Updated Czech proposal on child allowance suggests a hike from 2020

The updated proposal of the CSSD on increasing child allowances suggests that payments will increase only for benefits that are to be paid as of 2020, rather than retroactively, according to a document prepared by the labor ministry and quoted by Hospodarske Noviny, a newspaper. The idea is that if people on parental leave are to receive at least CZK5,000 of their allowance in January 2020, then they will be eligible for the increase. The current version, approved by the cabinet, envisages a hike of child allowance by 36.4% only for children born as of 2020. It was a compromise, after the finance ministry estimated that increased all allowance retroactively for people on parental leave as of January 2020 would cost CZK11bn.

According to the CSSD, their updated proposal will cost the budget CZK8.6bn, which is still a considerable amount, but it does allow for some savings. On Monday (May 13), FinMin Alena Schillerova (ANO) said she would discuss the proposal with labor minister Jana Malacova (CSSD) next week. Schillerova continues to insist that talks will probably not lead to a final version, however, as the change needs to be included in the debate on the 2020 budget bill. We remind that ANO and the CSSD are yet to start talks in earnest about pensions and public sector wages in 2020, which is also going to cost considerably.

The finance ministry has been warning of an economic slowdown, which will limit considerably how much spending can grow, which is why there has been a push to find additional revenue sources. It is what the CZK7.8bn to be raised through higher taxes on alcohol, tobacco and gambling is mostly aimed for, and a higher child allowance for most people doesn’t quite make the calculation. It is why the CSSD has been pushing so hard for a bank asset tax, but it appears increasingly unlikely that it will be able to push it through, since there is no political support for it. While the KSCM initially appeared favorable towards the idea, President Milos Zeman said he didn’t believe it was viable. This matters, because Zeman has considerable influence over the KSCM, even though not a party member, so without his stamp of approval, the KSCM is unlikely to join the CSSD in this.

Meanwhile, PM Andrej Babis (ANO) is still meandering about it, but his latest idea is towards taking away from bank dividends. This proposal remains unclear, however, as Babis apparently expects banks to set aside dividends voluntarily at first, something we don’t see ever happening. At any rate, Babis is leaning towards finding some way to penalize banks for repatriating profits, rather than supporting a bank asset tax, so the CSSD won’t get any support from him, despite Babis looking favorably towards a child allowance hike. Thus, we doubt that the new proposal will have a greater chance of passing than the previous one.

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