ELECTIONS Promises. Economics – what voting shows

All parties stress the importance of the economy and businesses, pledging to improve conditions in those sectors every election. Various abstract propositions help getting seats in the Seimas. Unfortunately the voting results do not always reflect the promises made in the run-up to the elections. The tv3.lt news portal looks into various pledges and proposals made by parties prior to the previous election and how well they held up. It is of note that the 2012 election campaigning featured far more general statements, rather than specifics, which allowed political parties to evade responsibility if the economic situation changed.

No positive change for the agricultural and financial sectors

The so-called “land safeguard” law is one of the points where party programmes envisioned a very different image to reality, despite pledges to encourage starting up in agriculture, it limited the capacities of large farms to expand and for young farmers to start up.

The law which came into power in spring 2014 prevents farmers from obtaining more than 500 hectares of land, while young farmers wishing to obtain 10 hectares of arable land or more must continue agricultural activities on it for 3 of the next 10 years and also declare expenditures. Furthermore purchases of more than 10 hectares of land require a permit from the National Land Service, with sales only being permitted after using it for five years. The law received support from 78 members of the Seimas, 7 were against and 5 abstained.

Lithuanian Free Market Institute (LLRI) President Žilvinas Šilėnas believes that such voting may come down to politicians truly believing this could benefit farmers due to the limitations artificially reducing land prices. Unfortunately this ends up being more harmful than beneficial with many Western European farms being far larger than 500 hectares and smaller Lithuanian ones are thus left unable to compete because they either cannot expand beyond 500 hectares or are unable to increase their size if they were larger than that originally. There have been actual calls from the European Commission to repeal or amend the piece of legislation due to its obstruction of free capital flows and freedom of entrepreneurship.

A similar situation is found in the dairy sector where the price of purchasing milk from farmers cannot be reduced by more than 3% without first justifying the change to the Market Regulation Agency. Šilėnas notes that this only served to increase bureaucratic burdens and limit competition, rather than protecting farmers from unjust price changes. 67 members of Seimas supported the law, with 1 voting against and 4 abstaining. The LLRI points out that this has also increased final prices for dairy goods, while also increasing administrative pressures for all parts of the supply chain.

The expert also finds the legislation on bank service prices and greater restrictions on instant credit services. This was supported by 108 members of Seimas, with only one vote against. True, the Social Democrat programme mentioned a need for more control of banks and responsible crediting, but this was concerned with the lending which permitted the 2008 real estate bubble, not instant credits. Meanwhile the Conservatives proposed the creation of non-bank financing sources to reduce reliance on bank loans. These alternatives ended up not even needing cabinet support.

A victory for hotels and implementing the Labour Code

Ž. Šilėnas finds the new Labour Code to be the greatest victory of this Seimas term. In their programmes many of the major parties focused on the need to make labour relations more flexible. In their electoral programme the Liberals focused on the potential to deregulate and allow companies and individuals or groups to come to terms on a similar basis to what was regulated in the previous Labour Code. Meanwhile the Conservatives pointed out the dated nature of the old Labour Code and how high income earners would have the leverage needed to negotiate better terms, rather than both the employee and employer being stifled by the old code.

The Conservatives would later lean toward the President‘s stance on the Labour Code, but this is no betrayal of what they stated in their programme as the new Labour Code envelops not just high income earners, furthermore there were earlier suggestions of allowing those earning over 6500 Lt to negotiate themselves. Šilėnas thus points out that abstractions are not necessarily bad in party programmes as they signpost the way for parties.

74 members of Seimas voted for the Labour Code without the President’s amendments, 39 against, 10 abstained. Most of those voting against were among the Homeland Union – Lithuanian Christian Democrats and the Electoral Action of Poles.

The business environment was also aided by a preferential 9% VAT rate for accommodation services. Such an idea was proposed in the programmes of the Social Democrats and the Electoral Action of Poles. The initial project was to set the rate to 5%, but only passed with amendments suggested by the President.

It was supported by 66 members of Seimas, with 2 voting against and 3 abstaining. Curiously, one of those voting against was a member of the Polish Electoral Action.

Ž. Šilėnas found it peculiar that if it is agreed that lower VAT rates reduce prices and help companies compete, then reduced VAT rates should be introduced overall, rather than in just one area as was done in this case.