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Wednesday, May 29, 2024

Grandma's. Active Parent – how much will the new program of Donald Tusk's government cost? Sławomir Dudek and Rafał Mundry comment

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The so-called grandma's are getting closer. The government has adopted a bill that provides for the introduction of three new benefits for parents of children aged 12 to 35 months. Sławomir Dudek, president and chief economist of the Institute of Public Finance, drew attention to the cost of the program on social media. “It turned out that 'grandmother's' money will not finance itself,” wrote the economist, adding that this meant higher budget debt.

The government during Tuesday's meeting adopted a draft act on supporting parents in professional activity and in raising young children Active Parent. Now the bill will go to the Sejm.

The project envisages the introduction into the legal system of three benefits supporting parents in professional activity and in the upbringing and development of a small child: “active parents at work” (also known as “grandmother's benefits”), “actively in the nursery” and “actively at home”.

Read also: The government has adopted the “Active parent” program. Will “grandmothers” wipe grandmothers out of the labor market?

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Payment of benefits is to start on October 1, 2024.

Sławomir Dudek on higher debt

Sławomir Dudek, president and chief economist of the Institute of Public Finance, drew attention to the costs associated with the Active Parent program on website X.

“It turned out that 'grandma's' will not finance itself. The cost of the program is PLN 6-6.5 billion per year, and the income from contributions is PLN 1.3-1.4 billion per year. That is, only 1/5 of the program costs were covered by additional contributions,” wrote the former director of the Department of Macroeconomic Policy at the Ministry of Finance. The impact assessment of the regulations attached to the project shows that in 2024 the cost of the program is to be over PLN 1.4 billion.

The economist pointed out that such a high cost occurs when the European Commission may subject Poland to the excessive deficit procedure. The Ministry of Finance expects such a decision. The ministry recalled that in the years 2020-2023, fiscal rules in the European Union were de facto suspended due to the COVID-19 pandemic and then the war in Ukraine. The Ministry of Finance added that from 2024 there will be a return to the European Union rules, according to which the excessive deficit procedure is triggered when the public finance sector deficit (according to the ESA methodology) exceeds 3%. GDP.

“The public finance sector deficit amounted to over 5% in 2023. We are facing an excessive deficit procedure and for now we are going against the grain. How will they put it together at the Ministry of Finance? Hmm?” – Dudek wonders.

Economist Rafał Mundry, in response to the entry, noted that the estimated expenses for the so-called grandmothers account for half of the revenues from 5%. VAT on food. At the beginning of April, the temporary zero VAT rate on some food products expired. Mundry previously calculated that for the state budget this means “approx. PLN 12 billion of additional revenues per year.”

“But VAT on food is already in the budget and finances the expenses included there. And from what I remember, decision-makers said it finances armaments. The deficit in the 'grandmother' sector means a higher debt,” Dudek said.

“Budding programs without examining the effects”

Moreover, Sławomir Dudek noted that “we are among the leaders in the OECD in terms of total expenditure on pro-family policy (family benefits, 800+, 300+, PIT relief for children, marital PIT relief and now the so-called 'grandmother' benefits, preferential VAT ), and the effects in births are completely invisible.

“Existing programs do not work. We are budding programs without examining the effects of these programs,” summed up the former director of the Macroeconomic Policy Department at the Ministry of Finance.

Read also: Alarming data from the Central Statistical Office. “There is no end in sight to the demographic crisis”

Dudek said that “the best thing is that in this labor market activation program (Active Parent – ed.), we have activation and encouragement to stay at home. This second option, in order not to be noticed, is called 'actively at home'. One contradicts the other. “- he emphasized.

Three new benefits for parents

As announced, the benefit “actively at home” in the amount of PLN 500 per month (for a maximum of 24 months) is intended to provide support for parents of children aged 12 to 35 months who will not be able to obtain the right to the “active parents at work” benefit or whose child will not attend a care institution. As explained by the Government Information Center (CIR), payment of this benefit will take place without meeting the professional activity condition. The “actively at home” benefit will be available to anyone, including the first and only child aged 12 to 35 months.

Benefit “active parents at work” (so-called grandma's) in the amount of PLN 1,500 per month will be addressed to the child's parents aged 12 to 35 monthswho are professionally active. Parents and guardians of children with disabilities will receive greater support, in the amount of PLN 1,900. Parents will have a free hand in spending these funds. The government pointed out that parents would be able to, for example, finance the care provided by a grandmother, including a pensioner, on the basis of an activation contract (i.e. a contract concluded with a nanny). CIR emphasized in the announcement that concluding an activation agreement will not be a condition for receiving the benefit.

Additionally, the project provides that instead of the current subsidy of up to PLN 400, a benefit will be introduced to the fee for a child's stay in a nursery, children's club or day care provider. “actively in the nursery”. This benefit will amount to PLN 1,500, no more than the fee the parent pays for the child's stay in a care institution (nursery, children's club or day care provider). The support will amount to up to PLN 1,900 per month for a disabled child.

CIR explained that parents will be able – depending on their needs and individual situation – to change, even multiple times, one benefit to another. It was also noted that only one benefit could be received for the same child in a given month.

Main photo source: Shutterstock

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