Tusk announces major reform agenda for new government

2011-11-20



Prime Minister Donald Tusk on 19 November won a vote of confidence in his new government, after outlining a series of tax, spending and pension reforms designed to ensure financial stability in an uncertain environment.
In his first address to the new Parliament on 18 November, Mr. Tusk laid out a programme of major fiscal and other measures, some of which will make an impact already next year, most from 2013, while others, notably the proposed reforms of the pension system, will bring benefits in the long term. In a reply to MPs’ questions on 19 November Mr. Tusk put the estimated total net savings in 2013 at PLN 10bn (approx. €2.25bn).
Of the more immediate measures, the most important one is a 2-point increase in the incapacity benefit contributions paid by employers, due to take effect on 1 July 2012. It will deliver the lion’s share of the anticipated savings. Other proposals include a new tax on minerals (copper, silver, shale gas), to be introduced in Q2 2012; making owners of large farms pay health insurance contributions, as of February 2012; the closing of loopholes in capital-gains tax laws effective from 2012; the abolition of the internet-access tax break, cuts in child tax credits for the wealthy, or less generous income-tax deductions for high-earning creative workers, all to come into force as of 2013. The most important long-term measures are a gradual increase of the official retirement age for men and women to a uniform level of 67 years, up from 65 and 60 respectively, starting from 2013 and to be completed until 2020 (men) and 2040 (women); and less generous pension rules for the uniformed forces, miners and some other state employees, from July 2012. Some other measures, such as a change in the way pensions are adjusted for inflation, are to be neutral for the budget while entailing some redistribution towards lower-income groups.
Business groups and analysts welcomed the main thrust of the programme, particularly the proposed pension reforms. However, they warned that the rise in employer-paid incapacity benefit contributions would increase non-wage labour costs and might stunt job creation or even increase unemployment.
Mr. Tusk replaced just over half of his cabinet, but its core economic team has been left intact, with Jacek Rostowski as finance minister; Waldemar Pawlak as Deputy PM and economy minister; and Elzbieta Bienkowska as regional development minister. One change is the appointment of Mikolaj Budzanowski as the new treasury minister, in place of Aleksander Grad, but Mr. Budzanowski served as deputy treasury minister in 2009-2011.