The public sector's structure and use Public Finances in Sweden 2006 to further changes in the Swedish administrative model. Amongst other things, the

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1 Public Finances in Sweden 2006 The public sector's structure and use 8 The public sector's structure and use In this Chapter we provide an overview of the economy and activities in the subsectors of the public sector: the central government sector, the local government sector and the old-age pension system. How citizens use publicly financed services at different stages of their life is also illustrated. The public sector can be divided into subsectors in terms of who is responsible for ensuring that the services decided on by the Riksdag and the government are also made available to citizens. The subsectors are the central government sector, the local government sector which consists of municipalities and county councils and regions, and also the old-age pension system (earlier referred to as the social insurance sector). Income and expenditures 2004 for subsectors in the public sector, current prices, SEK billions Other Consumption Transfers Taxes and fees 0 Income Expend. Income Expend. Income Expend. Central gvt. Local gvt. Old-age pens. system Source: Statistics Sweden (SCB), National Accounts The central government sector is the largest since it includes the large transfer systems. In the 1990s major structural changes took place in Swedish society. Not only were there changes in the distribution of responsibility between different subsectors, but also EU membership contributed Statistics Sweden 77

2 The public sector's structure and use Public Finances in Sweden 2006 to further changes in the Swedish administrative model. Amongst other things, these changes led to deregulation and liberalisation, as well as privatisation of central and local government activities. Activities in subsectors In contrast to the classification of services and products in terms of function as used in NA, the central government, municipalities and county councils usually show their activities according to different areas of responsibility in the administration. The activities together form activity areas such as, education, health and medical care, care of the elderly, culture and recreation, infrastructure and business activities. Activities of subsectors The central government Legislation, central management and administration Economic policy, tax collection Foreign policy, EU issues Immigrants, refugees, integration Defence Police and judicial system Financial security Higher education, research, study support Cultural issues Infrastructure Labour market Industry, agriculture and forestry Public quasi corporations (Central governmentowned companies) Municipalities Social care Education (preschool, compulsory school, upper secondary school, adult education) Planning and building Environmental and health protection Refuse collection and waste product processing Water and sewage Emergency services, civil defence Libraries Housing Voluntary tasks (recreation and culture, technical service, supply of energy, maintenance of streets) Regional and public transport (Municipally owned companies) County councils Health and medical care Dental care Public transport Regional development Voluntary activities in culture, education, tourism (County council owned companies) Old-age pension system Income pension system + guarantee pension Premium pension system 78 Statistics Sweden

3 Public Finances in Sweden 2006 The public sector's structure and use From the middle of the 1990s, it has become more common for activities to be carried out by privately owned companies of different kinds, whilst financing is still mainly provided through public funds. Public authorities still have the responsibility for ensuring availability to citizens even though activities are purchased from other providers or production is outsourced. Employment in the public sector In Chapter 3, on the size of the public sector, the measure "proportion employed in public authorities" was presented, among others, as a frequently recurring measure. If the term public sector is expanded to also include publicly owned companies, then around 45 per cent of the employed were in the public sector in 1993, whilst the corresponding proportion in 2003 had declined to 37 per cent. The number of employed persons in the public sector including publicly owned companies and quasi corporations was 1.5 million in This is a reduction of 10 per cent since 1993, when the number of employed was 1.7 million. During the same period, the number of employed in the non-public sector increased by nearly a quarter and amounted to 2.6 million in A large part of the increase (8 percentage points) took place in Employed persons in different parts of the public sector Per cent Central government administration 14% Central gvt. owned companies and public quasi corporations 9% Others 1% Local gvt. owned companies 5% Municipalities 55% County councils 16% Source: Statistics Sweden (SCB), Labour market statistics based on administrative sources, RAMS Statistics Sweden 79

4 The public sector's structure and use Public Finances in Sweden 2006 The majority of publicly employed persons are in the municipalities. The number of employed in municipalities and county councils, including local government owned companies, together account for three quarters of the employed in the public sector. The financial status of publicly owned companies The finances and activities of publicly owned companies are reported in general, and in NA, in connection with other market producers since they produce for a market. If we take into account ownership relations, then the public owner the central government, municipality or county council has a vital influence on the activity. For this reason, publicly owned companies can also be said to be a part of the public sector. As previously mentioned NA uses a narrow definition of the public sector by classifying publicly owned companies and utilities under market producers. Publicly owned companies account for quite a significant proportion of GDP. According to RAMS they represent 5 per cent of employment in the country. There are both central government owned companies as well as local government owned companies. Central government owned companies dominate and they account for about two thirds of publicly owned companies in terms of both value-added and employment. The central government owns about 60 companies, of which the largest is Posten (Swedish Postal Services). According to the company's web site, Posten had about 36,000 employees in 2004, of which the majority was in Sweden. There are publicly owned companies both in the county council sector and in the municipal sector. Many of the largest county council owned companies are large hospitals. Amongst local government owned companies, the majority are in energy, transport and real estate. Municipalities and county councils vary in the extent to which they form companies. The municipality of Göteborg owned 66 companies in 2004, whilst a number of municipalities owned no companies at all. Amongst county councils, Stockholm county council owned a total of 18 companies, whilst 3 other county councils owned only 1 transport company each. 80 Statistics Sweden

5 Public Finances in Sweden 2006 The public sector's structure and use The use of public services Public services are available for all, but the extent to which they are used depends on the individual's actual life situation. Public services such as defence and the judicial system, administration and infrastructure may be said to benefit all inhabitants equally and the use of such services is difficult to relate to specific individuals. Individual services, on the other hand, may benefit private individuals to varying degrees during different periods of their life or in connection with different events, such as sickness or unemployment. Similarly individuals, depending on their life situation, make varying use of the redistribution effects of the transfer of resources. In the same way the contributions of inhabitants to the public sector, for example, through payment of taxes and social charges vary during the different stages of life. The figure below illustrates how the more substantial individual services and transfers are distributed on average amongst inhabitants grouped by age. Collective services are not included, neither are services and transfers directed to households, for example, economic assistance and housing allowances. The services and transfers included are: education covering preschool and school-age childcare, compulsory school, upper secondary school, municipal adult education, university and university colleges and also study grants medical care and also sickness benefit, and sickness and activity compensation unemployment benefit and parental allowances care of the elderly and general pensions The contributions of inhabitants to public sector activities here cover direct taxes (income taxes, tax on capital, wealth and property taxes), social charges and also VAT payments, tax on tobacco, alcohol and vehicles. Statistics Sweden 81

6 The public sector's structure and use Public Finances in Sweden 2006 Certain public individual services and transfers and taxes paid etc. Distribution of costs in SEK / inhabitant by age categories. Conditions in Sickness, benefit, sickness, activity unemployment comp. Health and medical care Care of elderly Child allow, pre school, study grants, education General pension Direct taxes VAT, tax on tobacco, alcohol, vehicles Social fees The data is presented in SEK per inhabitant for different age categories. Sources: From Statistics Sweden s income statistics, data on income is obtained for five-year categories from sickness benefit, sickness and activity compensation, employment benefit, child allowance, parental insurance and expenditure in terms of income taxes. Total data from the official statistics on costs for care of the elderly, health and medical care, and education in different forms have been allocated to age categories by statistics on participants/users of different ages. Total data on VAT payments and selective taxes have been allocated to age classes by using data from Statistics Sweden s Household surveys. Total data on social fees have been allocated in accordance with statistics on employment by different age categories. From the figure, it is apparent that the inhabitants making greatest use of welfare services and transfer systems are those in the lower and higher age brackets, whilst the largest contributions to the public sector are made by people of working age. This figure showing conditions at the beginning of 2000 differs very little from the situation of 30 years ago. 82 Statistics Sweden

7 Public Finances in Sweden 2006 The public sector's structure and use The tax and transfer systems and different forms of publicly financed activities thus redistribute economic resources in society. This redistribution takes place not only from one individual to another, but also from one and the same individual over a life cycle. According to the analyses made by the Long-term Investigation 2003 (Långtidsutredningen SOU 2003:110), slightly more than 80 per cent of all transfers and subsidies are self-financed, that is they are paid out of the individual's own taxes and fees at some point during their life. Only 18 per cent of the redistribution which takes place via taxes and fees and public consumption and transfers is a genuine redistribution between individuals. Related to this section are the following: Table 3. Employment by sector according to RAMS and NA Table 4. Public sector expenditure, consolidated Statistics Sweden 83

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