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Swedish commission says government should cap tax-funded welfare firms' profits

Published 11/08/2016, 04:19 AM
© Reuters. A general view shows Stockholm

STOCKHOLM (Reuters) - Sweden should set a cap on profits that private firms can make from providing tax-funded hospital services, care for the elderly and schooling, a government appointed commission said on Tuesday.

Sweden was a trailblazer of deregulation in the health and education sector in 1990s, but many Swedes are now worried that quality has declined while tax payers are funding profits for big business.

The commission proposed rules to control which firms can operate in the tax-funded welfare sector. It also said operating profits for tax-funded welfare providers should be capped in relation to their working capital at a rate based on the return on government bonds plus 7 percentage points.

"In recent years, the welfare debate has been about bankruptcies, falling school results and unreasonably high profits," the head of the commission, Ilmar Reepalu, said in daily Svenska Dagbladet.

"A regulation such as this would ensure that the majority of tax money will remain in the businesses themselves and will benefit children, pupils, patients and others who use these resources."

The commission was set up by the minority center-left government - pushed by the Left Party which says capping profits is a quid pro quo for budget support - and has promised reform.

But the center-right opposition has broadly rejected capping profits in favor of tougher performance targets and oversight and the minority government may struggle to push a bill through parliament.

Experts have also said such a cap could break EU law.

The proposal is in line with reports in Swedish media earlier this month.

(This story corrects name of newspaper to Svenska Dagbladet)

© Reuters. A general view shows Stockholm

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