Should I have loved the Swedish model?

 

 In the late 1980s and early 1990s people used to tell me that Sweden proved you could have high public spending and economic success. There was no need to keep public spending as a percentage of output down as they did then  in the US, no need to go in for raw capitalism like America. I was urged to love the Swedish model.

As often with these things just as people urged others to follow, the weaknesses of the chosen example were about to become plain. In 1992 the Swedish crisis started. It all looks very familiar. It was a combination of an Irish/ Spanish style property crash and banking crisis, and  a state finance crisis all rolled into one.

The Swedes nationalised their problem banks, but on tougher terms than the UK did in 2008. It cost them around 4% of GDP, but they got some of it back later when they resold the banks once restored to health. They had their own sub prime crisis.

The state also decided that its welfare programmes were too generous, and its borrowing levels unacceptable. They settled on fiscal rules designed to eliminate  state borrowing  in future. Between 1994 and 1998 they eliminated their deficit. They cut all sorts of welfare benefits to make them less generous. It was not what politicians wish to do, nor was it friendly to the many now out of work.

Unemployment benefit, originally paid with no waiting period at 90% of previous earnings (up to a limit) was cut to 75% of past earning with a 5 day delay. It was limited to 300 days of claim. Eligibility for disability pension was tightened. To receive a basic pension an individual had to show 40 years of residence.  They tightened the definition of a work injury to make a substantial reduction in work injury claims.  Health insurance was made meaner.  In 1993 and again in 1996 they cut the pension indexing payments.  In 1996 they cut Child Allowance and withdrew the supplement for more than 2 children.

Once Sweden made her spending cuts, got to a balanced budget, and following devaluation of the krona, the economy started to perform better. I’m not sure that was the Swedish model my advisers had in mind.

This entry was posted in Uncategorized. Bookmark the permalink. Both comments and trackbacks are currently closed.

66 Comments

  1. norman
    Posted April 12, 2012 at 6:14 am | Permalink

    The left deal in misconceptions, they have to, if they were to deal with facts they’d have precious little to say. So we’re treated to hackneyed cliches along the lines of high Scandanavian spending proves big government works, ultra-tough German employment laws proves straitjacketing companies work, the UK has some of the lowest tax rates in the world, the rich don’t pay their fair share, if the minimum wage were dropped all employers would immediately start ripping people off and unemployment would shoot up,the brutal Thatcher spending cuts of the 80’s, etc.

    All complete nonsense but try and explain this to someone of the ‘anyone but the Tories’ persuasion and you’ll most likely end up getting punched on the nose after being called every name under the sun.

    • lifelogic
      Posted April 12, 2012 at 2:02 pm | Permalink

      As you say “The left deal in misconceptions” also absurd irrational emotion, hypocrisy, envy and quack science. They also seem to be drawn like a magnet to certain professions – the state sector, politics, acting, the usually state subsidised “arts”, academia the BBC and indeed most media. I do not think they can help it they just have that sort of brain I suspect. Is it nature or nurture? I thing mainly nature and generally a lack of rational reasoning to correct override their emotions.

    • Bazman
      Posted April 12, 2012 at 5:35 pm | Permalink

      You just don’t come out with this with no justification. Spreading your message of a race to the bottom. What do you think would be the result of abolition of the minimum wage? There would be foreigners working for pennies. You expect British citizens to compete with this. Interesting to know what you do for a living Norm. Not a lot I suspect? The same goes for lifelogic with his right wing nonsense. When confronted with any argument just goes silent. His main and it seems only argument a race to the bottom as long as he is not affected by this race.

    • uanime5
      Posted April 12, 2012 at 6:03 pm | Permalink

      Yet another right wing fantasist. Allow me to disprove you using the facts you so hate.

      “high Scandanavian spending proves big government works”

      Yes Sweden does show big government does work while the USA shows that little government, big army doesn’t work.

      “ultra-tough German employment laws proves straitjacketing companies work”

      Well Germany is the largest manufacturer in Europe and has one of the strongest economies in the world. I guess forcing every company to make employee representatives half their board of directors does make companies more effective.

      “the UK has some of the lowest tax rates in the world”

      Only for the wealthy, who are able to dodge most of their taxes.

      “the rich don’t pay their fair share”

      See above.

      “if the minimum wage were dropped all employers would immediately start ripping people off and unemployment would shoot up”

      Well the Government did introduce the apprentice wage and forced people to work for free which resulted in employers ripping people off and unemployment rapidly increasing. I guess if you don’t pay a living wage only immigrants will be able to afford to work in these jobs, resulting in higher levels of UK unemployment.

      “the brutal Thatcher spending cuts of the 80′s”

      Well unemployment and homelessness did increase by a large amount.

      Next time try doing research.

      • Max Dunbar
        Posted April 13, 2012 at 12:53 am | Permalink

        What do you do for a living Mr. Uanime5? And what is your real name? Take off your face-mask and lets have good look at you.

      • Susan
        Posted April 13, 2012 at 7:47 am | Permalink

        lifelogic, Bazman, norman, Uanime5,

        All four of you are wrong, no wonder Politicians struggle to find the right message to give to the public. It is little wonder people like me, between these two extremes get fed up.

        Uamine5 and Bazman, cuts have to be made to Government spending whether we like it or not the UK is in debt. This must include reform to all the services and welfare.

        Lifelogic and Norman, the rich are not the only people in this Country. A lot of the ordinary workers contribute just as much but for far less money. Without skilled workers a lot of rich people would not be able to earn their money. It is against every principle I hold dear to think that rich people are aggressively avoiding tax whilst lower paid workers income is being squeezed by high taxation. It is also wrong that the super rich are avoiding taxation by putting money into charities that do little of any worth. The Chancellor is right on this one.

        • lifelogic
          Posted April 13, 2012 at 3:05 pm | Permalink

          I agree with you. Charities should be properly regulated to ensure they are really doing charitable things. The problem seems to be that the UK has to give tax relief to poorly regulated overseas charities due to EU rules I assume and perhaps faults with the charity commission systems.
          But these are surely already illegal already not just tax avoidance.

          I would get all income tax down to 20% and scrap all charitable reliefs as being more trouble than they are worth at 20%. But to do that they have to stop all the endless waste and stop paying people to do nothing useful.

          Of course skilled and even unskilled workers contribute and they would all be better of and better paid if the business owners have more of their own funds to expand the businesses start new ones and ensure they have the latest plant to do the job efficiently.

          • Bazman
            Posted April 13, 2012 at 9:09 pm | Permalink

            What are you doing that is ‘useful’? A pertinent question as you keep saying it.

          • lifelogic
            Posted April 15, 2012 at 8:01 am | Permalink

            Bazman,

            Mainly creating jobs, manufacturing building materials, generating UK exports and building efficient buildings for people to use and work in. Since you ask.

            This despite all the efforts of Cameron and Osborne.

  2. lifelogic
    Posted April 12, 2012 at 6:46 am | Permalink

    Indeed high public spending and economic success will never go together because politicians and civil servants will never spend the money wisely or efficiently or often even honestly. Grants and funding will be given for buying votes, helping politically sensitive regions, government PR/indoctrination, current spending rather than real investment, given to friend, relatives or connected businesses, nonsense green bling, forcing people to speak Welsh, encouraging factories to the wrong places, given to the PIGIS, spent on happiness indexes, the BBC indoctrination factory, an dis-functional NHS (that kicks thousands of old patients out of hospital in the small hours for the hospitals convenience) and all the rest.

    Politicians just cannot help it. It is a shame Cameron and Osborne are clearly both of the old, big government, Swedish school and have an even less efficient state sector too.

    I have no knowledge of the merits, or otherwise, of the Zimmerman legal case – but
    listening to the prosecutor in Florida on the news this morning saying “We do not prosecute by public pressure or by petition” I am somehow reminded of Cameron saying that his government is on the side of pensioners and without even a smirk on his face.

    • lifelogic
      Posted April 12, 2012 at 6:55 am | Permalink

      Perhaps also reminded of the general rule that politicians usually only ever say two things.

      Either:

      So clearly true that they are not worth saying.
      Such as: ” We want an integrated, coordinated, well managed, efficient & responsive X ”
      Or
      Things that are very clearly false such as: “We are going to be business friendly or we are on the side of pensioners or hard working families.

    • Bazman
      Posted April 12, 2012 at 5:46 pm | Permalink

      Letting everything fall to the base level is not clever or wise. If you had to live at the bottom of society or fend for yourself in some way you would not last a day.
      How about the rest of the media that presents the same arguments as the BBC lifelogic? Are these just propaganda factories? We have seen the silly pseudo science websites and authors you believe are reputable and reliable. Laughable.

      • lifelogic
        Posted April 13, 2012 at 3:11 pm | Permalink

        Bazman,

        I started with no money and have certainly lived with very little money indeed at certain times in my life. I have fended for myself just fine thanks.

        My system is a ladder to the top – yours is clearly the race to the bottom

        • Bazman
          Posted April 13, 2012 at 9:13 pm | Permalink

          Guf Ho!. Did you run that one by your boss?

          • lifelogic
            Posted April 15, 2012 at 8:01 am | Permalink

            I do not have a boss.

  3. merlin
    Posted April 12, 2012 at 7:26 am | Permalink

    Cutting public expenditure and benefits is necessary if a country is to grow and prosper in the future. When Beveridge set up the welfare system in the UK he envisaged that this would enable working people to receive short term benefits while out of work, a noble ideal and perfectly understandable. Unfortunately in the uk the welfare system is now the most expensive form of public expenditure the present government has to administer. For whole generations welfare has become a way of life, I’m sure that this is not what Beveridge intended in his wildest dreams. I find it incredible that 3 generations of families have lived off benefits and we seem to be the benefit capital of the world. As a result of the the previous labour government the country has effectively been made bankrupt and we have a massive public sector deficit. The welfare culture has been embedded in our way of life and has created a something for nothing attitude in large swathes of the popualation. The majority of people in this country go out to work, unfortunately to prop up people who take advantage of their hard labour. I accept that there are some people who genuinly need benefits and that is fine, but what is required is to change the benefit culture attitude, I think actually, the welfare state in its present form is coming to a natural end anyway since it will not be affordable in the long term. We need to create a better attitude in individuals in this country so that the UK population believes in Great Britain once more, this will not be achieved by free handouts.

    • zorro
      Posted April 12, 2012 at 5:04 pm | Permalink

      Beveridge certainly did not envisage that this would happen. He was well aware of the dangers of sloth and idleness. This is an example of the law of unintended consequences.

      What we have now is a grotesque aberration of the Welfare State which is entirely a result of the culture of buying votes. Making people dependent ensures that they will need your support and will vote for you. All governments eventually engender this feeling in their lust for power.

      Governments detest the idea of free people not depending on them….it would threaten their livelihoods and their busy body we know best mentality.

      zorro

    • uanime5
      Posted April 12, 2012 at 6:11 pm | Permalink

      “Unfortunately in the uk the welfare system is now the most expensive form of public expenditure the present government has to administer.”

      This is mainly due to housing benefits so that people can afford to live somewhere and tax credits to supplement low wages. The only was to reduce this is to lower house prices and raise wages.

      “For whole generations welfare has become a way of life, I’m sure that this is not what Beveridge intended in his wildest dreams.”

      Well when Beveridge was alive unemployment was much rare because there were more jobs available. I doubt Beveridge every thought that unemployment would every reach 3 million.

      “I find it incredible that 3 generations of families have lived off benefits and we seem to be the benefit capital of the world.”

      Well there are all the old coal mining and steel works towns that never received another industry after Thatcher shut down the mines and closed any private sector industry that had a union.

      “We need to create a better attitude in individuals in this country so that the UK population believes in Great Britain once more, this will not be achieved by free handouts.”

      While correct it won’t be achieved by removing these ‘handouts’. Only by creating nearly 3 million jobs that pay a living wage will this occur. If the job pays less than a living wage then people will remain reliant on benefits.

    • Bazman
      Posted April 12, 2012 at 6:47 pm | Permalink

      What is your ideas for reform other than making the recipients more desperate? We would love to know.

      • lifelogic
        Posted April 13, 2012 at 3:23 pm | Permalink

        People working for and keeping most of their own money and plenty of jobs available too.

        • Bazman
          Posted April 13, 2012 at 9:14 pm | Permalink

          How does not believe this?

    • Posted April 14, 2012 at 4:10 pm | Permalink

      Beverage’s idea for the Welfare State was to allow a minimum amout of time so that each person had a fully-funded pension.
      It was the damned politicians of the day who, to curry short-term favour (elections will keep coming up), started paying out before the fund was fully established. Result, we now have a pay-as-you-go scheme which means that our as yet unborn grandchildren will have to pick up the tab. That is unless or until they revolt against the system.

  4. Susan
    Posted April 12, 2012 at 7:36 am | Permalink

    There are key differences though between Sweden then and the UK now, when they were attempting to cut their deficit. The most important was that they had a clear mandate from the people. This Coalition does not have that, it has yet to prove successfully to a large amount of people in Britain that there is a need for cuts. Sweden had a strong Government which set out clear goals and ambitions for the future and stuck to them, this Coalition does not.

    Furthermore Sweden decided on cuts instead of tax rises, cut red tape for business and reformed all their services in particular health, bringing the private sector much more into their services. They did not have the very high state benefits the UK has to start with and they dealt with the banking crisis very differently.

    The most important difference, in my opinion, is that the public was always on their side in their decisions.

    Canada is also held up as another good exercise in cutting the deficit but their model was slightly different. They also had public support for their mandate of reform and cuts.

    • rose
      Posted April 12, 2012 at 8:13 am | Permalink

      If the Liberals didn’t keep trying to differentiate the public here might be more on side.

      • Susan
        Posted April 12, 2012 at 9:17 am | Permalink

        Rose,

        The Lib/Dems do make a difference in how policies are made in Government but I do not think they make a difference to how the public thinks.

        I have come to accept that the UK has over 13 years of Labour become a much more socialist Country. The Labour organisation has been able to infiltrate every part of British life from education, most teachers are of the left, to high profile personalities in the acting profession etc. I still meet people every day that believe the Conservatives want cuts out of ideology rather than necessity. While this remains the case the Coalition will never be able to make the case to the public for large cuts and some private investment in the services.

        However, there is a problem for the Conservatives as well. I read and hear very extreme views coming from those who support them. Just cut this and that, allow the rich to aggressively avoid tax and so on, without any empathy for the people involved in the cuts and the unfairness of someone getting away with paying virtually no income tax. We are led by idiots because they will not do what I ask of them. With the best will in the World educated people are not idiots.

        I fall between these two extremes, I believe in low taxation for everyone not just the rich, cutting red tape for business, reforms in welfare, education and health. I believe in coming out of the EU, not because I despise them but because I believe in the Global economy and do not like the restrictions they put on our ability to trade as a free Country all over the World. I also believe in English Independence, the reason is all these devolved Governments are costing too much money and are holding England back.

        You see until the balance is right and the public sees a Government in power that they believe in and support, nothing will change for the UK. The spiral down will continue.

        • rose
          Posted April 12, 2012 at 3:02 pm | Permalink

          Yes, Susan, you are right: the country has been corrupted into becoming a much more Socialist country. The Liberals – and many of the Conservatives – reflect that. I fear it was the case even before the mass bribery by Brown.

          But now we are in this terrible state where money is being printed to keep down interest rates, and a Conservative chancellor is using weasel words like “aggressive tax avoidance”, I still think the Liberals could help by standing full square behind the need to go some tiny way towards balancing the books, instead of childishly undermining their coalition partners at every opportunity. Right at the beginning of the coalition, they did give their support, and the public were mostly in accordance with the need to be responsible.

          But if the Liberals now join the socialists in giving the public the idea that only the wicked Conservatives want to retrench and that it isn’t really necessary, what hope is there?

          • zorro
            Posted April 12, 2012 at 5:13 pm | Permalink

            The Coalition did have a mandate to cut the deficit and their manifestos.

            Unfortunately, they lack the ‘cojones’ to actually do this. They had an excellent opportunity after spendthrift Labour at the start of this Parliament but have mightily blown it.

            As time goes by, their incompetence and lack of any experience shines through in numerous examples.. They are experts at shooting themselves in the foot and missing open goals. We should not be surprised after Cameron’s failure to impress in the debates.

            zorro

    • Brian Tomkinson
      Posted April 12, 2012 at 9:07 am | Permalink

      Susan,
      You wrote: “it has yet to prove successfully to a large amount of people in Britain that there is a need for cuts.” As overall spending is increasing, they haven’t even made the case to themselves! We have just replaced a tax and spend party with a coalition doing just the same thing. Worse still they have talked about cuts when overall there have been none whilst they are happily spending more in some areas at the expense of others. Don’t forget also that by 2015 they plan to have increased the debt to at least £1350billion an 80% increase in just 5 years!

      • lifelogic
        Posted April 12, 2012 at 2:07 pm | Permalink

        Hence poor growth, poor trade figures and unemployment but we still have enough money to waste Billions on Carbon capture and forcing people to speak Welsh.

        • zorro
          Posted April 12, 2012 at 5:17 pm | Permalink

          I don’t think that our host will be applying for any of the Welsh speaking classes!

          zorro

        • Bazman
          Posted April 12, 2012 at 6:44 pm | Permalink

          This absurd obsession with health and safety has led to many people calling for the number of lifeboats to be of sufficient quantity as to accommodate all a passengers aboard the Titanic. Modern vessels such as this are unsinkable and only a few are needed to bring supplies and maintenance as to effect repairs with some additional space to forward passengers to other vessels should their business require. The additional cost and space is absurd especially with the new equipment called radio being able to call for intimidate help.
          Would be interesting to know your view on aircraft maintenance lifelogic..

          • lifelogic
            Posted April 13, 2012 at 3:30 pm | Permalink

            No one is against sensible health and safety and good maintenance.

            Many health and safety rules however often actually have the opposite effect, in practice, to that intended.

      • Susan
        Posted April 12, 2012 at 3:01 pm | Permalink

        Brian,

        I agree. However I think the Coalition know very well how dire things are and how much needs to be cut, but it is all about Politics and fear. They fear the public, because the case has not been made to the public for the cuts needed. Politics because they know they will merely be out of Government next time if they upset the public. So what we have at the moment is some kind of attempt to made very minor differences to the economy on cuts whilst pretending they are bigger and in the meantime trying to plug the gap with tax rises. It isn’t working and is never likely too. It is the mistakes that they are making along the way which are unforgivable really. This is alienating the public still further.

        Large cuts need to be made into all Government spending, done in an orderly and compassionate way. Not in this unorganized fashion at the moment where they cut a little here a little there, they are bound to make mistakes. But if you are waiting for the big cuts to appear, I think you are going to be disappointed.

        • zorro
          Posted April 12, 2012 at 5:26 pm | Permalink

          In a way, they are more guilty than Labour…..With Labour, they can’t help it, it is in their genes. The Tories, however, have been lecturing about what needed to be done for years. In power, they are all talk and no trousers, and more to blame because they know full well what needs to be done.

          The Coalition is performing poorly in a number of areas. Immigration Control will become even more of an issue over the next few months with the Olympics and queues, lack of staff at the airports. They are making no impact whatsoever into net migration. This is an issue where they could make a difference, and it is important to the electorate, yet they fail to make an impression.

          zorro

  5. ian wragg
    Posted April 12, 2012 at 7:48 am | Permalink

    It’s only a matter of time before major reductions in the welfare state will be forced upon us.
    With mass immigration and the explosion in population, child benefit for unlimited children is unsustainable.
    The same with pensions, people arriving and bringing their families then claiming pensions. In my mothers care home there are 2 East Europeans having care paid by the state who have only a few years residenc whilst we have to pay. This is neither fair or sustainable.
    Of course we will have to wait until we call in the IMF or the bond markets force it on us as its no good relying on the socialist government in poer at present.

    • zorro
      Posted April 12, 2012 at 5:29 pm | Permalink

      Unfortunately, our system allows this situation and we are being bled dry. Non-contributory benefits are anathema. Foreign nationals are making good use of the legal system to ensure that they can claim maximum benefits. It is not surprising that they are bringing in elederly relatives and effectively dumping them on the state. They are only taking advantage of our weakness.

      zorro

  6. oldtimer
    Posted April 12, 2012 at 7:58 am | Permalink

    No. It was the cause of a very high cost economy. The solution you describe is another matter entirely.

  7. alan jutson
    Posted April 12, 2012 at 8:01 am | Permalink

    Looks like a prime example of a solution to the problem, with a track record.

    The difficult stage is for politicians to recognise that they have a problem in the first place, something most of ours are still reluctant to do.

    Only when you accept you have a problem, can you start to resolve the issue with potential solutions.
    This is what I belive is the first stage of progress when treating an addict.

    Given most of our politicians are debt and spending junkies, we are still not through the the first phase yet.

    The penny (£ billions) I guess will drop eventually, but so far I see no sign of it.

    • zorro
      Posted April 12, 2012 at 5:29 pm | Permalink

      Cameron will never take a difficult decision.

      zorro

  8. Mike Stallard
    Posted April 12, 2012 at 8:09 am | Permalink

    Once again, you have taken the trouble to find out the facts and not blindly and lazily accepted the stereotype (high tax – lots of hand-out Swedes). Thank you for that.
    They are a brave lot those Vikings. It was they who actually made the Free Schools work with IES.

    So why can’t our mob do the same?

  9. David
    Posted April 12, 2012 at 8:42 am | Permalink

    Yes, Sweden is a fine example of sensible welfare reform. One of the differences between Sweden and the UK is the level of pragmatic intelligence both in the media and the general population regarding issues. And Sweden will generally take a longer term view. By contrast the UK tinkers at the micro level with a very short term view.

    Another thing that people may not realise is that there is a fee to pay when you see a doctor in Sweden

    I recall putting that idea to David Davies at one of his forums with Tony Benn and he said “we looked at that, but……..”. And I understood that he meant ‘politically’ it would not work.

    • sjb
      Posted April 12, 2012 at 5:22 pm | Permalink

      The fee used to be 120 SEK (about £11), but then you did get a 20-minute consultation.

      With regard to the NHS, discussing whether particular items of service should attract a fee often comes up; the topical one being faulty breast implants. Tattoo removal is another. The principle being that if a pt paid for the tattoo then he should also pay for its removal. BUT I think the problem was that gearing the NHS up to accept payments from pts would have cost over a billion pounds in administration. Surprising, I know! But let us not forget computers and the NHS have proved to be very expensive in the past.

    • lifelogic
      Posted April 13, 2012 at 3:35 pm | Permalink

      Of course they should charge a fee to those all who can pay to see the doctor.

  10. Richard1
    Posted April 12, 2012 at 9:43 am | Permalink

    A few other notable differences: Although the Left often cite high personal tax rates in Sweden they overlook the fact that capital gains tax is less than 1/2 the marginal rate of income tax (currently 28%), that dividends are taxed at the CGT rate and there is NO inheritance tax. Reforms in education and in health have introduced extensive private provisioning.

  11. Judge Nutmeg
    Posted April 12, 2012 at 10:23 am | Permalink

    Stop making a living out of tax avoidance Mr Redwood.

    Reply: I do not make a living out of it. I do, however, like all MPs and many people we represent save money for retirement in a tax privileged fund.

  12. Posted April 12, 2012 at 12:38 pm | Permalink

    Wasn’t it a famous Swedish film director who pointed out that his taxes would have exceeded his income if he actually lived there?

    I have been watching the French Presidential Election Hustings on TV. Fascinating to see all of those candidates who advocated shorter working weeks and higher wages without once stating (or being challenged) where the money was coming from? At least one blames the Euro for France’s monetary woes.

    Incidentally I wonder what would happen if Prime Ministerial Candidates were chosen as per the Presidents here – with the public, rather than the M.Ps. voting for them?

  13. nicol sinclair
    Posted April 12, 2012 at 12:39 pm | Permalink

    I am currently totally exasperated with politicians of all hues apart from Mr JR (is my cheque in the post yet?). From JR, we at least have honest debate.

    For me politicians are, bar none perhaps, a bunch of charlatans feeding off my taxes (on my Army pension) and giving sod all in return. Thanks to The Kirkaldy (man-ed)…. When was he last seen? Is he representing the hapless people of Kirkaldy? Is he even alive? Or has he gone to that great evil Parliament in the Sky?

    Reply: Mr Brown does come to Parliament and is still the MP for his seat.

    • zorro
      Posted April 12, 2012 at 5:36 pm | Permalink

      Gordon’s alive…!

      How often has he appeared in Parliament since the election?

      zorro

      • Gordon
        Posted April 12, 2012 at 7:47 pm | Permalink

        Zorro,
        excellent!

  14. Lindsay McDougall
    Posted April 12, 2012 at 2:04 pm | Permalink

    You would probably have to leave it to the contracting parties. Suppose that a new Drachma started life at parity with the Euro but then Greece pursued a looser monetary policy so that it fell to 85% of the value of the Euro. What then?

    Reply: Most of us think if you start at 1 to 1 the drachma will fall sharply on the first day. Greece needs a devaluation or big wages cuts to become more competitive – that’s part of the medicine.

  15. robin
    Posted April 12, 2012 at 2:13 pm | Permalink

    My goodness John, you do come up with some informative research. What a shame that the media do not feature it!
    I am but a simple person and the solution to our problems is surely simple in that the country lives within its means! My wife and I lived this way all our working lives and if we could not afford something we went without! But of course, having behaved responsibly we are now being penalised and are expected to support those here and from across the world who want to live of our backs.

    Until cameron listens to people like you, he should do so soon, the future for this country and my children and grandchildren is not at all good. Perhaps we need a British Spring, albeit a non violent one, to ensure a parliament of the people for the people. We do not appear to have had one of those since Maggie’s day.

    Please keep up your excellent work John.

  16. Epigenes
    Posted April 12, 2012 at 3:52 pm | Permalink

    Mr Redwood, the only Swedish model I ever loved was called Lotta Sandquist. She lived in Stockholm.

  17. Credible
    Posted April 12, 2012 at 5:32 pm | Permalink

    There is always balance to be had. Sweeden had its problems and spent too much, but it dealt with its situation. I believe it managed this because the country has a greater sense of fairness than inthe UK. They really were much more all in it together. They don’t have such a powerful super rich and banking sector controlling policies for bribes. They believe in a welfare state but had the sense to stop it getting out of control and were prepared to take the pain because they felt it would benefit everyone in the end. We have no such feeling with this current UK government – either from left or right ideologies it seems.

    • Winston Smith
      Posted April 12, 2012 at 10:00 pm | Permalink

      “I believe it managed this because the country has a greater sense of fairness than inthe UK. They really were much more all in it together. They don’t have such a powerful super rich and banking sector controlling policies for bribes.”

      Not true. Mythical nonsense. Sweden’s top 10 richest people have a combined wealth of £80bn. The UK’s top 10 amount to £50bn in a nation 6x larger.

  18. uanime5
    Posted April 12, 2012 at 5:53 pm | Permalink

    Fun fact about Sweden: they have a flat salary system, so almost everyone earns the same salary whether they’re a cleaner or CEO of a company. Perhaps the UK should take similar steps to reduce income disparity.

    John you mentioned cuts to benefits but did Sweden cut their taxes between 1992 and 1994 during the crisis, or between 1994 and 1998 when they eliminated their deficit? If so by how much? Did they raise them after 1998?

    Reply: The Swedes I know are not on flat salaries. Another figment of your imagination.

    • Winston Smith
      Posted April 12, 2012 at 10:07 pm | Permalink

      “Fun fact about Sweden: they have a flat salary system, so almost everyone earns the same salary whether they’re a cleaner or CEO of a company.”

      Have you found those fairies yet at the end of your garden?

    • zorro
      Posted April 12, 2012 at 10:27 pm | Permalink

      http://lostinstockholm.com/2012/01/10/average-salaries-in-sweden-by-occupation/

      Uanime5,
      There is still a sizeable difference between salaries. I spoke with an international colleague from Sweden about the subject not long ago. You are a silly billy sometimes….

      zorro

      • uanime5
        Posted April 13, 2012 at 3:21 pm | Permalink

        I see that a doctor earns twice the salary of a painter, a far lower difference is salaries than the UK.

        • zorro
          Posted April 13, 2012 at 4:10 pm | Permalink

          Doctors in the UK are overpaid compared to those in Europe.

          zorro

          • Bazman
            Posted April 14, 2012 at 9:26 am | Permalink

            Overpaid? Interesting idea. Maybe you are also overpaid? A pay cut for someone else is not a pay rise for you as many people believe, though at the same time want the rich to pay less tax.
            Often it’s personal they want the person working with them to have a pay cut not realising that they are setting themselves up for a pay cut. Same vein. Jeremy Clarkson, speed cameras. What a laugh!?! When told that you have clocked some really high speeds and only throttled off as you saw dinosaurs and had to slow down to consult the operating manual. In fact what we are dealing with is a total lack of respect for the law, suddenly become all law abiding and outraged. Funny huh?

          • Posted April 14, 2012 at 4:15 pm | Permalink

            They probably are – I speak as a retired doctor.
            The French system is far better (along the Australian lines) where the State pays fixed percentages of the bill depending on one’s income and the patient pays the remainder from their pocket or via “top-up” insurance.
            French doctors have about half the patient list sizes than in the UK.

    • Rob
      Posted April 12, 2012 at 10:38 pm | Permalink

      I moved to Sweden 4 years ago and as Mr Redwood states, salaries are not flat. If I had the time I could write an article for Cameron and “stagflation Osborne” on how they are doing things wrong. As others have mentioned, Sweden acted VERY quickly with the necessary reforms when they spotted trouble.

      The Swedes are extremely creative and entrepreneurial and appear to me to be export focused. I had a conversation with a music teacher recently who told me that children are encouraged at age 6 to learn how to play a musical instrument as there is a good opportunity to make a good living from writing lyrics or music. He knows people who make the equivalent of about 200 to 300 thousand sterling per year from in royalty payments. He hopes to join their ranks in a few months.

      The computer games industry, which had an amazing start in the UK back in the 80’s is doing very well here. There is a huge amount of money to be made from worldwide sales from this industry. They have something called the Nordic Game Program here which delivers funding to game developers. I don’t know if such help exists in the UK but many of the best UK talent has moved out of the UK. It’s bad for me to see after the great head start that the UK had. New Swedish development studios are appearing all the time.

      There is no compensation culture here. My wife once cut her finger quite badly on a shop door. The solution was for a member of staff to bring her a plaster. The problem was solved and that was the end of it.

      Yes you do pay a small fee to see a doctor. It’s 100 SEK now.

      They have a great welfare system here because they can afford to have one as they do so many things right. The way they do things here has been a real eye opener for me and I’m so happy that my daughter is being brought up here. The way they do things can makes the UK look very amateurish.

      Sorry for a hastily written message with no doubt bad grammar, but it’s 00:30 here now and I have an early start after a long and productive workday. I hope I got some points across though!

      • uanime5
        Posted April 13, 2012 at 3:31 pm | Permalink

        There really isn’t anything similar to the Nordic Game Program in the UK. The best you can do is either make a prototype and try to sell it to a publisher, or make a working version and sell it on Steam.

        The UK really lacks a way for programmers and engineers to obtain funding and assistance for new ideas.

    • uanime5
      Posted April 13, 2012 at 3:16 pm | Permalink

      John can you explain why Sweden has such a low Gini ratio if they don’t have flat salaries.

      Also I noticed that you ignored my questions about reducing tax rates. Could this be because tax cuts didn’t play a major part in fixing Sweden’s economic problems?

      I also found that in 2010 Sweden obtained 45.8% of GDP from tax revenues, down from 48.3% in 2006, because most people pay 60% of what they earn in taxes (mainly income tax and VAT). It seems that you can actually get more than 38% of GDP in tax revenues if you try hard enough.

      Reply: Sweden did cut her top rates of Income Tax in the early 1990s from the very high rates in the 1970s and 1980s.

  19. PedroelIngles
    Posted April 12, 2012 at 8:39 pm | Permalink

    The Post Office offers a Savings Account and the funds therein are deposited with Bank of Ireland (UK) plc. Deposit Protection was set at a maximum of £85000 as at 18 November 2010 and this figure is still subject to consultation. The figure of £85000 related to the sterling equivalent to Euros100,000 and is effective from 01 January 2011. These arrangements correspond with the Financial Services Authority (FSA) requirements regarding security of savings and Deposit Protection generally but I am concerned that the Post Office is dealing with the Bank of Ireland which is in the Eurozone. I fear the impact of a decision by the Irish Government to withdraw from the Euro or even of the collapse of the Euro itself. If the Euro simply no longer exists are Post Office Savers still covered for up to £85000 in Sterling (based on a 19 months old and vague Exchange Rate still subject to consultation)! What are the ramifications as one can envision chaotic exchange rates between a new Irish Pund, a non-existent Euro and Sterling with devious wheeler and dealering with discounts and losses to be accounted for on the markets. More detailed information on the existing unclear regulations may be found in the Post Office Advice entitled “Important Information Regarding Deposit Protection” (Reference 20231 001/2011 PL6350) – not I may add a “User Friendly” source of information.

  20. Lindsay McDougall
    Posted April 13, 2012 at 12:23 pm | Permalink

    Sweden’s public expenditure fell from 71% of GDP in 1993 to 52% in 2008. Over the same 15 year period, public revenues fell by 6% of GDP.

    So they improved their fiscal position and cut taxes. It can be done.

  • About John Redwood


    John Redwood won a free place at Kent College, Canterbury, and graduated from Magdalen College Oxford. He is a Distinguished fellow of All Souls, Oxford. A businessman by background, he has set up an investment management business, was both executive and non executive chairman of a quoted industrial PLC, and chaired a manufacturing company with factories in Birmingham, Chicago, India and China. He is the MP for Wokingham, first elected in 1987.

  • John’s Books

  • Email Alerts

    You can sign up to receive John's blog posts by e-mail by entering your e-mail address in the box below.

    Enter your email address:

    Delivered by FeedBurner

    The e-mail service is powered by Google's FeedBurner service. Your information is not shared.

  • Map of Visitors

    Locations of visitors to this page