Eurasia Press & News
Law and Justice unveiled new economic measures designed to benefit the poorest, in what can be seen as a major offensive by the governing party ahead of the 2023 general election.
Back in 2015, when it first came to power, Law and Justice (PiS) presented voters with a catchy proposal: it offered a monthly benefit of 500 zloty (over 100 euros) per child to families with kids. Dismissed at the time by the opposition as an act of populism, today no one would dare touch the subsidy, which has actually proven popular and effective in combatting child poverty (if not in addressing demographic decline).
In May, PiS has attempted to repeat the same trick with a package of measures dubbed the “Polish Deal” (initially the “New Deal”), the most prominent of which are changes to the tax system aimed at benefitting the neediest in society.
One of PiS’s main sources of electoral success has been correctly diagnosing that, after three decades of capitalism, the demand for redistributive policies in Polish society is high. Depicting itself as the party of the “regular Pole”, PiS has spoken out against inequality and even implemented some measures, such as increasing the minimum wage, to help combat it.
With the governing United Right camp in turmoil – two smaller parties in the coalition whose support PiS needs to maintain a parliamentary majority have proven disloyal on more than one occasion – PiS leader Jaroslaw Kaczynski needs to be ready for a general election that could come at any time. Scheduled for the fall of 2023, the election might happen sooner if the coalition collapses.
The Polish Deal, then, can be seen as the governing party embarking on the electoral trail by reaching out to the same voters who brought it to power in the first place: lower or lower-middle income people, often from outside the big cities, some of whom share the party’s nationalist-conservative vision, most of whom vote pragmatically for the party that pays most attention to their economic needs.
PiS is again playing the most powerful card it has – redistributive social policies – and the mumbled response from the opposition so far gives reason to believe that this could prove to be another masterstroke by Kaczynski.
Marxism and class struggle
“This is a program to build the middle class for everyone, not just for the few,” Prime Minister Mateusz Morawiecki said on May 15, announcing the new measures during an online convention, which, despite its remote nature, was nevertheless infused with the optimism of the ongoing lifting of the COVID-19 restrictions.
“We have today a large group of people in the middle class, especially in the big cities, but there is still a big group of our citizens who are living from day to day,” Morawiecki elaborated the following Monday on a visit to Lublin, one of the stops for the premier on his country-wide tour to share the details of the programme with citizens. “For them, it’s hard to save money: the Polish Deal is for them.”
As part of the proposals, the government is promising to raise the non-taxable income allowance to 30,000 zloty (about 6,600 euros) and the threshold to enter the highest income bracket, taxed at 32 per cent, to 120,000 zloty (over 26,000 euros). Poland has a tax system more regressive than other developed countries and most experts welcomed the changes as a small step in the direction of fairness.
“The problem identified by PiS was real: that the tax system in Poland is not very progressive,” income inequality expert Michal Brzezinski, an assistant professor of economics at Warsaw University, tells BIRN. “The changes seem like a move in the right direction, even if there are better tools to increase progressivity.”
Brzezinki quotes a report published on May 19 by the Center for Economic Analysis, or CENEA, whose experts calculated that the tax changes will amount to a 22 billion zloty (almost 5 billion euro) annual loss for people in the highest income decile in Poland. Calling this a “significant loss of income” for the rich, Brzezinki says the money will go to the poorest and – even more – to “lower and middle middle-income” people, which will reduce inequality and poverty, even if it’s unclear yet to what extent.
The CENEA report also highlights that much of the gains will accrue to pensioners, thus having a limited impact on boosting the labour market – but providing potentially good electoral effects for PiS, which is anyway favoured among the elderly.
One of the most controversial changes announced by PiS is the new treatment of contributions to the healthcare system, which the self-employed will no longer be able to deduct from their taxes, meaning that upper middle-income people, primarily, would lose out. According to estimates by the financial consultancy Grant Thornton, a small business owner making 10,000 zloty a month (2,200 euros) would see their income fall by about 300 zloty (60 euros) a month following the changes.
The government plans to use the cash to increase spending on healthcare, which has been severely underfunded during the last few decades. PiS promises to increase health spending to 6 per cent of GDP in 2023 and 7 per cent in 2027 from the current 5.3 per cent, a low rate compared to other EU countries. Even though the COVID-19 pandemic has highlighted yet again the dire state of the chronically understaffed and under-resourced public healthcare system, the fact that higher-income earners will see money from their pockets go towards this purpose has created some degree of alarm in Poland.
“Jaroslaw Kaczynski reaches deeply into Marxist thought and class struggle,” Borys Budka, leader of the main opposition force, Civic Coalition, said in response to the proposals. “He rules by dividing people.”
“More socialism, more etatism; worse for those with ideas, initiatives and working the hardest,” is how Tomasz Lis, editor-in-chief of Newsweek and a high-profile commentator, summed it up on Twitter. “For those who remember PRL (communist Poland), the ‘new deal’ looks and smells entirely familiar.”
And herein lies Kaczynski’s tactical genius. As blogger Galopujacy Major explains, it’s precisely the outrage from liberal politicians and commentators at what are fairly minor extra deductions on their incomes that is likely to ingratiate PiS even more with lower-income voters.
“That is why PiS will win again,” Major wrote in a blog. “It will win because it provides relief to 70 per cent of Poles, for 20 per cent there will hardly be any difference, and it’s taking away from the richest 10 per cent.”
“You are groaning and despairing for a few hundred zloty,” Major went on, addressing liberal politicians and commentators who have been critical of the Polish Deal, “and they (i.e., lower income people) are watching… and thinking: ‘they’re mowing through 7-8,000 a month and they don’t want to give us 300’. To the garbage with them at the next elections.”
“This is how class interest works,” Major explained. “They will vote according to their interests and you according to yours. It’s just that, silly thing, there are many more of them.”
No vision of development
Beyond the tax changes, the Polish Deal includes other measures, such as: further financial help for families with children, who are set to get over 2,600 euros for the care of their second child and onwards between the first and third year of life; guarantees for mortgages; a promise to gradually get rid of precarious labour contracts; and infrastructure investments.
Speaking at an event organised on May 17 by the Union of Business Owners and Entrepreneurs (ZPP), economist Wojciech Paczos from Cardiff University criticised the Polish Deal for not being based on any clear vision of development, particularly when it comes to human capital, which the expert argued should be a key focus for Poland at the moment.
While he welcomed the changes to the tax system as a “small step in the right direction”, as well as the intention to spend more on healthcare, Paczos said the whole plan looked as if it had been “written in a week”, without expert consultations, piloting proposals or directing spending towards specific goals.
Paczos warned against mislabelling the Polish Deal as a “social-democratic programme”, as it essentially amounts to pouring money into the health sector without any vision of how public services – particularly in the key sectors of health and education – should work.
Brzezinski, the inequality expert, agrees: “Many of the long-term concerns of Polish society and economy are not addressed. There is nothing about science and innovation, climate change, education; and health is dealt with symbolically – there is not much on how the money will actually be spent.”
“It certainly looks more to me like a package addressing the political concerns of PiS. In the last year, they lost about 5-10 per cent in the polls and maybe they got the idea that if they let it slip further, they would have no power to hold on to. Now, when the pandemic is losing its power and growth will soon reappear in the economy, it’s a good time to do something like this: they could strengthen the impact of removing restrictions with the stimulus and gains for households.”
Writing in Krytyka Polityczna, commentator Michal Sutowski argued that the plan sounds “as if it was written 20 years ago, ignoring key civilisational challenges, starting from climate change, and allows us to believe that our problems can be dealt with in the same way as before, just more generously and on a larger scale.”
“Unfortunately, it also has a great chance of being liked by many millions of Poles,” Sutowski concluded.
