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The Mundus Blog – opinion and analysis from Mundus International
A fortnight ago we blogged, “When the dust settles the world will be stunned by what is planned,” our instinctive response to the breakthrough January Agreement (JA). With two weeks additional time to analyse the politics and business impacts, we stick to this conclusion, and are cautiously optimistic that much of it will be implemented.
Summarising some of the main points;
- Income tax cuts for middle to high income earners from 2020.
- Environmental taxes will be increased by SEK 15bn, making room for tax reductions on labour. One assumes that fuel will cost significantly more.
- Jobs will be promoted, by liberalising the rules for dismissals and lowering payroll taxes.
- Entrepreneurs will have better conditions;
- Improved rules for employee stock options, by, among other things, expanding the size and the personal circle so that “Swedish rules are competitive in an international perspective”.
- Reduced employer fees
- There will be an end to talent expulsions. A special visa for highly qualified people who want to apply for a job or start a business will be introduced.
- The Public Employment Service (Arbetsförmedlingen) will be reformed. In fact, this has already begun, with 4,500 redundancies being made at the agency.
- Rents for apartments will be liberalised. This means that rents will go up, but property should be easier to find.
Will it happen? If so, when?
No sooner had JA been announced than Swedish political commentators immediately began to speculate who had won, who had conned who, and piled into a debate attributing blame to politicians who had broken promises or backed out of previous agreements. This noise largely distracted from the main message, which was that at the election, Sweden had voted massively in favour of right-wing economics (57.7% voted M, C, L, KD or SD vs 40.2% voted S, MP or V). This vote is now recognised in JA, a manifesto for economic and social change in Sweden. Some see it as a trick, that the Social Democrats have hoodwinked Centre and the Liberals, and that Sweden’s government will stick to centre-left policies. We think that is unlikely for a couple of reasons.
Firstly, the indications are from the Prime Minister that he intends to deliver on JA. Quoting from amongst first Löfven’s sentences in his Statement of Government Policy (in English).
We are now beginning a historic form of cooperation. Sweden will now have a Government made up of the Social Democratic Party and the Green Party that will cooperate on the budget and the direction of policy in several areas with the Centre Party and the Liberal Party. Now we can finally make a fresh start. The problems in society cannot wait.
- Jobs must increase and climate emissions must be reduced.
- Welfare must improve and integration must become more efficient and effective.
- Security must increase and crime must be combated.
Sweden is in need of major reforms. We can now address these, together, across the old political blocs.
Löfven then continues for 20 pages listing bullet by bullet the agreement, and in doing so commits his government to deliver on it.
The other reason that we believe that most, even if not all of the agreement will stick is the political construct that dangles like a Sword of Damocles over Löfven’s head;
- The 73 points are a clear roadmap for change that Swedes generally believe is necessary, even if they don’t all agree on how to get there.
- Rather than indulge in the spoils of government, Centre and the Liberals have consigned themselves to opposition. Individuals in these parties are not bestowed with ministerial powers they might be unwilling to give up, or benefiting from government salaries. If Löfven strays from his agreements, then there is little at stake for individuals in C and L to bring him down, via a no confidence motion that can be triggered at any time, and is likely to attract the support of M, KD and SD.
- The cooperation over the budget needs to be refreshed every year. Failure to show immediate and continued delivery of the agreement invites a tougher battle over budget prioritisation.
Löfven needs to deliver, or his job is immediately at threat. The indications are that his government understands this. This week, Arbetsförmedlingen, the Public Employment Service, long a bastion of Social Democrats policy announced that it was firing 4,500 employees – one third of its entire workforce, as mandated by both JA and the M+KD budget approved by the Riksdag.
But not all of the 73 points are as prescriptive as a reduced budget allocation. Many require Riksdag investigations to produce detailed recommendations about policy changes. Dagens Nyheter counted 20 government inquiries, nine direct assignments to authorities and number of departmental letters and bills, observing that politicians and officials will be kept very busy in 2019. So, much of the change will happen gradually over several years.
Stay tuned via our blog.
Mundus admits to breathing a sigh of relief now that the political impasse has been resolved. While the deadlock did not make for particularly interesting copy, we look forward to a much more engaging time ahead. We will continue to bring you details of reforms to visas, taxation and housing. You can continue to receive our summaries by signing up to this blog.