Nerijus Mačiulis. Five key accents of the new Lithuania’s government programme

Goverment of Lithuania
Goverment of Lithuania, DELFI

For whom and what does the new Lithuania’s government programme promise? Across the 118 pages long programme, anyone could find accents of relevance to themselves – optimists can celebrate every page, while pessimists, as the author Oscar Wilde said, would complain about the noise when opportunity knocks. Nevertheless, based on the subjective evaluation of this text’s author, what are the key accents of this programme, Nerijus Mačiulis asks?

Firstly, if one didn’t know ahead of time, it would be hard to guess, what party or ideological direction’s representatives drafted this programme. Some would even describe it as eclectic, lacking a firm and clear ideological spine. However, in this case, the mish-mash of green, conservative, liberal and social democrat values is more an advantage than a flaw – the programme emphasises the need to seek compromise, cooperate while leaving no one on the side-lines and coordinating the interests of all public groups.

Those who miss strong ideology the most can recall the American author Germanist Eric Jarosinski’s proposed definition – ideology is the mistaken belief that your beliefs are neither beliefs nor mistaken.

Secondly, Lithuania’s government programme raises measurable goals and criteria not only up to the year 2024 – the next Seimas elections but until the end of the decade. Some might find it to be a baseless ambition of remaining in power, but this innovation should be viewed as an attempt to look beyond a single political cycle.

Many of Lithuania’s entrenched problems cannot be resolved within a few years and the results of the decisions they will make, for example increasing life expectancy or improving student achievement due to higher quality and more accessible pre-school education, could become evident only at the end of the decade. Future cabinets should adhere to this practice as well – this way, the indicators of state development success that are raised for the decade would not have to be outlined anew every four years, it would suffice to renew and supplement them.

Third, a national agreement is sought for one of the oldest and most painful problems Lithuania has – its limping education system. This would allow for smoother and faster implementation of reforms. Two years ago, all the parties managed to sign an agreement on guidelines for national defence financing and Lithuanian defence policy. It would be odd and unfortunate if we could not achieve such an agreement on education, which is definitely no less a contributor to national security, independence and welfare.

Lithuania’s government programme outlines an education reform from the ground up, that is to say from pre-school education to the fruits – lifelong learning. Pre-school education, which is especially important for families in social risk groups, and the quality of which influences one’s further academic and professional success, is still not universally accessible and not of sufficient quality.

The welfare and achievements that students gain are not ensured by a dense network of schools and thus, intentions to abandon a heritage from the previous century – joint classes – is worthy of applause with the creation of a more sparse but universally accessible network of good schools.

An OECD study of student ability shows that we are first in our region in the number of students unable to reach minimum ability levels – in some smaller schools, they number an entire 42%. This year’s mathematics exam should have been eye-opening as well, with every third final year school student failing and in some schools, only every third passing it. This is a pandemic that began in the previous century and it will not end next year. As such, it demands more than just this cabinet’s attention and efforts.

Fourth, the taxation front sees no intimidation or unsustainable promises. Quite the contrary – there is an emphasis on how the tax system must be in line with the need for public expenses. In the past, commitments to increase public sector financing would often be incompatible with accompanying promises to cut taxes. Nevertheless, the programme’s ambitious goals, ranging from education and healthcare to social and regional policy, mean that greater financial resources will be required than the state currently possesses.

That said, taxes won’t necessarily increase, especially for those who already pay a great deal of them. The tax burden on hired employees is already vastly higher than that of individuals formalising their economic activities otherwise and so, it is planned to evaluate the justification for concessions and resolve problems of tax inconsistency.

It is promised to also review the profit tax exemption for reinvested profits. This exemption already exists not only in Estonia, but also Latvia and Poland. Thus, in order to increase Lithuania’s appeal for foreign investment, in terms of which we are in the last place across Central and Eastern Europe, we shouldn’t think on it too long.

Lithuania’s government programme does not include, but let’s hope later it will be remembered that there could be a similar exemption for not only companies but also investing citizens – the legal formalisation of an “investment account” would allow paying citizen income tax for capital revenue only when earned funds depart the account.

Fifth, alongside a more favourable tax policy, the innovation ecosystem, encouraging entrepreneurship, increasing capital accessibility, deregulation and improvement to the business climate are also taken into account. “Maximum freedom for business to operate is the main guarantee of economic transformation and continued growth,” emphasises one of the priority projects, which outlines numerous laudable initiatives.

Nevertheless, in terms of oversight institutions and “bureaucratic” operational restrictions, we cannot hold a preconception that they are all bad and prevent self-realisation or the creation of value. We must look at all restrictions and prohibitions through a clear lens – if an activity has a negative environmental impact or negative impact on those around us or future generations, then certain restrictions and rules are necessary.

Freedom to act without being restricted is not absolute and its limits are well illustrated by a quote sometimes attributed to US President Abraham Lincoln or sometimes to philosopher and economist John Stuart Mill, sometimes to philosopher Zechariah Chafee or other public figures and thinkers – one man’s right to swing their fist ends where another’s nose begins.

We have seen detailed and promising government programmes before. It should come as no surprise that this one too shows the continuity of some of the previous government’s work. It would be weird if seeing the same entrenched state problems and similar challenges, different governments in a democratic state would pull the country in different directions. That said, just a government programme is not enough – from its presentation to a specific action plan, its support in Seimas and its implementation, often a number of pitfalls await.

The eighteenth government’s programme includes numerous stumbling blocks as well, but it would be difficult to describe it as lacking ambition or potential to create a more open, smarter, more competitive, more just, more harmonious and healthier Lithuania. One can only wish luck.

Dr Nerijus Mačiulis is the chief economist for Swedbank in Lithuania.

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