It is the third worst in terms of income distribution in the EU.

The European Council has strongly recommended that Spain create an income support program, arguing that only 20% of those who need help receive it, and that last year it was the member state with the lowest average of family benefits per child.

Italy last year approved a poverty relief programme named “citizen’s income”.

Initially, Spain will try to reach the potential beneficiaries who, according to tax statistics, may need such assistance and will work with charities and town halls to reach the maximum number possible.

Escriva said the programme would not discourage job searching in a nation with historically high unemployment, set to end this year around 20%. “It is compatible with having a salary. In Spain there is a significant portion of workers having a very, very low salary or sub-employment”, he said.

To encourage job-seeking, it will be allowed for a limited time to exceed the minimum income level, he added.

Other assistance, such as housing, will also be permitted and coordinated on a single “universal social ticket”, something unprecedented in highly decentralized Spain.

$1 = 0.9127 euros Reporting by Belén Carreño; Editing by Andrei Khalip and Andrew Cawthorne

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