Sweden proves that private profit improves services and influences policy

http://www.guardian.co.uk/society/2013/feb/05/sweden-private-profit-improves-services

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Is it a law of nature that financial crises must result in political gridlock? The answer is no. Swedish experience shows that unions can be constructive agents of change, even in times of severe economic turbulence.

Swedish school reform, which pioneered free schools run by parents, has had a profound influence on UK education policy, first on the Labour government and now on the coalition. The mayor of London, Boris Johnson, wants to find land for new free schools in London, and conservative modernisers press for even more radical measures. According to the press reports, a proposal to allow profit-making companies to run state schools is a "frontrunner for inclusion in the Tory manifesto" for the 2015 election.

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.

When the unions concerned were forced to choose between lending ideological support to a public sector monopoly, and taking responsibility for all their members regardless of their employer, they chose the latter.

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 welfare services.

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 820m krona (£82m) between 2006 and 2010. The dividends, on the other hand, amounted to a meagre 30m krona, while investments in, for example, premises and advanced quality systems, amounted to 2.4bn krona (£240m).

The old public monopolies were abandoned for several reasons. Costs spiralling out of control was one factor, but perhaps more important was the fact that employees wanted to be able 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. An argument that Swedish unions accept.

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-Sjövall is project manager for welfare at Swedish thinktank Timbro and author of Private choice in the public sector: the new Swedish welfare model. She is keynote speaker at Wednesday's Guardian Public Leaders Summit 2013