Swedish parliament debates limiting PE investments

The Social Democrats (S) - the main opposition party in Sweden - have launched a debate in parliament over private equity ownership of tax-funded welfare companies.

The opposition argued for a cap on profit payouts from companies receiving public funding, and to stop profits from being channelled into tax havens. Jennie Nilsson (S), deputy chair of the parliamentary tax committee, questioned what added value private equity houses brings to companies operating in the welfare sector, and suggested cooperative ownership as a more appropriate form of governance.

Nilsson argued that the profit-maximising and, according to her, short-term nature of private equity ownership presents a danger to the quality of welfare services. She accused the industry of deriving profits from cost-cutting measures rather than good organisation.

The Moderate (M) minister for finance, Anders Borg, highlighted the increased consumer choice; notably, a boom in independent schools, which has offered students a number of alternatives to the previously almost entirely state-run education system. He suggested that profit-driven companies produce services more efficiently.

In reply to the opposition's criticism of tax shields, Borg reiterated the government's intention to crack down on these by closing externally provided, tax-deductible shareholder loans.

Nonetheless, Nilsson pointed to the media storm of last autumn, and brought Carema Care into the debate to accentuate what she saw as a profit-motivated drop in quality of services. Triton and KKR-held Carema was reported to be pushing for aggressive cost-cutting efforts, whilst running a generous bonus scheme for senior management.

The coalition responded by citing various authorities that regulate the sector, and hinted it would strengthen regulation in the future. The liberal party's Alan Widman questioned the ability to tackle the issues as the leveraged buyout is not a legally defined ownership form and is thus very difficult to legislate against.

Whereas the centre-left opposition appeared keen to regulate private equity directly, the centre-right coalition leaned towards regulation of operations in target sectors. Borg claimed that the current government holds a pragmatic view towards the welfare state. He suggested regulation to be well-defined and supporting a balance between private, state, and cooperative ownership forms.

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• Topics
• Nordics
• Regulation
• Sweden