I have used the reverse translation method to do Nowy Ład into English, as Roosevelt’s New Deal agenda is commonly
translated into Polish as such. The Nowy ład has also been immediately dubbed Nowy Wał by critics of the government, for
which I use term in the title of the post.
It has taken me a few days to catch up with the document. Since the
quality of media coverage in Poland is on decline, same as journalists’ grasp
of economics, I have decided to take more than a glimpse at the source
document, before drawing any conclusions. Despite my dislike for the
government, I am trying to take an unbiased look.
The agenda is a leap forward, to keep up the support by the parliamentary
election in 2023 and in the meantime to buy off some voters. People have to
forget about the trauma of the pandemic and over 100,000 excess deaths the
country will have reported by the time the epidemic is truly over.
The very document is just a blueprint of what PiSites want to reform in
Poland by 2030, full of general catchwords, lofty intentions and bragging about
recent successes. At such level and stage lacking details, but setting objectives.
I shall focus on commenting just a few of them.
1. Increasing the health care spending to 7% of
GDP – a commendable goal, yet allocation of money must be wise between
available resources. As three decades of not sorted out problems of the state-run
health service in Poland prove, any government can sink an infinite amount of
money into the system, but in order to make it operate efficiently and
patient-friendly, structural problems need to be tacked.
2. Raising the tax allowance to PLN 30,000 is a
step that moves us closer to standards of taxation in the civilised world,
where those earning the minimum wage pay almost no tax.
3. The document mentions a deductible for the
middle class, i.e. those whose yearly earnings are in the range from PLN 70,000
to PLN 130,000 – an interesting idea, yet without any details. This point has
not appeared in the media coverage.
4. The threshold for the second tax bracket is to
be raised from PLN 85,528 (at which it has stood since 2009) to PLN 120,000
which still does not make up for accumulated inflation over the last 13 years,
yet brings some relief to the middle class.
5. Remote working in non-pandemic times should be
finally governed by law (even sooner), ensuring the employee gets compensated
for their house maintenance expenses related to home office – at last.
6. I searched in the document for the provision
under which the health care contribution will no longer be deducted from
taxable income and have not found it. If such intention does hold true, it will
offset positive effects of points 2, 3 and 4.
7. Property purchase equity is to be guaranteed by
the government. Here I am the most sceptical. All programmes aimed at the
housing markets pump up property prices (making them less affordable) and
benefit banks as mortgage lenders. The scheme is to include a cap on price per square
metre, but it will either be sky-high or exclude most properties in large cities
from the programme. I would call for a programme aimed at increasing supply of
dwelling, yet in a civilised way.
8. The state is to become an important investor
and to create directly or indirectly 500,000 jobs. I am wary of this – free
market allocates resources more efficiently, but in Europe and in the USA
governments pursue sizeable recovery programmes, so Poland just falls into
line.
9. The tax burden for enterprises to be lower –
fine, yet in Poland not the level of taxes, but the instability od regulations
and extent to which they are complicated make up a problem.
10. The pension system
with the current pension age (60 for women, 65 for men) is not sustainable and
the document does not address that issue.
The costs of the agenda have been presented in the document, yet funding
sources have not been specified. Any government before it begins to give out
money has to collect it in taxes or run up debts. Do bear in mind there is no
such thing as a free lunch in economics.
