Energy price hike should be compensated with targeted benefits - Bondars

RIGA - Energy price hike should be compensated with targeted benefits so that the increased energy costs would not drive people into poverty, said Martins Bondars (For Development/For), the chairman of the Saeima budget and financial (taxes) committee.

Asked about the party's stance in relation to the proposal of Economics Ministry Janis Vitenbergs to reduce value added tax (VAT) on energy resources, Bindars said that the party believes that reduced rates is not he best way to support people who need social assistance. Instead benefits could be granted, depending on the size and income of households, the politician said.

Local governments, the Finance Ministry and the Welfare Ministry should work together to decide on the size of the benefits.

As reported, Vitenbergs will repeatedly urge the government coalition to reduce the value added tax (VAT) rate on electricity, natural gas, thermal power and fuelwood.

The minister's spokeswoman Vineta Vilistere-Lace revealed that the economics minister's proposal, which will be presented at the coalition's weekly cooperation meeting, provides for temporary reducing the VAT on energy from 21 percent to 5 percent from January through April.

To keep down households' energy costs, the Economics Ministry is proposing a compensatory measure, namely, capping heating rates on centralized and gas-fired heating systems from January 1 to April 30.

"The current situation with electricity, gas and heating bills is dramatic for households and businesses alike. The existing support mechanisms for electricity consumers are only a partial solution. Consumers are alarmed at their bills, which are unprecedently high this heating season. Even a small reduction of each bill is an essential for maintaining people's solvency," the economics minister said.

According to Vilistere-Lace, the Economics Ministry's proposals are supported by the Latvian Association of Local and Regional Governments (LPS) and the Association of Latvia's Large Cities (LLPA). On Friday, Vitenbergs discussed possible solutions to energy poverty risks with LPS chairman Gints Kaminskis, LLPA executive director Viktors Valainis (Greens/Farmers) and Welfare Minister Gatis Eglitis (New Conservative Party).