Analysis: Finance minister outside of the decision making loop?

Finance minister Professor Teresa Czerwińska is rumoured to have offered her resignation after the ruling Law and Justice (PiS) promised rises in benefits and tax cuts.

It was the Saturday of the launch of the PiS campaign for the European elections and the leader of the party was unveiling the programme. He promised universal 500+ benefit for all children, before it was for every second and further children.

But that was not all. The list of promises continued with an extra flat rate payment for all pensioners of PLN 1100, reducing the basic rate of income tax and increasing the amount free of tax, freeing people under 26 from personal income tax and a programme of restoring public transportation links for small towns and rural communities.

A whisper was heard in one of the front rows: “where’s the minister of finance?”. “She’s being taken away in an ambulance”, replied some commentator.

The finance minister is not a politician. She is an academic with no position in the ruling party. She was a close associate of PM Mateusz Morawiecki when he was himself FInance minister. But he was also Deputy Prime Minister and minister of the economy with a directline to the ruling party leader Jarosław Kaczyński. Prof. Czerwińska has no such direct line to political power.

Law and Justice promises universal child benefit

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She has studiously avoided saying anything about the viability of the proposals and their implications for the state’s public finances in the future. This lack of visible engagement in the initiative has led to speculation that she was by-passed in the process of the policies being developed and feels that they are over-generous and a threat to the stability of Poland’s budget in future years.

The ministry of finance has refuted press reports that the FInance minister offered her resignation but that it was declined by the PM. Prof. Czerwińska’s colleagues have also said that there was no resignation. The liberal conservative Jarosław Gowin, a Deputy PM in the government, has argued that at least three of the measures announced were liberal; the tax cuts and the promise to restore mobility to bring people to the labour market.

Nevertheless, it is not surprising that there are tensions with regard to the promised measures. They are estimated to be costing 40 billion PLN in this financial year alone. With economic growth likely to be reduced and the ability to tighten up the tax system not infinite the measures are creating entitlements and expectations which may be hard to meet in future years for this or any other government.

At the beginning of the week further details of Czerwinska's objections came to light. The spending policies would not cause too much damage in 2019, as most would actually not come into force until the new tax year. The most expensive policy- the widening of the net for 500+ child benefit is scheduled for payout only in Q4 of this year. The problem is for next year. Mrs Czerwinska has fears that such a significant hike would break spending rules, thus requiring legislation which she, with the reputation of a sound book keeper would be unwilling to steer through the legislature.