Prime Minister Donald Tusk on 29 January unveiled a “Plan for the Development and Consolidation of Public Finances”, a wide-ranging set of reform measures to be implemented over 2010-2011 in a bid to reduce the budget deficit and public debt, and stimulate long-term economic growth and jobs creation.
The cornerstone of the plan is a spending rule that caps growth in discretionary spending at inflation plus one percent. It will apply over the next few years, until the general government deficit is brought back down to 3% of GDP from over 7% at the moment. Thereafter, a less restrictive rule will apply, namely of spending growth not higher than inflation plus average GDP growth over the preceding five or six years, minus one percentage point. This will ensure that the level of public spending as a share of GDP declines over time. These rules, together with other cost-cutting measures, such as the centralisation of certain back-office operations across the public sector, are to bring annual savings of PLN 15-16bn, or €3.7-4.0bn (including PLN 10bn, or €2.5bn from the spending rules).
Comparable savings are expected to be achieved thanks to a reform of the pension system that will progressively abolish generous special schemes for certain groups, such as armed services or farmers. All this will enable a marked reduction of public debt.
At the same time, the government vowed to redouble its efforts to simplify business laws and to accelerate privatisation, which is to bring even PLN 27bn (€6.7bn) in 2010 alone. There will also be measures to close loopholes in the tax system (e.g. compulsory cash registers for doctors and lawyers) and reform the education system. Rapid absorption of EU funds will remain a key priority.
Relevant bills are to be ready by the end of the year. Tusk stressed that even if President Lech Kaczynski were to veto a public-finance reform bill, the 2011 budget would still be prepared in accordance with the new spending rules.
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