On Saturday the Polish ruling United Right (UR) coalition presented its “Polish New Order”. A massive post-pandemic spending plan which will boost the economy and ensure economic growth in the years to come.
Originally the plan was meant to be presented on the 20th March but due to the third wave of covid and a crisis in the ruling coalition the presentation was postponed and the date was moved to mid-May.
Few weeks ago the Polish parliament passed the EU Recovery Fund, the government had to count on the opposition’s support as one of the UR coalition parties decided to vote against the ratification. In the end the vote passed with 290 voted for, 33 against and 133 abstentions.
Among those who voted for along with the government was the New Left, Poland2050 and Polish Coalition. Civic Coalition the biggest opposition bloc which at first was for, then against, in the end decided to abstain.
With the passing of the EU Recovery Fund the government could finally proceed with their final touches to prepare to unveil their massive spending plan. Up to 2030 the entire plan will cost 651,6 bln zloty (€143bln), the yearly costs of the plan for the budget stand at 72,4bln zloty (€16,3bln).
These figures are astronomical for the Polish budget especially when taking into account the other social benefits which the UR had introduced in the past few years which cost billions and caused inflation to hike.
The “Polish New Order” covers a number of important issues for the Poles such as: good salaries, more jobs, decent lives for seniors, reshaping of the tax code, more support for families.
The main points on which the Prime Minister, leader of PiS and the two other leaders of the minor coalition parties focused on during their speeches were: raising the healthcare spending to 7% of GDP in the next few years, raising the threshold at which you start paying income tax to 30,000 zloty, exempting pensioners whose pension is lower than 2,500 zloty a month from paying income tax, creating 500,000 new jobs, constructing 2,500km of new motorways and roads by 2030, once of 12,000 zloty payment for second and next child, creating a ‘help to buy scheme’ which would cover up to 40% of the buyers costs of acquiring a house.
Opposition politicians as soon as the plan was announced took to the media to warn people about the consequences of such lavish spending, they claim that the plan will further cause a hike in inflation and that the ‘help to buy scheme’ will lead to a property price boom making it unaffordable for people to buy property.
About 80% of taxpayers are set to benefit from the plan, however, those who make over 10,000 zloty a month will see their taxes go up as well as self-employed which will be hit with a 9% health insurance tax.
Instead of paying a top rate of 32% top earners and self-employed will end up paying 41% in tax.
Time will show whether the plan can actually work, what is inevitable though is the fact that as a result of it inflation will remain steady at around 3-4% over the next couple of years.
Two years away from the parliamentary elections the government is hoping that voters will reward them at the polling booths for the spending plan, as of now the government’s support in the polls varies between 30-35% which will leave them short of an absolute majority which they hold in the parliament since 2015.