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Public services, improved by private profit

Swedish school reform, which pioneered free schools run by parents, has had a profound influence on United Kingdom education policy.

Swedish school reform, which pioneered free schools run by parents, has had a profound influence on United Kingdom education policy.

The Mayor of London, Mr Boris Johnson, wants to find land for new free schools in London, and conservative modernisers press for even more radical measures such as allowing profit-making companies to run state schools.

That these proposals encounter resistance is no surprise to those of us who have tried — with success — to slim down and modernise the public sector by bringing in profit-making enterprises.

When Sweden embarked on the road to radical, liberal welfare reform in 1991, the left was firmly against it. Yet, as more and more people who deliver welfare services went from having a public sector to a private sector employer, attitudes started to shift.

Today, the issue of private profit in the public sector is back on the political agenda in Sweden. As the public sector remains underfunded, there is an argument against money being siphoned off into the pockets of shareholders.

Yet, Swedish companies that deliver welfare services add badly needed resources through investments, and a decision to end private competition in the public sector would lower the quality of services.

SCHOOL PERFORMANCE UP

Here, education can serve as an example. A recent study on the outcome of the school voucher reform — which allowed privately run, including for-profit, schools to receive public funding for each pupil on the same terms as state-run schools — shows the average performance in state schools increased long-term as a result of more independent schools entering the market, and school expenditure has not risen.

As for private companies draining the public sector of resources, the accumulated profit for the 10 biggest school chains/groups was 820 million krona (S$159.7 million) between 2006 and 2010.

The dividends, on the other hand, amounted to a meagre 30 million krona — while investments in, for example, premises and advanced quality systems, amounted to 2.4 billion krona.

The old public monopolies were abandoned for several reasons. Costs spiralling out of control was one, but perhaps more important was that employees wanted to influence their workplace and help develop the services they provided.

None of this was possible, or encouraged, within the public monopolies. This is one of the most important arguments for liberalisation.

The decentralisation that occurred in Sweden after 1991 has helped foster a climate of innovation and change that the country benefits from today.

As demand for advanced welfare services grows globally, Swedish companies such as Kunskapsskolan, which runs 33 state-funded schools in Sweden, and Capio, one of Europe’s leading healthcare companies, are entering new international markets.

Sweden demonstrates that a brave reform programme does not just improve public services; it changes the politics of tomorrow.

Karin Svanborg-Sjovall is Project Manager for Welfare at Swedish think-tank Timbro and author of Private Choice in the Public Sector: The New Swedish Welfare Model.

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