People queue in Barcelona to collect food aid © Angel Garcia/Bloomberg

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The Spanish government is set on Friday to use emergency powers to push through a so-called minimum income guarantee as a central part of its legacy and a model for other countries.

The leftwing coalition plans to issue a decree to establish the measure designed to help the 2.3m poorest people in society withstand the savage economic aftershocks of the coronavirus crisis as soon as next month.

Parliament will have four weeks to back the measure — which tops up incomes to a guaranteed level of between €461 and €1015 depending on individual households’ circumstances — or see it fall, which would mean withdrawing the scheme just after people have started benefiting from it. At present, potential recipients earn an average of just €310 a month.

“It will be difficult to go against this in the current juncture,” said José Luis Escrivá, the minister of inclusion, who has pulled the plan together. In an interview with the Financial Times, he said he was confident that parliament would ratify the decree, despite Spain’s bitterly polarised politics and the lack of a government majority, and that the courts would see off any challenge to its legality.

The coming months are set to be extremely testing in Spain, one of the worst hit countries in Europe by the economic consequences of the pandemic. About 3m people on temporary leave schemes are likely to be officially classified as unemployed during the summer. Companies will face the crucial choice of whether to dismiss or retain such people in the autumn, when a six-month prohibition on cutting staff on temporary leave schemes expires.

But while the government is invoking extraordinary powers to deal with economic crises to impose the minimum income guarantee, the measure is a central part of the coalition agreement between the two parties in government: the Socialists and the smaller, radical left Podemos movement. It is intended to be permanent, not just for the current crisis.

The administration argues that poverty was already a structural problem in Spain before the pandemic, with more than 3.8m households — a fifth of the total — below the poverty line and a tax and benefit system that does less to transfer income than many other EU countries, particularly in northern Europe. 

Mr Escrivá, an economist who previously headed Spain’s independent fiscal watchdog, argues that the measure, which relies on detailed and frequently updated data, could serve as an example to other countries of how to target assistance on the neediest at a time when states are painfully short of tax revenue. He also contended it could bring people into the formal economy, partly because recipients will need to submit tax returns. 

“If our analysis is correct, we are going to achieve lots of results in terms of quite strong eradication of poverty and income redistribution with a relatively modest fiscal expenditure,” he said. The government hopes to limit the cost of the measure to €3bn a year, with an average top-up payment of €313 per household.

But several aspects of the plan — such as how it will deliver incentives for people to increase rather than decrease how much they work, and co-operation with the private sector — have yet to be finalised. The government is also hoping that bureaucratic concerns will not deter people from claiming, with non-government organisations and municipalities helping people fill out the necessary forms.

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The minister said the minimum income guarantee, which will be means-tested on both the income and the non-housing wealth of potential recipients, was “completely the opposite” of so-called universal basic income, a much more expensive measure that has been trialled in countries such as Finland and involves paying everyone a fixed amount.

By contrast, the Spanish measure breaks the 850,000 qualifying households into 14 different categories, with the top-up payments they receive dependent on the number of adults and children in each.

Mr Escrivá said the government would seek to design paths to social inclusion, since up to a third of the eligible people would be unable to obtain work immediately, whether because of mental health or drug problems or other issues.

He added that the preparatory work for the measure had shone a light on Spain’s “very acute” inequality of wealth, as well as the role of the informal sector.

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