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David Rutley MP: It's not just the size of the state that matters, but its shape

Rutley David David Rutley is the Member of Parliament for Macclesfield, Damian Green’s PPS, and a member of the Free Enterprise Group. David spent many years in business as a senior executive in companies such as Asda and worked as a Special Adviser at the Treasury during the last Conservative government.

In Hamlet, it is famously said that “Something is rotten in the state of Denmark”. The evidence suggests that this is no longer true.

Nordic nations demonstrate that while the size of the state is certainly a critical dimension, the shape of the state and the fitness of its institutions are also vital to performance. The likes of Denmark, Norway and Sweden may not have been at the top of the Olympic medal table, but they are able to point to solid economic performance and efficient, trusted public services at a time of global economic uncertainty.  

Scandinavian countries put aside their Viking reputation centuries ago. Today, they would shy away from being labelled anything like “Celtic Tigers”, viewing themselves more like industrious bees. Understated perhaps, but efficient and ordered in the way they run the state and innovative in how they have embraced market-based solutions in delivering public services.

This may seem surprising from countries which have historically been better known as big state spenders. But things have changed in recent years. As a Conservative, I am much more sceptical about the scope of the state than my cousins in Denmark (my mother is Danish) and I enthusiastically support the aim of lower Government spending in the UK. That said, I have learned that it pays to take a closer look at how the state is being reshaped in Scandinavia.

According to the World Economic Forum (WEF) Sweden, Finland and Denmark are ahead of the pack as the 3rd, 4th and 8th most competitive nations respectively in its most recent global league table. They have had this lead against the UK for several years, although we were able to close the gap last year moving up to 10th place.

These competitiveness rankings may seem odd when compared with the historically high levels of public spending in Nordic nations. But the WEF report also shows that while the state is large, businesses find regulations less burdensome in these countries. Finland, Denmark and Sweden are all in the top 30 countries with the lowest regulatory burdens, while the UK is placed 83rd.  This helps highlight how public services are perceived to be more efficient and how the state is seen as less heavy-handed - at times an enabler - in Scandinavian countries.

Danes, Finns and Swedes also have higher levels of trust in state institutions according to recent European Commission research, with over 60% trusting their national Parliaments. This compares with figures that only just get into double digits across Greece, Italy and Spain, and levels of trust in the UK fluctuating near the 20% mark for at least the last five years.

So, what lessons can be learned from across the North Sea about: how public services should be delivered; who is best placed to provide them; and the role of market-based solutions?

Recent experience in Sweden has shown how public services can be radically reformed to deliver better outcomes. Their well documented school vouchers system has created greater parental choice and empowered a network of free schools. This appeal of greater local accountability has helped reinforce Michael Gove’s commitment for more self-governing Academies and his clear enthusiasm for “free schools”.  In Scandinavia, there is a long tradition of local autonomy, which has been reinforced by the new approaches of the 1990s with their greater emphasis on decentralising powers away from the central administration. 

Scandinavians have also changed their views on who should provide public services. Since 2007, Sweden has been involving what they call “complementary actors” - private sector providers – in delivering welfare services. These providers now offer a wide range of services, including job-search activities, career guidance and on-the-job training. In Finland, over a fifth of social and health care services are now run by outside providers.

What’s more, Nordic nations have recognised the importance of market principles. The creation of a highly flexible labour market is an integral part of Denmark’s policy of “flexi-security”. Each year, 800,000 Danes change employment. For a country of just 5.5 million people, that is a very high level of labour flexibility, with nearly one in three moving jobs every year. By contrast, over the last five years, around 15% of UK workers have changed jobs annually.

The fact that so-called Scandinavian “big spenders” have made tangible progress in reshaping their states and enhancing public services should encourage us in the UK in these vital tasks. We clearly have the economic imperative to focus on the size of the state and to drive for greater efficiency. The Government is also right to recognise the opportunity to go further by working to create greater choice in public services and deliver real value for money for the taxpayer. Seizing this opportunity will help get the state in better shape and take performance to a higher level.


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