With the elections less than two weeks away the Lithuanian Free Market Institute looks at some of the key points of the Lithuanian Peasant and Greens Union electoral programme and their significance.
Improvements of social security:
“We are for the decentralized distribution of welfare aid. There are plans to analyse and identify the problems with the reform. We hope to use the money that has been saved by the social security reform to solve pressing social issues.”
Continuity of the social security reform
In 2014, municipalities were allowed to distribute social security aid on their own terms. This means that they can identify those in need of it more accurately. The number of people as well as the amount of money spent on social security has decreased. However, even though the situation is improving, we have yet to reach pre-crisis levels of social security receivers and money spent on social security. The fact that this reform is still given attention and issues of social security are being considered is commendable.
Verdict: proactive politics – a proposition that will have positive outcomes in the future.
Improvements on State governance:
“By reforming the government system we will decrease the number of ministries, State and government institutions, public and business regulated institutions. This will be done by getting rid of unneeded governance areas, duplicate functions and institutions that are responsible for these functions.”
Saving of government funds
The aim of stopping bureaucracy, preventing it from growing and diminishing its numbers is welcome. Otherwise, the aging population and the decrease of taxpayers would become too much of a burden for those who work. Every progressive country agrees that excessive bureaucracy is a hindrance, costs money and is a waste of resources. The fact that the party plans to give up the surplus of governance areas, institutions and their functions is also commendable.
Verdict: proactive politics – a proposition that will have positive outcomes in the future.
Lower taxes for young families:
“The sum of Tax Exempt Income (NPD) will be increased for families that have two or more children.”
Lower taxes for workers
Increasing the NPD is a great way to increase the earnings of those who work. This is a better alternative to increasing the minimum monthly wage, as with it comes the increase of paid tax. This means that the wage increase becomes lower than expected. For example, following the rise of the minimum wage by 30 euros, the actual post-tax increase was a mere 21 euros.
Verdict: the proposition provides an opportunity for bigger earnings now and ensures financial freedom.
Unification of “Sodra” fees:
“In order to simplify the taxing system, we aim to encourage people to work legally and pay their taxes and unify the so-called ‘employer’ and ‘employee’ social insurance payments. This will discourage the employer from paying incomplete wages, clarify and distinguish the definitions of what income and salaries are. Employees will become more liable and demanding of the government institutions regarding the use of their taxes paid”
A more transparent taxation system
The current taxing system splits social security payments into the “employer” and “employee” categories. This results in seemingly lower wages compared to neighbour countries as well as a confusing taxation system for the employees. The unification of these taxes would result in less untaxed payments and a simpler, more transparent taxation system.
Verdict: proactive politics – a proposition that will have positive outcomes in the future.
New unemployment benefits and compensations
“We will strive to support families for every child they have. Depending on the financial affairs of the State, it is safe to plan a 60 euro benefit payment for every child. This payment wouldn’t have any additional conditions.”
“Implementation of subsidies that would cover mortgage interests for young families (under 35 years), that purchase housing outside of the bigger cities.”
The benefits would be paid independently of the person’s financial situation and it is unclear where these funds would be taken from. The party has several payment plans that disregard the benefactor’s earnings or current wealth.
Anyone can apply for the child payments, even those whose earnings are higher than the average. The housing loan subsidies have the same regulations, since even those families that have housing near the capital city and whose earnings add up to several thousands of euros can lay claim. There are currently more than 518 thousand children younger than 18 living in Lithuania, and a monthly 60 euro compensation would cost the budget around 373 million euros yearly. This sum is equal to the amount of money planned to spend in 2016 on leisure, culture and religion (379 million euros)!
Verdict: the proposition is most taxing on the taxpayer and has a considerable negative influence on the budget.
Money dedicated to keep the children busy
“In order to stop children and teenagers from forming bad habits and engaging in harmful activities, we will take measures to keep the children busy with activities. One proposition is to create a child card, where money would be transferred each month. This money could only be used on healthy activities.”
“Green” pocket-money
The benefits devoted towards keeping children busy in the form of a card are similar to other such forms of payments. This “pocket-money” would be paid regardless of the family’s financial situation, and children that come from families that are well-off would also be eligible. There isn’t a clear indication what exact activities this money would cover and whether or not a list of approved activities and their providers would be created. This would create favourable conditions for corruption. Also, the ability to use these funds would differ depending on where exactly the family is situated. For example, families that live in smaller cities might not get the opportunity to spend money on the child card. This would waste state capital.
Verdict: the proposition is most taxing on the taxpayer and has a considerable negative influence on the budget.
“Class budget basket” instead of “student budget basket”:
“We will give up the concept of a ‘student budget basket’ as it increases the disparity between the student’s ability to study and replace it with a budgetary package, tied to the situation in the bigger cities and other regions.”
State commissions in place of a ‘study budget basket’:
“In order to regulate higher education, we will replace the concept of a ‘study budget basket’ and replace it with study financing related to the results of higher education institutions, the number of professions and amount of higher education institutions. The new package would also take the strategic aims and standards of the government imposed onto the institutions, how innovative and how much they had achieved scientifically, into account.”
Abolishment of budget baskets is a step backwards in the education reform
The idea of financing schools according to the amount of classes is flawed, as it aims to finance both full and half-filled classes equally. The current system is based on the principle of the budget baskets following the students and if it is replaced, it would be a step backwards. The education reform helped change the stale rules in the education system that have been in place ever since the soviet times. If the concept of a budget basket financing concept creates worry about insufficient funds spent on education, we shouldn’t go back to a method that didn’t encourage competition between education institutions. On the contrary, we should try to make the education system more effective and try to invest into a higher standard of education instead of half-filled classes.
The budget baskets allow families to choose where to study. If that model is eliminated, bureaucrats will be the ones that choose. In the case of higher education, they will also choose which professions students should study.
Verdict: back to the past – a return towards planned economy.
Heating sector and airports – strictly state owned:
“We are critical of allowing private businesses into the heating sector. We should also continue using and implementing biofuel, as it is a cheap and local choice in the heating sector”
“We will not hurry in trying to sell or give up the state-owned company “Lietuvos oro uostai” (Lithuanian airports) to concessionaires. An effort will be made to keep the company owned by the state and have it make profit in every field.”
State-owned businesses
The main aim should be to reduce the price of energy for the consumer instead of keeping some companies in the hands of the state. More competition would mean that manufacturers and providers would have to provide their services cheaper. Nationalization of the heating sector and airports wouldn’t allow any competition.
Verdict: back to the past – a return towards planned economy.
Farming business subsidies:
“We will implement a mechanism that will control the farming market during critical times. If the price of farming produce were to drop below the price of production, methods to control the market would be used (in accordance with the law). These methods would guarantee minimal earnings.”
Farmer compensations during tough times
Giving subsidies to farmers out of the state budget would be unfair in the eyes of the taxpayer. It is unclear why farmers would get subsidies for lost profits instead of, let’s say, chair manufacturers.
Verdict: the proposition is most taxing on the taxpayer and has a considerable negative influence on the budget.
A state monopoly on alcohol:
“We have plans to move leave the sale of alcohol in the hands of a state-controlled, monopolised retail chain. We plan to increase the legal age of buying alcohol from 18 to 20, limit the resale of alcohol at night and decrease the number of places that sell alcohol.”
Imitating a business
The aim to decrease the availability of alcohol through a state-controlled retail chain can already be reached by increasing excise payments. The aim of spending more money on prevention can be achieved through using money collected from excise payments. The goal of decreasing the number of places that sell alcohol can be accomplished by limiting the number of licenses given out.
Any measure of controlling alcohol can be done without creating a chain of state-controlled stores.
It is unclear how moving alcohol from one place to another will decrease its availability, since people will still be able to buy it. If the is to try and lessen the number of underage drinkers, current laws and regulations should be implemented more effectively instead of expanding them further. There aren’t any limitations for older people so the only reasoning behind state-owned stores seems to be a desire for the state to take on more commercial activities. Increasing the legal age of buying alcohol up to 20 years would mean one of the strictest prohibitions in all of Europe. This wouldn’t affect the number of fifteen year olds drinking alcohol.
Verdict: a ticking time bomb with unanticipated and reckless consequences.
The proposition looks good on paper, but has harsh consequences.
A return towards planned economy.
Mystery shoppers:
“We will increase the responsibility to prevent shops from selling alcohol and tobacco to minors. The concept of an imitated law violation will be implemented into the legal system of Lithuania. It would allow us to co-operate with police offers and minors to use the mystery shopper method, which has been successfully used in the United Kingdom, Sweden, Germany, the USA and other countries.
Imitating customers
Incorporating mystery shoppers into the legal system is a step backwards from the reorganization started in 2009. It allows institutions become collaborators and consultants to businesses and helps them abide the law, instead of promoting rule violations. The terms used in the programme are also broad and could expand the use of rule violations in a variety of areas.
Verdict: a return towards planned economy.
Empowering trade unions:
“We will liberalise the conditions upon which trade unions operate by relinquishing all limitations and streamlining the terms and conditions for organizing a strike.”
To the barricades, my friends!
The activities of trade unions aren’t limited. According to chapter 50 of the Constitution of Lithuania, “Trade unions can be freely created and operate independently. They defend the interests of workers in terms of professional, economic and social interests. All trade unions have equal rights.”
The picture painted by the proposition is that all trade unions do is organize strikes. Strikes are an extreme measure for the settlement of disputes and they shouldn’t be the main way of communication between employers and employees.
Progressive taxing:
“We will try to reorganize the taxation system and implement progressive taxing in terms of long-term perspectives.”
“Progressivenes” in exchange for less righteousness
Progressive taxing, as it is called, would only make the taxing system more unfair. People who earn more money are already paying more taxes, for example, half of the total tax budget is paid by 15% of workers.
The issue of disparity in people’s earnings can be solved more effectively by ensuring that only those that need welfare support are eligible to receive it.
Verdict: the proposition looks good on paper, but has harsh consequences.
Higher excise payments:
“We plan to increase excise tax on alcohol.”
“We plan to increase excise tax on tobacco.”
Expensive alcohol + low earnings = illegal drinking
Even though the excise payments in Lithuania are higher than the set EU minimum, this term, Seimas increased them three times. Excise payments were increased for alcohol and tobacco products. The affordability of products subject to excise payments is one of the lowest in the EU. Taxes make up 80 % of the total cigarette pack price and 60 % of the total alcohol and fuel price. High prices encourage illegal use of alcohol. Research shows that high alcohol prices, low earnings and the availability of cheap alternatives (a.k.a. illegal alcohol) encourages people to use the latter.
Verdict: the proposition can have unforeseen consequences.
Taxes on old cars?
“We will take measures to try and lower nitrogen oxide emissions. One way to do it is to add taxing within the car resale park. The cars that are currently there have been made, on average, almost 15 years ago.”
Taxes on cars for those who are unable to buy new ones?
Cars are bought with earnings that have already been taxed, so taxing them any further would not be right. People are being encouraged to use their money on food instead of investing it to buy property or saving it for the future. If these new taxes are implemented, the risk of both new and old cars being taxed becomes greater. All in all, it is unclear what the criteria for these taxes actually are. If older and less environmentally-friendly cars are taxed, the people that aren’t as well off get to bear the burden.
The tax on older cars would most likely be regressive, i.e. people that have lesser earnings would pay relatively higher taxes.
It’s like a modern version of Marie Antoinette, “Can’t even afford a used card? Buy a new one from the salon!“
Verdict: the proposition can have unforeseen consequences.
Taxes on food:
“We will encourage a heathier lifestyle by informing the consumer and decreasing the use of harmful products (food additives, sugar, trans fat, GMO and so on). We will aim to use proven international tactics, such as the short campaign messages ‘Eat, don’t snack’, ‘If you’ve eaten, move a little’, ‘When you eat, drink water’, used in France. Denmark uses special marking for unhealthy food and additional taxing. We will use these and other practices to form habits of healthy living in the society.”
Telling us what to put in our mouths?
There is no guarantee that additional taxing on sugar or fatty products will encourage healthy living. It might not have any effect, as several cents added to the price of a product wouldn’t be enough to discourage people. These taxes would have the biggest effect on those who are unable to afford more expensive and healthy food. Denmark, which was used as an example, gave up the aforementioned taxes after 15 months.
Verdict: the proposition can have unforeseen consequences.
We will change the way people think
“<…>the fastest way to change the mind-set of many people is by way of an administrative decision that must be followed by all people working for the money of the taxpayer and the state. Institutions backed by the budget should be held accountable for sorting their trash, state officials should use public transport more and radically reduce the amount of paper they use. Construction projects funded by the state could use more effective materials, etc.”
“We will increase the number of ‘green public procurements’ and evaluate administrative decisions based on the effect their environmental effect.”
Green though police
Every third adult who works (the amount of people in the public sector) will be re-educated and told to use public transport and not waste paper. Because it would be a mandatory administrative decision, it is likely that enforcers of these rules will be needed.
Verdict: the proposition looks good on paper, but has harsh consequences.
Green spoons in public procurements
The public procurement system is already suffering from being ineffective and expensive purchases. If green alternatives have to be chosen, taxpayer money might be wasted on particularly expensive, ecological alternatives that might not prove their worth.
State-run bank:
“On the basis of the Lithuanian postal system, we will establish a bank for regional expansion. It will increase the availability of financial services within regions and act as a stabilising force within the precarious private financial sector, as proven by the 2009-2010 crisis in Lithuania.”
Imitating banks
There is no reason why, in a an environment of equal competition, a state-owned national commercial bank would work better and provide better services to the client when compared to already existing private commercial banks or other credit institutions. These existing banks compete, pursue profit, seek to protect the funds of their owners and clients, evaluate the abilities of the loan-receiver and the risks of lending and only then decide on the price of their services. If a national commercial bank were to work under different specifications (i.e. cheaper loans and services, crediting the riskier market participants), the bank’s activity would inevitably be unprofitable in an environment of equal competition. The national bank doesn’t have a cheaper source of funding and is unable to provide loans cheaper, than the credit institutions that have been operating longer. This would lead to bankruptcy or subsidising from the pocket of the taxpayer.
Verdict: the proposition looks good on paper, but has harsh consequences.
Translated by Aivaras Medeubetovas
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