Warsaw, 22nd October 2020
100-BILLION SHIELD FOR EMPLOYMENT
Proposals of support for companies during COVID 2.0 by the Union of Entrepreneurs and Employers
The second wave of the epidemic in Poland took on a scale that was still hard to expect several weeks ago. The increasing number of infections and the healthcare system reaching its limits of efficiency generate a sense of danger, in view of which the society naturally limits its activity and mobility. Therefore, due to the dynamics of the epidemic, the demand for certain services decreased organically. This effect was intensified by further restrictions introduced by the government. In addition to the standard sanitary regime encompassed by the DDM strategy (distance, disinfection, masks), restrictions have been introduced to the operation of catering establishments, the fitness industry, or the industry behind the organisation of events (interestingly enough, also those organised online). While only a few weeks ago, the government clearly declared that there would be no second shutdown of the economy, we can already conclude that we are operating in a creeping lockdown, which – in the light of the recent, slightly revised declarations of decision-makers – may soon become an actual lockdown.
Bearing this in mind, it has become necessary to prepare a new aid package for companies affected by restrictions and limitations. The key goal should be, as in the case of the hitherto existing anti-crisis shields, the protection of jobs, therefore we decided to call the package proposed by us “the 100-billion shield for employment”.
According to the available data, it is possible to implement this package without the need to exceed the debt limits resulting from the present framework for aid programmes shielding the economy against the negative effects of COVID-19. Out of the PLN 270 billion limit allocated to the launch of anti-crisis measures, PLN 145 billion have been used so far (for example: the Polish Development Fund has allocated PLN 60 billion out of the PLN 100 billion it has at its disposal for the implementation of the “financial shield”). Even assuming that some of the remaining money will be spent by the end of this year, it is safe and prudent to assume that, within the adopted limits, an amount of approximately PLN 100 billion will still be available.
Below, we present a comprehensive package of aid solutions that take into account the possibilities of allocating these funds – not limited, however, to financial support only. We have divided the recommendations into three sections: regulatory security, financial security, and security for the next year.
We believe that the exceptional situation in which we find ourselves creates the need to ensure strict regulatory security for employers, and thus also to adapt regulations to the conditions in which companies are operating and the challenges they have to face. With this in mind, we postulate the following measures:
- a temporary reduction of the VAT rate on products and services from all “socialising sectors” (food catering services, hospitality industry, fitness centres, beauty salons etc.) to the minimum level of 5%;
- exemption from social security contributions for all entrepreneurs and employees in industries subject to restrictions exceeding the DDM standard (including, among others, the event, catering, hotel, fitness, entertainment, and art industries) for the duration of these restrictions;
- basing any and all business activity restrictions to be introduced on data and objective argumentation. We find no justification for banning the fitness industry from operating, or for the restoration of “hours for the elderly” – therefore, we call for those restrictions that do not meet the above-mentioned requirements to be lifted and demand that these requirements are respected each time the list of restrictions is reviewed;
- the introduction of a 12-month-long moratorium on new taxes and regulatory burdens. Poland belongs to the infamous vanguard of OECD countries and decides to introduce new levies in the face of the crisis – in our view, any initiative of this kind ought to be postponed by at least 12 months;
- accepting the assumption that Poland cannot afford another lockdown. Consequently, the policy of fighting the virus should be based on strict adherence to the sanitary regime (DDM), not on shutting down more sectors of the economy.
As mentioned in the introduction, a growing number of industries has to face not only a demand lowered by the epidemic, but also the gradually increasing number of restrictions going beyond the DDM regime. There are certain sectors in which we can already speak of an actual lockdown. Accordingly, in order to protect jobs, it is necessary to quickly mobilise additional aid.
A part of the PLN 100 billion earmarked for the aid package during the second wave of the epidemic will be used to implement some of the regulatory demands (exemption from social security, VAT reduction). The remaining funds should be allocated to the mobilisation of the following instruments of direct financial support:
- for entrepreneurs from industries subject to restrictions exceeding the DDM regime: working capital loan in the current account, granted in the amount of up to 10% of turnover for 2019, guaranteed by the Polish Development Fund. The instrument ought to be 100% repayable (including the preferential interest rate on the loan). Access to the instrument should not be subject to any additional requirements, that is, it should be available to all entrepreneurs from the above-mentioned industries, regardless of employment, current turnover etc.;
- for all entrepreneurs whose turnover for September and October decreased year-on-year by over 25%, we propose two instruments:
- a subsidy granted by the Polish Development Fund up to 10% of turnover for 2019, which is an instrument analogous to the current “financial shield” programmes, that is, partially repayable. We propose that it should be possible to write off 75% of the granted amount, provided that at least 80% of jobs at the date of granting the support are maintained;
- long-term (10- and 15-year) loans guaranteed by the Polish Development Fund – granted in the amount of up to 10% of turnover from 2019, 100% repayable, with preferential interest.
SECURITY FOR THE NEXT YEAR
The development of the COVID-19 epidemic has so far been characterised by a high level of uncertainty. We do not fully know how the virus operates, nor how it might mutate. Therefore, one should also prepare for a worst-case scenario assuming a third wave of the epidemic in the spring of 2021. It seems that the proposed budget draft for the next year does not provide for the creation of an adequate “financial overlap” for the possible launch of additional support measures for the labour market. Taking this into account, we call for a revision of social spending planned for next year. Unfortunately, the programmes introduced at the peak of the economy are not suited for the crisis conditions in which we will find ourselves next year. In consequence, we believe that extending the 500+ programme to the first child without establishing an income threshold should be dropped, as well as the additional, 13th and 14th retirement benefits. The “good start” school starter kit should also be liquidated. The revision of the policy in the above scope will allow for the creation of a “financial cushion” in the amount of almost PLN 45 billion, which in the event of another wave of the epidemic can be quickly activated in order to save jobs.