Czech government to cap housing, energy costs at 30% of income

Electricity pylons carry power from CEZ's Ledvice coal-fired power plant near the village of Ledvice, Czech Republic, February 9, 2016. REUTERS/David W Cerny

PRAGUE, Aug 17 (Reuters) - The Czech government will hand out state aid to ensure people do not spend more than 30% of their income on housing including energy amid soaring gas and electricity prices, Prime Minister Petr Fiala said on Wednesday.

The contribution for housing will complement the 66 billion crowns ($2.73 billion) the government aims to distribute in the form of a subsidised energy tariff over the 2022-2023 heating season, Fiala said. The government will also waive fees for subsidising renewable energy.

"People will pay maximum 30% of their income on housing, including payments for water and energy," Fiala told a news conference. "The government is prepared to cover all costs of housing above 30% income through a housing contribution."

Register now for FREE unlimited access to Reuters.com

The cap for spending on housing including energy will be 35% in the capital Prague, Fiala said.

Energy has been among drivers of Czech inflation, which has been running at three-decade highs of 17.5% year-on-year in July.

Fiala did not put any figure on the expected size of the aid to keep the costs under the cap.

The government planned to run a fiscal deficit of 4.5% of gross domestic product before raising the central budget gap by 2 billion euros, or around 0.7% of gross domestic product, last month.

The government has been pondering the introduction of a windfall tax on energy firms and banks, which could raise billions of euros next year, to compensate the additional costs of social spending.

Czech households are beginning to feel the hit from soaring gas and electricity prices as fixed-term contracts gradually run out.

The country has been nearly 100% dependent on Russian gas, and the government has secured to cover around a third of its demand through a liquefied natural gas terminal in Netherlands.

Domestic gas storage has also been filled to more than 80%, but that still leaves gaps in case Russian gas stops flowing completely.

The government said savings and European solidarity should allow the country to manage to get through the winter season.

Savings under extreme scenarios may include, apart from reduction in supplies to industry, a reduction in the temperature for heating in public buildings and remotely-heated apartments to 18 Celsius under a decree presented this month by the country's Industry and Trade Ministry.

($1 = 24.1540 Czech crowns)

Register now for FREE unlimited access to Reuters.com
Reporting by Jan Lopatka; editing by David Evans

Our Standards: The Thomson Reuters Trust Principles.