Tens of Billions in Hidden Cost Increases in Municipalities

According to a new report, there are 65 billion SEK in cost increases in the country’s municipalities and regions that cannot be explained. According to experts, this shows that there is a great potential for improvement in the public sector.

The cost increases, according to the report by the Confederation of Swedish Enterprise, are larger than what can be explained by rising prices, higher wages, a larger population, and new expensive technology. The 65 billion SEK covers the period 2014-2023, of which 17 billion applies to the municipal sector and 48 billion to the regions.

Even the economist Johan Lidefelt cannot explain where the billions are going, but argues that there is a great potential for improvement in the public sector.

– Even if it is not a measure of inefficiency that we present today, we can assess, based on previous studies, that the unexplained cost increases are largely a result of inadequate efficiency, he said at a seminar organized by the Confederation of Swedish Enterprise.

The municipalities’ and regions’ incomes come from taxes, general and targeted state grants, and fees. According to Lidefelt, the fact that tax rates have increased by just over two percentage points is mainly driven by the fact that the regions’ tax rate has increased significantly since the turn of the millennium. At the same time, state grants have increased as a share of municipal income from about 15 to 21 percent, while their own taxes as a share of total income have decreased slightly. The same trend can be seen in the regions.

254 percent

Despite the fact that total state grants have increased by 254 percent since 2000, the debate constantly criticizes what is referred to as eroded state grants, the report points out.

The opposition wants state grants to be indexed, something Johan Lidefelt is critical of.

– If it is introduced, state grants will be automatically adjusted every year. At the same time, the political need to profile oneself and show that one is doing something remains. This would be added on top of the new higher base level every year. This means that we would have an even higher rate of increase in state grants than today.

– I think the figures speak for themselves. State grants have increased faster than if we had had indexing already with today’s system.

Johan Lidefelt. Photo: Ernst Henry Photography AB

Minister Questions State Grants

Civil Minister Erik Slottner is critical of the notion that state grants are too low and also argues that there is reason to question targeted state grants.

– But there will never be a no to targeted state grants. Parliamentary politics will always have a need to target state grants to ensure that the money spent really goes to what the money is intended for. But when providing a targeted state grant, it can be designed in a way to have the greatest possible effect, he says.

Erik Bengtzboe, chief economist at the Swedish Taxpayers’ Association, also agrees that there is a great potential for efficiency in the public sector.

– The point of having a fragmented and decentralized system is that you can choose different paths forward and learn from each other. But the problem is that Swedish municipalities and regions are bad at learning from each other, he says.

Other Ways

Previously, the Confederation of Swedish Enterprise has presented several proposals that can improve efficiency among municipalities and regions, which among other things involves finding other ways than increased taxes.

– If you look a little ahead, it is quite easy to see a development where tax rates continue to tick upwards. We may have tax rates in parts of the country at 40 percent in a few electoral periods, perhaps 35 percent on average in large parts of the country. This affects the willingness to work, educate oneself, run a business, and the company’s willingness to invest, says Johan Lidefelt.