The continuing problems with the exchange rate are causing great problems for Brits living here in Spain. The slow climb back from 1 Euro to the pound was halted when the rate started to worsen again; it is currently hovering around the 1.12 Euro to the pound mark. Effectively, those relying upon a UK pension e.g. have seen their disposable income drop by about 27% in the last year or so.
As a consequence, a number of residents here in Bigastro are being forced into reconsidering their position. Many say that the cost of living here in Spain, which was once a great attraction to coming here, is now killing them. However, they are in a no win situation because property sales are still in the doldrums and house prices are still at an all time low. Unable to sell their houses, these people are stuck between a rock and a hard place; they can neither afford to live here nor return to Britain
To add further to the misery, normal rate IVA (VAT) in Spain will definitely be raised on July 1 from 16 to 18 per cent. The government estimates that, in spite of this, prices will only increase by one percent because providers will choose to 'absorb' the hike by lowering their prices before adding IVA. The industry minister, Miguel Sebastián is even more optimistic; he claims only a quarter of the increase will be passed on to consumers - increasing prices by just 0.5%.
Whether this is the case or not, suppliers of electricity, pipeline gas and butane gas have already stated the IVA rise will have to be passed on to their customers because they claim they have 'no commercial margin' to absorb the tax rise.