Pledges

“Men should pledge themselves to nothing; for reflection makes a liar of their resolution.” The words of Sophocles, which most politicians, nay most voters, would do well to remember. Poland’s ruling Law and Justice Party (PiS) is not shying away from making pledges confident, no doubt, that its record of implementing the pledges it made before the last elections will encourage voters to keep it in power.

At a party congress held on Saturday in Warsaw under the slogan “A New Programme Arena”, PiS presented five major proposals in advance of this spring’s elections to the European parliament and the national elections this autumn.  The first major pledge is to extend the 500+ programme, a monthly payment of PLN 500 (EUR 115), to include the first child and not just the second and subsequent children as at present.

The second pledge is to help young people who begin their working lives by exempting them from personal income tax (PIT) until they reach the age of 26. At the other end of the spectrum, every pensioner will receive an extra annual payment equal to the minimum monthly pension, currently PLN 1,100 (EUR 254) or “a 13thpension” as party leader Jarosław Kaczyński put it. Deductible expenses for PIT will also be raised.

The prime minister, Mateusz Morawiecki, emphasised the role of the family and encouraging young people to remain in Poland or to return from abroad. He said that the government aimed to raise the standard of living to in Poland to European levels. “We’re heading in this direction and we know how to do it”, he said.  He added that the total cost of the party’s new pledges is estimated at PLN 30-40 billion.

Speaking on Monday, in Herby, President Duda expressed support for the programme. He said that he was very content to see progress in family policy in Poland, which progress was due to the present government which was “meeting its obligations”, something which in his opinion, “gives cause for great pride, and, most of all, satisfaction”.

Duda also said that all parts of Poland were equally important. and that growth should embrace smaller communities such as Herby. In his view sustainable development was the best model for Poland, as it ensured growth opportunities for all regions of the country. This is why he said his main focus was on smaller towns and municipalities.

So, a continuation of the family friendly reforms which the government has said are necessary to spread Poland’s prosperity more widely, or a cynical attempt to bribe the electorate, particularly its own voter base, in an election year?

According to Rafal Benecki chief economist of ING in Poland, the spending pledges are higher than expected, and while they pose a limited risk to the 2019 budget, the picture for 2020 is less certain after two years of positive fiscal surprises. The EU threshold of the budget deficit not exceeding 3 per cent of GDP is not under threat.

According to him, the bank does not like that fact that three quarters of the programme is directed at social measures which are politically effective in supporting PiS in the polls but provide only a transitory boost for GDP without solving any structural issues. It would prefer to see that three quarters spent on health care or education or simply to stop the tax system from tightening (more tightening will come when the economy slows to keep the deficit under control). The bank is concerned that the earlier tightening had a negative impact on private investment, which grew by just 3.5% year-on-year in 2018, below GDP growth. As a result, Poland is losing its competitiveness in the region in terms of investment’s share of GDP, which undermines long-term growth potential.

The fiscal effect is projected to boost GDP by some 0.6% in 2019 and 0.8% in 2020. Thus, economic growth in Poland is shielded against a potential global slowdown. The bank sees moderate upside risk to its 3.6% year on year GDP forecast for 2019, and 2020 at 2.8 per cent year on year. However, the uncertain global picture is the main risk.

Of necessity, economists and politicians speak to difference audiences. Cynicism aside, the government’s proposals of themselves, particularly in relation to PIT which does start to bite at a much lower level than in the UK, for example, seem not unreasonable. It remains to be seen whether promised further pledges affect this relatively benign picture.

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