Social partners debate role of welfare service providers

The role of venture capitalists in the provision of welfare services and how much profit they should make from the services they provide has been widely debated over the last 12 months. Some unions believe the profits should be capped, while the Confederation of Swedish Enterprise argues that common perceptions of venture capitalists are unfair. Experts have suggested that new, mandatory social insurance schemes may be a solution to the long-term problem of funding welfare services.

Background

The role of venture capitalists in the provision of welfare services continues to divide the Swedish social partners. Some social partners say they are more interested in profit than in defending fair service provision for all, and how much profit they should be allowed to make from providing welfare services has been widely debated over the last 12 months.

In early 2013, the Swedish Trade Union Confederation (LO) suggested putting a cap on ‘extractable profits’ made by private companies operating in the welfare sector, which would be limited to one percentage point above the government borrowing rate.

In order to limit profits, the union argued the case for a new ‘corporate form’ in the social sector. This suggestion was supported by a Statistics Sweden report, Funders and providers within health, education and care 2010 (in Swedish, 329 KB PDF), which argued that the return on total capital for private companies in these sectors was 15%, compared with an average of 8% in other sectors.

Several employers’ organisations, such as the Confederation of Swedish Enterprise (Svenskt Näringsliv) and the service sector trade organisation, Almega, opposed the suggestion, arguing that a cap on profits would make it impossible for companies to operate in the welfare sector. They described the level of profit as necessary to fund new investment and to create new jobs in welfare establishments. Companies in the social sector accounted for 17,000 of 29,000 new jobs (58.6%), according to figures from Statistics Sweden SE1302039I).

Lower taxes and resource distribution

After a calm autumn without lively debates on profits, but instead focusing on the resource distribution for health, education and social services, a new round of debate was sparked by the Confederation of Swedish Enterprise in early 2014. It presented figures to back up its earlier arguments in support of higher profits for private companies operating in the welfare sector.

The Confederation of Swedish Enterprise argues that the common perception that resources, including profits, do not go back into service provision is false. It therefore argues that a lack of resources is not the cause of poor results for Swedish pupils at schools run by private service providers. On the contrary, resources have increased despite lower taxes in Sweden in recent years. The reason is that the value of social benefit transfers, such as sickness and unemployment benefits, when calculated as a share of gross domestic product, has dropped. Meanwhile, public spending on health, care and education has increased.

However, several trade unions have chosen to reiterate their view that taking high profits in the welfare sector is unacceptable. The LO’s report on the issue, Measures to limit gain in welfare (in Swedish, 969 KB PDF) was published in early 2013 and the Swedish Municipal Workers’ Union (Kommunal) announced its support for the LO’s proposal in response to pressure from their members.

Mandatory social insurance

While the social partners are debating how the welfare sector should be resourced, researchers are discussing how Sweden can continue to afford its welfare system. A new report (in Swedish) from the Centre for Business and Policy Studies (SNS) echoes the general view that new, mandatory social insurance schemes are one possible solution. The report also makes the following specific proposals:

  • the link between contributions and benefit levels in the social insurance system should be strengthened;
  • social insurance solutions in new areas of the welfare sector, such as the care of senior citizens, should be examined;
  • the promotion of a longer working life should be encouraged through inclusion policies;
  • welfare service providers should be challenged in the areas of cost-effectiveness, quality and innovation.

Commentary

The debate over the source of welfare service provision in Sweden is likely to continue during the spring of 2014 because it has engaged social partners as well as political parties.

Political parties such as the Swedish Social Democrat Party (Socialdemokraterna), the Left Party (Vänsterpartiet) and the Green Party (Miljöpartiet) have also criticised the level of profits in the welfare sector, securing a place for the topic on the political agenda.

Emilia Johansson, Oxford Research

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