Coal Allowance in Poland: From Soup to Nuts

Peter Paul Rubens: Old Woman with a Basket of Coal (ca 1616-1620) // Public domain

In times of galloping inflation, the Polish government creates another inflation impulse – the “Coal allowance”, the payment of which is expected to cost as much as PLN 11.5 billion. Once again, the government grants support regardless of the beneficiary’s financial situation – every household can, regardless of income, receive PLN 3,000 provided that its main source of heating is “a solid fuel boiler, fireplace, air heater, and different kinds of solid fuel fired stoves”.

The same situation as with the recently introduced “credit holidays”, which can be used by every debtor, regardless of whether one has a problem with paying higher installments or not (and let us recall that for many debtors, even after the recent interest rates increases, the installments are not a greater burden for the household’s budget than they were at the time of taking out the loan).

The government presented the draft of “Coal allowance Act” in response to the failure of also absurd idea of setting a maximum price for coal in conjunction with subsidies for sellers. That idea didn’t work out, but not because of the lack of will of cooperation on the side of coal sellers, as Mateusz Morawiecki thundered indignantly.

The reason was much simpler: the maximum price plus the allowance equaled roughly to the net amount sellers had to pay for the coal at the harbor.One has to add transport costs, margin and VAT. What’s more, sellers would have to wait several months for money from the government – when the zloty depreciates with each month. All this meant that sellers who would show “willingness to cooperate” would have to lose money doing their business.

The “Coal alllowance” is to be paid not from the budget, but from the COVID-19 Response Fund, operated by government-owned Bank Gospodarstwa Krajowego. How exactly subsidies to households that use coal for heating counter COVID-19?

After all, the state does not introduce subsidies for healing charcoal, although it must also be remembered that – contrary to the advice that can sometimes be found on the Internet – it does not help in the treatment of coronavirus disease, unless it is accompanied by diarrhea. Therefore, we are dealing not only with the transfer of more expenses out of the state budget, but also carrying it out by a fund that was not established for this purpose.

The history of the “Reprivatization Fund”, comes to mind. Established over 20 years ago for the purpose of satisfying the claims of former owners of property taken over by the State Treasury. Recently, money from this fund has been used to finance state-owned companies, including Polish Television.

Moreover, the Coal allowance Act introduces a provision that in 2022 the additional part of the payment from profit of the National Bank of Poland will not go to the budget, but to the COVID-19 Response Fund. Although in recent years, the NBP has been trying to make the public feel that its profit is earned in a similar way as in enterprises.

Meanwhile, it mainly results from the zloty’s devaluation against the currencies that the NBP maintains as foreign exchange reserves. So, when the zloty depreciate, the state receives additional money for its expenses.

Finally, the fact that the act also includes changes to the provisions on the protection system of commercial banks, announced by Morawiecki in April this year, summarizes this pathological legislation. In June, the Financial Supervision Authority approved the draft agreement and recognized the commercial bank protection system.

Now, the government wants to change the rules of the game, allowing the possibility that funds from the private protection system can also go to a bridge institution created as part of resolution by the Bank Guarantee Fund.

According to the Regulation’s Impact Assessment, the Coal allowance Act should solve the problem that “in 2022, a significant increase in the prices of fuels is observed on the EU and domestic markets”.

How this problem is supposed to be remedied by regulatory changes in the banking sector? Bill’s author is silent on this matter.

The PiS government is invariably characterized by legislative and budgetary pathology – all kinds of add-ons in bills and expenses taken outside the budget. The Coal Allowance Act combines both. Changes in regulations unrelated to the problem which is being solved according to the declarations and payout of funds carried out outside of the budget, in addition from a fund established for a completely different purpose.

Once again, we received everything, from soup to nuts in one act, for which, we will pay dearly. Even though prices are rising noticeably month by month, the government will once again extinguish the inflationary fire with gasoline of spending.

Translated by Bartłomiej Jabrzyk

Continue exploring:

Credit Holidays in Poland: Take from Poor, Give to Rich?

What Is Next for “Virtual Agora”? Regulation of Social Networking Sites and Changes in EU Law

Marcin Zielinski