Sunday 12 September 2010

Politics - time to change gear

Since Platforma Obywatelska (PO - Civic Platform) was formed in 2001, I have voted for the party at elections local, parliamentary and presidential. Its blend of moderate economic liberalism and moderate social conservatism squares pretty much with my own views brought over with me from the UK. I remember when PO's leader Donald Tusk made his maiden speech as prime minister to the Polish parliament. I was sitting in a traffic jam, radio turned up; I found myself involuntarily applauding every other sentence. A speech in which the importance of re-building trust in Polish society was the key theme.

Yet today three years on, with PO in such a strong position in Polish politics, I am thoroughly disillusioned with it and yet there is no alternative to it. None.

And when a political party gains such control it can use it for good, or ill. But in the case of PO, it's not using it at all. The party is showing that its natural instincts are to do nothing. Hope something will come along.

Why am I writing this today? Firstly, a personal epiphany last week. I am unlikely to vote for Hanna Gronkiewicz-Waltz, the PO mayor of Warsaw in this autumn's local government elections. She has done too little for the residents of Jeziorki. Some sewers are being built, but at a snail's pace. There is still no pavement along ul. Karczunkowska, no road crossing by the bus stop, water standing on fields drowning crops (where are the drainage ditches?), far too many unasphalted roads, no macro-scale planning solutions to suburban and exurban sprawl and how the owners of the tens of thousands of new homes recently built around the city's rim are to get into town. And still no drains for ul. Trombity. We have spent nearly 15,000 zlotys (£3,000) on having our septic tank emptied since the last local government elections. Enough already!

Secondly, the realisation that Donald Tusk's government has not got down to any serious reforms of the Polish state. When I read Scatt's blog post today about his attempts to extend his meldunek and resident's permit, my blood boiled. That such brutally unhelpful, pig-ignorant people should still be allowed to interface with the public, 20 years after then end of communism, just beggars belief. The woman in question should be thrown out of work. Poland can't afford better medical treatment for its chronically ill citizens and yet can afford to pay a salary to this useless woman (and many, many more like her).

Reform is not just about making the Polish state more citizen-friendly. It is about making those tough choices that need to be made to get Poland's budget deficit and public debt under control. And what are we seeing? One percentage point increase on VAT and talk about a tax on banks (which will in any case be passed straight on to their customers). Where are the cuts?

Hats off to George Osborne (who's gone up in my estimation immeasurably since becoming Chancellor of the Exchequer). This is what needs to be done - set a target (get the deficit down to around 1% by 2016) and define the way to get there. The gap will be closed by a mix of measures that is 23% tax increases, 77% spending cuts.

Yet there is no appetite in Tusk's government - even with a PO president - to contemplate the minutest cut in spending. All the talk is of price rises of government services - vehicle technical inspections (the Polish MoT), vehicle registration plates... But what about slimming down and streamlining onerous procedures? When it comes to setting up in business as a sole trader - jednoosobowa działalność gospodarcza - paying taxes, buying real estate, going to court - in these areas Poland competes with some of the world's most inept states, say the World Bank and PricewaterhouseCoopers.

The English-language corner of the Polish blogosphere is currently replete with stern mutterings that the political and economic situation is no good and that Something Must Be Done. Polish M'Knob is worried that the Poland's current economic dash is unsustainable in the medium term. Student SGH at Politics, Economy and Society is worried that Jarosław Kaczyński is going nuts and radicalising the National Catholic element in a most unhealthy and undemocratic way, while his Prawo i Sprawidliwość (PiS - Law and Justice) party implodes. Raf Uzar is saying pretty much the same thing. Pan Steeva in Młochów compares, on the basis of latest World Economic Forum findings, how much ground Poland still have to make up on the US and UK in terms of innovation, labour market efficiency, macro-economic business environment and of course infrastructure.

Public spending cuts have to be made, but they have to be made where they have the least negative impact on the economy. Compared to the UK, Poland has the relative comfort of lower deficit (6.9% of GDP last year as opposed to the UK's 11.2%) and lower debt (roughly 54% of GDP vs. the UK's 70%). This means that Poland does not need to cut to the bone. Infrastructure spending must increase - and don't forget our railways. Innovation is needed and a reformed higher education system that turns out graduates with skills that employers will need a few years down the line.

Savings can be made almost anywhere. There are way too many bureaucrats adding nothing to the economy. In the UK, Companies House (where all limited liability companies are registered), employs 1,064 people to look after the entire country. In Poland, companies are registered in a court. A judge decides. Why? Who's the other party in the case? In Warsaw alone, the Ministry of Justice (again - why!) is believed to employ 1,200 people in the KRS to administer this procedure. 'Believed' - unlike the transparent UK government, where this information is available on line - in Poland there is no such information publicly available. The estimate comes from a Warsaw lawyer that regularly has dealings with the KRS.

In Ireland, it costs €0.009 (nine-tenths of a eurocent) to raise one euro of tax. In Poland, it costs 2.3 grosze to raise one zloty of tax. The Polish tax system is two and half times less efficient than the Irish system. Why is Poland's VAT threshold so low? It costs more to administer the VAT input and output of low-turnover micro-businesses than the revenue it brings into the treasury. It is to create work for armies of clerks. The savings made here should be redistributed into spending on education, healthcare and infrastructure.

Last year, Deloitte published a report saying that Poland could save 15 billion zlotys (that is three times more than the VAT rise from 22% to 23% is expected to bring in) by creating a shared services centre for government so that payroll, HR and other back-office functions for all the ministries and government agencies can be handled from one place rather than from 45 separate departments as at present. This is the kind of radical thinking that's needed right now.

But we won't see it from Tusk and Komorowski. They are far too busy worrying about next autumn's parliamentary elections. Who are they worrying about? PiS will have imploded by then, fracturing into at least two smaller parties, the Jarosław hardcore and a more moderate socially-conservative but economically statist party. SLD will gather support, especially from the young who don't remember the indignities of living under communism. (They should remember the impudent corruption of the Miller government 2001-2004). Socially-liberal and redistributionist, SLD will support the miners and other powerful bastions of worker privilege living off the taxes of others. SLD will not reform the state, just fill its top positions with its own cronies.

A new party is needed, not necessarily more liberal than PO on economic issues - but prepared to do it, not just talk the talk. Politicians - other than Jarosław Kaczyński - are not showing any conviction. PO is satisfied with just hanging on in power. But guys - what about the history books? Do you want to be remembered as the government that could have done something but didn't?

The Polish media need to engage with their readership. Where should the cuts come? How can Poland balance its budget? Would you rather let large swathes of public sector employees retire early on your money - or spend it on new roads? Would you rather increase VAT or personal income tax?

See how the BBC is doing this here. Look at the clarity of the language. And this - what would you do?

9 comments:

student SGH said...

Painfully sad, but painfully true. While I can say PiS is power-minded, PO is a bunch of careerist who want to set themselves up in their cushy jobs. Actually a bunch of lazy cowards who care mostly about the support of voters and (un)fortunately enjoy it, not because people appreciate what they (don't) do, but because they're afraid the other party capable of winning the elections is now ready to turn the country upside down. The mechanics is simply: "they do nothing but at least don't screw anything up". And there's no one to vote for. For PiS I won't vote by dint of how they handle democracy and because their views on Poland totally don't square with mine. In social issues SLD takes my fancy, but I base my choice on economic issues, so they're out of the list. SO who? New Palikot's party?

I understand your disgruntlement with how infrastructure modernisation came to a standstill on your suburb. It's probably been at the expense of the suburb as many repairs and construction projects and under way in the centre. But people somehow have to get to the centre from the suburbs and here it's a washout. No decent rail service, a bottleneck on ul. Puławska (I read on skyscraper a new traffic arrangement there is to come into force on 15 September), far too small P+R car parks. At least I don't have the problem of local election - I'm satisfied with my pani wójt and councillors.

The budget - you seem to have converted and realised in the long-term balanced budget is much more important and crucial for sustainable growth than low taxes wich are a quick fix. Simple taxes and more important than low taxes since it costs you to look for all allowances, deductibles, loopholes etc and puts off doign business. A mix of increases and cuts - I won't discuss the proportions but the target of very low budget deficit is laudable, but I'd personally set another target of publci debt / GDP ratio.

I'm cruel - the money saved on slimming down bereacuratic apparatus I'd earmark for paying off our public debts to slash our indebtness. That would mean of course a shock for the economy, but in the long run we'd make a significant stride.

A VAT increase - I'm not against, I'd temporarily raise also personal income taxes and return to hapless three brackets for before the reforms after the budget woes peter out I'd opt for one tax rate with high tax allowance and override all tax reliefs than make tax system only more complicated and give room for abuse (mostly to the rich who can afford to employ tax advisors to reduce state budget revenues and thus sponge on other taxpayers).

BTW - a great post. MD in top form!

Anonymous said...

Glad to see more than my blood was boiled over this!

I'm happy for the gov to take whatever it needs from me, within reason, but I'm tired of paying and getting bugger all in return. Or if not bugger all then bloody silly things that shouldn't be a priority on anybody's list.

VAT makes sense here as it will impact the most those with more to spend.

Sigismundo said...

Excellent article that really hits the nail on the head.

Have you thought about translating it (or getting it translated) and sending it (or something like it) in to a Polish newspaper, or perhaps one of the glossies such as Wprost, Polityka or Time Magazine Poland?

Folk in Poland need to read this, above all Poland's politicians and opinion-makers need to read it. The fact you're British-born may get it in under the radar as more than just the usual political gripe about the current party in office.

Unknown said...

...but we have many glorious days full of sunshine and beautiful woodlands everywhere :)

Take it or leave it as they say - we decided to leave it ;-)

At least you foreigners have it good, you can sort out your sprawy urzędowe, I had to travel 3 times, 3 hours each way just to register a car.

This is because my meldunek is 200km away from Warsaw - it doesn't count that my meldunek tymczasowy was within Warsaw - it has to be my Parent's "fixed" address. And it doesn't matter I don't live there for more than 10 years - it's still my "fixed" address.

So - the car registration:

I paid for the car in cash in a salon, but had to take 2 days off work to sort out the stupid rejestracja. One day wasn't enough, as there was a queue (with appointments allocated for 2 weeks in advance!!!!) to submit the Registration Application.

So there I was, moneyless, carless and pissed off, sitting on a bloody cold train at 6am in the morning, going for 3 hours just to submit some papers. And when I was done, roughly at 11am - I boarded next train to Warsaw, another 3 hours, plus 1hr to get home at Kabaty.

You'd think this was enough - hahaha.

The registration certificate you're given on the 2nd visit is a TEMPORARY one. It's only valid for 30 days, and if by that time there's not full registration certificate ready for you - you have to go there AGAIN just to renew that temporary certificate.

And I did.

The renewal was valid for.... 7 days!!!!

Luckily by the time that has ran out the final document was ready. On my 4th visit I had everything sorted out and could finally drive my car legally and with no fuss.

Repeat the whole travel four times - result:
4 totally lost working days, incurred expenses:
2x70zł for train fares,
2x200zł for petrol costs.

I'm packing my bags and leaving for the UK next month :>

Unknown said...

The wider problem with the System in this country seems to be the willingness to put up taxes (VAT 23%? For God's sake!) to Scandinavian levels and not giving anything in return.

What taxpayers demand at least is respect for the money they give back - not to mention a proper safety net for the society's most needy.

The zasiłki people are offered are of no practical value (few hundred zł here and there) and the thresholds are so low, that only people with no money for food - can apply for them.

Also, the divide in salaries is one of the most unhealthy ones I've seen.

Compare the 1000zł of a checkout person with 5000zł of an IT guy (conservative estimate).

5 Blooming times the salary? How is that possible?

Even the socialy unequal country of England boasts a ratio of 2,5!

(Cleaner: 800GBP, IT guy 2000GBP)

I really expect a wave of social unrest coming from grass roots, the way it is at the moment social change happens (youth's big expectations) cannot be met with economic reality.

I read in the Economist that the UK is a bad place to raise children - but on all the counts (social inequality, social problems) Poland fared worse.

It's a shame, we have a great new young generation of skilled people, we have to let them realise their potential!

Gaweł said...

Please wiev below Link:

http://www.tvnwarszawa.pl/0,1593968,wiadomosc.html

Leszek Ciurzyński - Responsible of Ursynów infrastructure visit ul. Karczunkowska and Buszycka last year. Follow by to his promise modernization of ul. Karczunkowska will start in second half of 2010.
And?

Michael Dembinski said...

@ Gaweł - many thanks for the link - I've pasted it in permanently on the post from 10 September. Amazing - 18 months on and nothing.

Pan Steeva said...

Sorry, but please exclude me from the emotions behind "stern mutterings that the political and economic situation is no good and that Something Must Be Done" list.

Your belief in the past that PO would do something significant seemed unrealistic and you're current disillusionment is simply the need for you to face reality. I do not expect politicians to make a leading contribution to Polish development and would rather that they change little to a system that is seeing significant positive results already. Fudged changes between weak governments of different hues is better than major changes by powerful governments going in the wrong direction or simply cancelling each other out.

I am happy to accept that all that you say is needed, although the primacy of Jeziorki stretches it a bit. I can't help but believe however, that a political party that is willing to do all this, and is given the strength to do it, will have the same effect as most powerful governments - ultimate disaster.

Michael Dembinski said...

@ Steve:

Fudged changes between weak governments of different hues is better than major changes by powerful governments going in the wrong direction or simply cancelling each other out

Hmmm! there's one for Polical Science majors at Harvard, Oxford or Yale. I'll have to ponder on that. A thesis worth developing on your blog...