Social Objectives in Polish Fiscal Policy – Spending vs Performance

Abstract Purpose: The organization of this article was subordinated to the connections between the government program documentation related to the state social objectives and their implementation at the budgetary level. The article shows the necessity of perceiving fiscal policy as an instrument to implement government programming objectives. The aim of the article is to assess the degree of implementation of social objectives on the basis of information resulting from the experience gained in the area of performance budgeting in Poland. Methodology: To assess the scale of financing of social objectives in Poland in comparison with other European countries, the author used Eurostat data from COFOG (Classification of the Functions of Government). To assess the effectiveness of state operations related to the achievement of social objectives, the author used information from the implementation of the performance-oriented state budget. It was assumed that the performance-oriented system linking the clear structure of public expenditure with the objectives and measures assigned to them to assess the effectiveness of fiscal policy in particular areas of government intervention. Findings: The relations between individual strategic documents related to social objectives and performance-oriented budgetary structure are presented. The results indicate that the scale of financing of social tasks in Poland is at a lower level than the average for European countries. The author points out the functions related to the achievement of social objectives whose effectiveness could be improved. Originality: Using information from the implementation of the performance-oriented budget to compare the individual budget functions of social character on the basis of the evaluation of the degree to which the measures for these functions’ operations have been implemented.


Introduction
Fiscal policy, as an element of national financial policy, is defined as a set of activities, engaged in by public authorities in the sphere of public revenues and expenditures, used to achieve social and economic objectives of the country (Mankiw and Taylor, 2014). Thus, it involves decisions concerning the size and structure of public revenues and expenditure. This means that the implementation of social and economic objec tives is possible thanks to the use of the appropriate set of tax instruments and public spending. The process of defining social and economic objectives is complex. In the institutional layer it may be equated with the system of strategic management of a state functioning within the framework of development policy. Therefore, to evaluate the degree of fulfillment of social objectives, government strategic documents and budget documents were analyzed.
It was assumed that the experience of Poland in the implementation of performance budgeting makes to use the information on the achieved values of the measures used for the needs of performanceoriented budgetary plans prepared to assess the extent to which the specific social objectives of the country have been achieved. Thus, the aim of this article is to assess the degree to which social objectives have been achieved on the basis of information from the experience gained in the area of performance budgeting in Poland.

Fiscal policy instruments in the implementation of state developmental programs
In the system of state strategic management in Poland, on the basis of the regulations of the act on the rules of development policy, the following three categories of develop ment strategies can be differentiated: 1) Long-term National Development Strategy (LTNDS), with at least a 15-year implementation perspective; 2) Medium-term National Development Strategy (MTNDS), with a 4-to 10-year implementation perspective; 3) other development strategies.
The Long-term National Development Strategy is a document identifying the main trends, challenges and social and economic development scenarios, as well as the Vol. 24, No. 2/2016 Slawomir Franek directions of spatial development of the country, with reference to the principle of sus tainable development.
The Mediumterm National Development Strategy, which is subordinated to the Long term National Development Strategy, determines the basic conditions, objectives and directions of the development of the country in the social, economic, regional and spatial dimensions in the period of the next 4 to 10 years. The Mediumterm National Development Strategy is implemented through development strategies and with the use of programs, with reference to the European Union programming period.
Other development strategies are presented in the documents defining the basic development conditions, objectives and directions in particular areas specified in the Mediumterm National Development Strategy, related to the development of regions, spatial development, sectors or areas and implemented with the use of programs. Among them, nine horizontal strategies corresponding to the main areas of state intervention are of crucial importance. In the social area, these strategies are as follows: The Human Capital Development Strategy (coordination -Prime Minister's Office); The Social Capital Development Strategy (coordination -Ministry of Family, Labor and Social Affairs); The National Cohesion Strategy, which is prepared in order to ensure the imple mentation of the European Cohesion Policy in Poland. This is a strategic document specifying priorities, areas of use and the system of implementation of European Union funds.
Programs are the documents of operational and implementation nature established in order to implement the Mediumterm National Development Strategy and other development strategies. There are two types of programs: operational programs (docu ments executing the objectives included in the national cohesion strategy and other development strategies) and development programs (documents executing objectives included in other development strategies, including provincial programs and long term programs referred to in the regulations on public finances).
While all these strategic documents include references to development priorities and indicate activities that are indispensable to achieve these priorities in a medium-term years perspective, entities' annual activity plans, in which operational objectives are defined, are created at the level of the particular central government sector.

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Social Objectives in Polish Fiscal Policy -Spending vs Performance However, an efficient state management system requires combining the strategic dimension with the financial dimension. Only then is it possible to verify the significance of the particular state objectives. This means that the shape of fiscal policy to assess the degree to which the strategic objectives in the particular areas of state activities have been achieved. Table 1 demonstrates the relations between the govern ment programming documents and the documents determining the implementation of fiscal policy.

Social objectives in the government programming documents
The specified hierarchy of programming documents is also reflected in the structure of the state development objectives, among which social objectives play a significant role. This is already demonstrated in the wording of the main objective of the Long term National Development Strategy, which is "the improvement of the quality of living of Poles" (The Council of Ministers, 2013a, p. 5). These documents also indicated that achieving this objective should be connected not only with an increase of the GDP per capita in comparison with the richest state of the European Union but also with the increase of "social cohesion". Therefore, the following aspects of the social sphere are expected to build up the quality of living: longer life expectancy, health improve ment, higher job satisfaction, efficient social security network focused on providing assistance, old age financial security, and participation in cultural life. These aspects reflect various spheres of social activities and require support from public sources.
The review of the provisions of the Mediumterm National Development Strategy (The Council of Ministers, 2012) allows to specify these manifestations of state intervention, in which the reference to social objectives was made. Thus, in the sphere of the "effective and efficient state", the priority of "social capital development" was identified, within the framework of which the significance of education strengthening creative thinking and cooperation abilities, as well as the role of culture and sports in the integration of local community and stimulating civil activities, were emphasized. In the sphere of "com petitive economy", the following priorities connected with the development of human capital were specified: "increasing professional activity rate" and "improvement of the human capital quality". The importance of activating reserve capacity (among youth, women, seniors, and the disabled), on the labour market, lifelong education, digital education, facilitating and supporting healthpromoting and preventive activities was emphaized. In the sphere of "social and territorial cohesion", the priorities concerning "increasing the activity of people suffering from social exclusion or at risk of social exclusion" and "reducing poverty in the most vulnerable groups" were distinguished. Within these priorities, particular attention was paid to: the implementation of social integration programs, increased access to rehabilitation, development of instruments supporting social economy, increased the accessibility and improved quality of flexible forms of childcare, better matching and support in the social benefit system, and increased accessibility of various forms of assistance for school pupils.

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Social Objectives in Polish Fiscal Policy -Spending vs Performance The specification of strategic plans in the social sphere was presented in these hori zontal strategies that directly refer to the social sphere -that is, the Strategy of Human Capital Development (The Council of Ministers, 2013b) and the strategy of Social Capital Development (The Council of Ministers, 2013c). Table 2 presents the relations between the specific objectives of these strategies and the performance-oriented budget functions. It should be emphasized that this is the performanceoriented system that allows for a more precise evaluation of the degree of implementation of public authorities' objec tives in connection with the scale of financing of the specific tasks of the country. The application of the budget construction method -in which, apart from the expendi ture planned for the implementation of particular tasks, objectives to be achieved Slawomir Franek through this expenditure and measures enabling the evaluation of the degree of imple mentation of these objectives are formulated -makes it possible to monitor progress in achieving development objectives. The significance of the social sphere of the performance-oriented budget structure is reflected in the fact that 6 out of 22 state functions directly cover tasks of a social nature, although in the case of other functions activities related to the social sphere can also be indicated. An example is function 16, "civil affairs", within which the following tasks were distinguished: combating discrim ination and initiatives for the benefit of national and ethnic minorities; maintaining relationships between the state and the church and other religious organizations; and protection of civil, child, and patient rights.
Expenditure on social functions constitutes 40% of total budget expenditure. Func tion 13, "social protection and family support", has a special position, as expenditure on this function constitutes approximately one fourth of total budget expenditure. The share of performanceoriented budget expenditure on state social objectives in relation to total budget expenditure is presented in Table 3. Two of these functions, namely function 13 ("social protection and family support") and function 14 ("labour market"), may be equated with the narrow understanding of social policy as an activity consisting in social protection. Figure 1 presents the

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Social Objectives in Polish Fiscal Policy -Spending vs Performance structure of tasks within functions 13 and 14 of the performanceoriented system, indicating example activities constituting these tasks.
This approach is consistent with the COFOG used by Eurostat (2011, p. 33), in which the function related to social protection is composed of expenditures on: sickness and disability benefits, old age benefits, survivor benefits, family and children benefits, unemployment benefits, housing allowances, and benefits for people at risk of social exclusion. Sometimes, health protection issues are also included in the scope of social policy (OECD, 2007). There are also approaches in which the concept of social policy covers an even broader scope of public services, such as culture, education, and phys ical culture. This comprehensive approach to state social objectives is reflected in the strategies implemented

The scale of financing of social tasks: A comparative analysis
The scale of financing of social tasks from public sources in the European Union and three EFTA countries (Switzerland, Norway and Iceland) is presented in Figure 2. To that end, expenditure of the general government sector on social protection -defined in accordance with the Classification of the Functions of Government in relation to GDP -was used. The share of this expenditure was presented in relation to the total general government sector. It is worth noting that expenditure on social protection in Poland is below the average for the 28 European Union countries, both in relation to GDP (16.2% in Poland, while the EU28 average is 19.6%) and in relation to the total expenditure of the general government sector (38.4% in Poland, while the EU28 aver age is 40.3%). If we compare these quantities with the data from 2004, we can observe that in Poland this expenditure has decreased by 1.6% of GDP; in comparison, the only more significant drop was registered in Germany (1.8%). In 21 European Union countries, the expenditure on social protection in relation to GDP increased, with the highest increase noted in Spain and Finland (4.8% and 4.6%, respectively).  It should also be noted that not only public expenditures determine the extent to which the state is engaged in financing social tasks, as an alternative can be tax expenditures. It is estimated that in Poland, according to the data for 2013, they may amount to PLN Slawomir Franek 85 billion, which is 5% of GDP. Of this amount, tax expenditures facilitating family and social support constitute the greatest share, amounting to 2.2% of GDP, while tax expenditures related to healthcare amount to 0.4% of GDP and tax expenditures sup porting education, culture and sport amount to 0.2% of GDP (Ministry of Finance, 2015). The significance of tax expenditures is confirmed by the OECD research on the funding of family-friendly policy carried out in a group of 33 countries, which demon strates that tax expenditures supporting families constitute, on average, 10% of the overall public funding in this area (data for 2011), while in the USA they constitute 40%, in the Czech Republic 35% and in Germany 28%. On the other hand, the exam ples of Denmark, Sweden and Finland indicate that the whole support for families takes the form of cash benefits or services provided free of charge or co-financed by the state (OECD, 2014).

Evaluation of the degree of implementation of social objectives with the use of performance-oriented budget measures
The author assumes that the specificity of the performance-oriented approach to con structing budget plans comes down to looking for relations between expenditures and the achieved values of the measures demonstrating the degree to which the objectives have been achieved, and considers it reasonable to carry out performance analysis of expenses in connection with measures defined for the purposes of an expenditure performanceoriented system for the functions related to the implementation of social objectives. Such an approach makes it possible to use the information on public expenses in a broader manner than in the traditional approach, in which only expenses incurred are compared with the volume of expenditure specified in the budget plan.
However, since an "added value" of the performanceoriented budgeting in comparison with traditional budgeting is the performance information obtained from the measure ment of the degree of implementation of budget goals, it is possible to evaluate the degree to which the assumed values of the measures have been achieved. Table 4 presents statistics demonstrating the percentage of measures defined at the task level of the performanceoriented system within each particular function related to the imple mentation of social objectives, for which the planned value was achieved at the end of a given financial year.
The data included in the the percentage of the measures that in the successive years reached the planned values in the analyzed period, is at a lower level than the average value of this indicator for all functions of the performanceoriented system (ranging from 0.6 to 0.7). In the case of function 13, the majority of the applied measures are product measures showing the number of benefit recipients of the specific form of support. Using these measures does not allow for an unambiguous evaluation of the extent to which the objectives have been achieved, since failure to achieve the planned value of a measure is instead an indication of discrepancies (usually small) between the number of entitled indi viduals and the number of those who actually use the benefits. However, it is worth noting that some of the measures that have not reached the assumed values indicate insufficient progress in meeting the priorities defined in the strategic documents. Examples include: the proportion of people with higher education in Polish society in the group aged above 25 (a value of 22.3% was planned at the end of 2014, but the actual value achieved was 20.3%); the number of people declaring physical activity in a given year in comparison with the preceding year (101% was projected, while the actual value achieved was 90.2%); the percentage of inspections resulting in issuing a statement of the infringement of labor law provisions (a value of 60% was projected, while the value achieved was 63%); and the number of highly specialized services financed by the state budget per 1 million inhabitants (488 activi ties were planned, while 345 were provided). The implementation of these measures for years 2012-2014 is presented in Table 5. it was assumed that the number of highly specialized services financed from the state budget per 1 million inhabitants by 2018 will be 345 on average, which is significantly lower than the number planned initially for the year 2014. Thus, it turns out that, despite guaranteeing public funds for some tasks of the social sphere, there is no success in achieving the planned results. This means that not only the scale of task financing but also the method of task organization influences the potential for achieving the planned goals. It should also be noted that, in the case of many state tasks, the way

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Social Objectives in Polish Fiscal Policy -Spending vs Performance of formulating the measures used in the creation of a performance-oriented budget does not allow to evaluate the effectiveness of state policy. It This refers especially to measures showing the number of people using the particular forms of social support or the beneficiaries of the pension scheme. For these groups of people, it would be more reasonable to use measures specifying their financial situation.

Conclusion
On the basis of the presented analysis, the following conclusions can be formulated. Firstly, the institutional solutions used in Poland, in the form of principles of the development policy and instruments of the implementation of the fiscal policy, enabled to create a comprehensive set of government programming documents, in which the premises of the implementation of social objectives were specified. Secondly, owing to the experience in the implementation of the performanceoriented budgeting, it is possible to monitor the extent to which the country is engaged in achieving social goals in both the financial and performance dimensions. Thirdly, the evaluation of the degree to which the measures defined for the needs of performance-oriented budgeting have been achieved allows to indicate the social spheres in which there is the potential to improve the effectiveness. Fourthly, it should be noted that demo graphic factors are a significant reason for the changes in trends in the fulfillment of social objectives. For example, the large scale of young people's longterm trips abroad is one of the reasons for the lower interest in higher education. This factor influences the unemployment rate by improving the situation on the domestic labor market.
This means that the factor that determines the efficiency of the execution of state tasks is not only the scale of financing of state tasks as a result of the implemented fiscal policy but also the method of their organization as a result of management efficiency in public administration. In the face of the changing demographic situation in the country, it is also necessary to change direction in relation to many spheres of social activities of the country, particularly education, health protection and pension policy.