Polish government approves energy price freeze for households and health insurance cut for businesses

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Notes from Poland is run by a small editorial team and is published by an independent, non-profit foundation that is funded through donations from our readers. We cannot do what we do without your support.

Poland’s government has approved bills that would maintain the current freeze on electricity prices for households and cut the health insurance contributions paid by some business owners.

The measures will now be sent for approval by parliament, where the government has a majority, and must also be signed into law by President Andrzej Duda, who is aligned with the opposition.

Prime Minister Donald Tusk said last week that the freeze in electricity prices was needed to keep Poland’s economy competitive, especially as the arrival of Donald Trump in the White House in January is expected to see energy costs in the US fall.

However, in the bill approved by Tusk’s cabinet on Tuesday, the freeze would be maintained for households – who would continue to pay the maximum rate of 500 zloty/MwH that has been in place since July – but would be ended for other entities such as businesses, local authorities and hospitals.

Electricity consumers who have signed dynamic pricing deals with electricity suppliers will be excluded from the cap. The bill also maintains the current freeze on capacity fees for households to use electricity.

Without the freeze, electricity prices would rise to around 623 zloty/MwH for households, said the climate ministry in an explanatory note. The new measures will be put into force at the start of next year and will cost up to 5.5 billion zloty (€1.3 billion).

In justifying the decision not to extend price freezes for non-household consumers, the ministry said that “their position on the energy market is expected to be relatively better compared to 2023-2024”.

“These recipients, as professional entities, should be able to actively participate in the market and take full advantage of the benefits of market mechanisms,” the ministry stated in the bill’s explanatory note.

Before the cabinet meeting, Tusk announced that prices for households would be frozen for nine months. “During this time, there should also be, as we propose in the draft law, a reduction in tariffs, so it is possible that a further freeze will not be necessary. But if it is necessary, we will also consider this,” Tusk said.

The speaker of parliament, Szymon Hołownia, who is one of the leaders of the ruling coalition, said he would like a first reading of the electricity price bill to take place this week, with it being passed next week.

However, according to Aleksandra Gawlikowska-Fyk, an expert at the Forum Energii think tank, extending Poland’s electricity price freeze fails to address the underlying challenges of the energy sector and obscures the true cost of electricity for consumers.

“The decision is not justified by market conditions,” Gawlikowska-Fyk told the Polish Press Agency (PAP). “Freezing prices discourages efforts to curb [price] increases by restructuring the energy generation system. Poland needs to invest in more cost-efficient, integrated capacity.”

In addition to the bill on electricity prices, on Tuesday the cabinet also approved a reduction in health insurance contributions paid by some business owners.

The changes will be introduced in two steps. The first, which will come into force in 2025, includes the abolition of the obligation to pay a health contribution on the sale of fixed assets – such as a company car – and a reduction of the minimum contribution paid by business owners who earn less than the minimum wage.

The regulation reduces the basis for calculating the minimum health contribution to 75% of the minimum wage, which from January will amount to 4,666 zloty (€1,077.85), from 100% of the minimum wage as it currently stands. The contribution rate itself will be unchanged at 9%.

This means that after the changes, the minimum contribution will be 314.96 zloty, compared to 419.94 zloty if it was calculated based on today’s rules. These changes are expected to benefit 900,000 business owners next year.

The second stage, which will begin in 2026, entails lowering the contribution for business owners who pay taxes based on so-called “general rules” (zasady ogólne), a flat 19% rate or a lump-sum tax on recorded revenue, provided that their income does not exceed a certain threshold.

Those who pay taxes based on general rules or a flat 19% rate will pay a contribution calculated as 9% from 75% of the minimum wage up to 1.5 times the average wage – which in September amounted to 8,140.98 zloty (€1,880.53) a month. Higher earners will have to pay an additional 4.9% on the excess over the threshold.

Business owners who pay a lump-sum tax on recorded revenue, meanwhile, will have to pay a surcharge of 3.5% if they earn above a threshold of three times the average wage.

The reform is expected to benefit approximately 2.45 million out of 2.6 million affected business owners, said the finance ministry in the bill’s explanatory note.

The change will reduce revenue for the National Health Fund (NFZ), which finances Poland’s healthcare system, by an estimated 5.85 billion zloty in 2026. By 2034, the lost revenue is expected to reach almost 59.5 billion zloty, calculates the finance ministry.

The ruling coalition has long promised to reduce health contributions for business owners, saying this was necessary to offset the losses they suffered from the widely criticised tax overhaul, known as the Polish Deal, introduced by the former Law and Justice (PiS) government.

Katarzyna Pełczyńska, minister for funds and regional policy, said that the changes would “give a breather to Polish small and medium-sized businesses who have been crushed” by the Polish Deal. 

She claimed the changes “will not deplete healthcare funding by a single zloty”, though without explaining how the difference will be covered.

Michal Hetmański, head of the think tank Instrat Foundation, disagreed with the minister’s assessment, calling the changes “Polish Deal 2.0”, which will be “a gift for the richest, not for those who create real economic growth”.

Hetmański, like many other commentators, also noted that the project had been rushed through without public consultation.

“In my opinion, with the changes for the next few years, the government could have held back and given itself time for a more calm and comprehensive discussion,” Michał Myck, director of the CenEA Centre for Economic Analysis, told news and analysis website OKO.press.

He pointed out that the change could also result in large disparities in the contribution business owners will pay compared to employees. “Ultimately, on an annual basis, all policyholders should fund the system to the same – proportional – extent,” he said.

“With high defence spending and growing needs in other areas, and rising expectations of the level of healthcare, looking for ways to make further reductions and exemptions in health premiums is a path in the wrong direction.”

Notes from Poland is run by a small editorial team and published by an independent, non-profit foundation that is funded through donations from our readers. We cannot do what we do without your support.

Main image credit: Kancelaria Premiera/Flick (under CC BY-NC-ND 2.0)

Alicja Ptak

Alicja Ptak is senior editor at Notes from Poland and a multimedia journalist. She previously worked for Reuters.