The end of the deadlock in Sweden: policy reforms in a four-party agreement ESPN Flash Report 2019/09 JOHAN FRITZELL AND JOAKIM PALME – EUROPEAN SOCIAL POLICY NETWORK FEBRUARY 2019 After more than four Description to improve the efficiency of the housing months of deadlock market (also mentioned in several EU following the elections The Swedish elections of 9 September “Country Specific Recommendations” in Sweden, a 2018 resulted in an indecisive outcome. [CSRs] to Sweden); tax policy changes government was None of the blocks had a clear victory increasing inequality; and proposed finally formed in and the populist anti-immigration party changes to Swedish labour law and January 2019. The (Sverigedemokraterna) received 17.5% labour market regulations. of the votes. In principle, the basis for the On the issue of profit in the welfare government is a four- parliamentary situation was the same as after the 2014 election. More than sector, the heated discussions about party agreement deregulation and private for-profit paper, listing 73 policy four months after the election, the deadlock still remained. sector involvement in basic education, items to be healthcare and social services seem implemented. Many of However, in the new year, the Social now, after many years, to have come to these run counter to democrats, the Green Party and two of an end. The agreement paper states earlier Social the former Alliance parties (the Centre clearly that no private for-profit Democrat policy. party and the Liberals) reached interference will be allowed. Possible agreement on 73 policy items, subject problems should be resolved by to which Stefan Löfven (Social increasing quality controls in these democrats) could remain as Prime sectors. Minister. However, the stated precondition for the deal was that the As far as housing regulations are Left party would be blocked from having concerned, although all political parties agree that the housing market in an influence. This statement, and the content of the 73-point deal, was a Sweden is dysfunctional, that there is a provocation to the Left party but, after shortage of housing, that production has been too low for many years, and additional negotiations between the Left and the Social democrats, a new also that household debt due to Government was formed on 20 January extreme housing prices is a serious 2019. The Left party, however, declared problem, there has been no agreement that they would bring a vote of no- to date on how to resolve this. The confidence if the Social democratic agreement now states that market prices should be introduced in the government put forward proposals which increase social and economic renting sector for new apartments. LEGAL NOTICE inequalities. Given that new production represents This document has been only about 1-2% of the total housing prepared for the European The 73-point deal covered almost all stock, the overall impact is likely to be Commission. However, it policy domains. This Flash Report briefly small but it might lead to marked rent reflects the views only of the looks at four crucial social policy increases in attractive areas such as authors, and the Commission cannot be held responsible aspects: the issue of profit in the Stockholm’s inner city. for any use which may be welfare sector (see ESPN Flash report made of the information 2016/69); housing regulations aiming contained therein. On the tax policy issue, the had made a deal resulting in a regulations, will not be put to agreement states that tax secret agreement. Nevertheless, Parliament in the next two years. progressivity will be reduced, in the agreement paper with the The same is true for the particular by abandoning the 5% other three parties remains valid. introduction of market prices in the increase in the high earners’ tax, housing sector, which is planned Given the fragile position of the first introduced during the severe for July 2021, and only for new new government, it of course recession years in the 1990s dwellings. Needless to say, it remains to be seen whether all (värnskatt). The many earned- remains to be seen whether such these reforms will be implemented. income tax credits that have been reforms will then get through Under the agreement, there will implemented have led to a Parliament, or even if the new most likely be no change in the situation in which old-age government will still be in power. types of providers permitted in the pensioners pay higher taxes for the welfare sector. Sweden will Political commentators mostly same income than those working. therefore continue to have for- point to the fragile position of the These higher taxes paid by old-age profit providers, not only in the government. In sum, the pensioners will be abolished in healthcare and long-term care uncertainty regarding many of 2020. A tax reform is suggested, sectors but also, at odds with most these policy reforms is likely to reducing taxes on labour and other countries, in primary remain. introducing a number of “green education. The paper even states taxes”. Criticism of the agreement has that “Freedom of choice is a central come from very different parts of Finally, on the fourth issue, part of the Swedish welfare the political spectrum, but in Swedish labour laws and model”; this is a real departure particular from more left-wing regulations will be changed to from how the Swedish welfare writers and think-tanks, and from increase flexibility. The model has traditionally been the LO (trade union Employment Protection Act (LAS), defined in international policy confederation), which has long which states that in case of discussions and in welfare state been close to the Social democratic redundancy those employed most research. In addition, the party. The chief economists of LO recently should be the first to agreement includes a point stating wrote that the four-party leave, will therefore be reformed. that provision of employment agreement compounds the This issue has also been discussed services will be opened up to challenges of polarisation and for many years, with the Social private providers. To a large increasing inequalities. democrats often repeating that extent, the Swedish Public they want neither changes of LAS, Employment Service Severe criticism has also come nor state intervention in wage (Arbetsförmedlingen) will from the right-wing party, the negotiations/ collective bargaining. therefore have a reduced role, Christian democrats and the However, under the agreement an more concerned with quality Sweden democrats. This has official inquiry will be set up in check-ups of the private providers generally, however, been levelled order to reform LAS. The social that will do the matching between less at the suggested policy partners will have a chance to employers and job seekers. This reforms, and more at the four- conclude such an agreement, but reduced role has already led to a party agreement as such. It is seen otherwise the government will situation in which the Public as a betrayal of the two former implement reforms during 2021. Employment Service has stated alliance parties. that about a third of its employees Outlook & will lose their jobs. Further reading commentary The changes in the tax system LO. Sveriges problem riskeras nu att In general, the agreement paper planned in the agreement (reduced fördjupas, Svenska Dagbladet on which the new government is progressivity etc.) will be January 21, 2019. based has been regarded as a implemented but other reforms are https://www.svd.se/lo-sveriges- move to the right by the Social more uncertain. Many of the policy problem-riskerar-nu-att-fordjupas democrats. This is true, in items mentioned in the The 73-point agreement: particular, since it touches on a agreements follow a typically https://www.socialdemokraterna.se/ number of issues seen as “sacred Swedish procedure: an official aktuellt/2019/Utkast/ cows” by the Social democrats. The inquiry/ commission is opened, last days of the negotiations which is asked to come up with Author specific policy proposals within a between the Social Democrats and Johan Fritzell (Karolinska Institutet the Left party increased stipulated period. Accordingly, & Stockholm University) and Joakim uncertainty in the minds of the many of the reforms proposed in Palme (Uppsala University) public. Following the discussions, the four-party agreement both party leaders said that they document, such as the changes to Swedish labour law and The Flash Reports are produced by the European Social Policy Network (ESPN) established in 2014 to provide the European Commission with independent information, analysis and expertise on social policies in 35 European countries. The topics covered are identified by ESPN experts in the light of significant developments in their countries, or in some cases suggested by the Commission or the Flash Reports’ editorial team (Eric Marlier and Slavina Spasova). 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