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.
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