LTV's De Facto looks at planned state aid in potential energy crisis

During the last heating season, state aid was distributed to all. Now the Saeima has finally approved a law providing targeted support for lower-income households, but it does not really provide answers to what this support will be, Latvian Television's De Facto reported Sunday.

In order to compensate residents for the increase in heating and electricity costs, the state spent almost EUR 700 million in two years previously. Such an amount is a heavy burden on the budget, and then there were calls for support to be targeted. This required data on households and their income.

The necessary base is now ready under the supervision of the State Construction Control Office (BVKB), which undertook to set it up when others hesitated. BVKB Director Svetlana Mjakuškina explained that the system will read data on income from the State Revenue Service and the State Social Insurance Agency and connect it to information about people declared at a specific address.

But such a database alone means nothing when it is not known how it will be used to provide support, and for now, there is little clarity.

"[Support] is currently foreseen in cases where energy prices are high, above a certain limit, we don't know what that limit will be for now, it's for the Cabinet of Ministers to decide, and support is for households with incomes below a certain threshold. That threshold is not known either," Mjakuškina said.

The draft law, which was drafted by the Ministry of Climate and Energy (KEM) and should have brought more clarity, came to the Saeima from the government in September and was finalized in November. One particular thing in the bill was initially that households whose housing expenses – rent and utility payments – exceed 30% of revenues will be eligible for support. But the discussions concluded that it could not be calculated and this was deleted from the law.

It is clear from KEM's account that this principle will not disappear anywhere. Which households will qualify for support will still be determined by a 30% proportion of housing costs.

"But it needs to be understood that we will not account for the housing costs of each individual household as part of this new support system. This will be the statistical average in Latvia," said Līva Šnitko, deputy director of KEM's energy market department.

In the Central Statistical Office (CSB), the most recent survey on housing costs is only for 2019, and the Ministry acknowledged that it will indeed take these years-old data as the basis for further calculations.

"For each of the spending items we have taken into account the inflation ratio, which is also available on the CSB website. If, respectively, one of the positions paid the “x” price in 2019, then we add that 40-50 inflationary ratio to it and understand what its actual cost could then be right now," Šnitko said.

 According to a survey by the Central Statistical Bureau, expenditure on housing per person in the household was €61.51 in 2019. in December 2022, when inflation was highest in the category (59%), it would be around EUR 97. So households with incomes of no more than about €325 per person would be eligible for support. For a four-person household, it would be 1,300 euros combined.

At a higher price jump, the income limit would rise. For example, if prices doubled because of inflation, the income limit would be €410 per person, or €1,640 in a four-person household. These are only indicative estimates.

In April, the Ministry of Climate and Energy sent data to the Ministry of Welfare that the income threshold could be €570, which would reach more people. However, as it has developed, there was no justification and no subsequent discussion.

KEM predicts that Cabinet of Ministers regulations with further details of support criteria could take two to three months.

The Ministry reassured that there are no signs that a rapid rise in energy resources is expected in the near future, so there is time. The BVKB also hopes for clarity so that the newly created system is not without use. In addition, in time it can be used for purposes other than this.

“Of course, the system has tremendous potential and I hope that this potential will also be utilized effectively,” Mjakuškina noted. 'Fundamentally, when there is some information about the median household income, more targeted support policies in the country can undoubtedly be planned. It can then be understood how our households live and how the country could help.”

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