Response to interpellation 2025/26:35 on the economic conditions of municipalities and regions
Translated from Swedish by AI; the translation may contain errors. The Swedish text is the original.
Summary AI, written in advance
KD argues that the government has successfully lowered inflation, which has given the municipal sector increased room for maneuver 1. KD emphasizes that municipalities and regions are responsible for their own finances 1 2 and wants to create incentives to avoid tax increases 3. KD believes that better public procurement, digitalization, and AI services are solutions to lower costs 3. KD is convinced that the budget strengthens growth 4 and wants to invest in research, education, and integration policy 4. S argues that the economy is in a recession and that municipalities are forced into savings due to the government's policy 5. S claims that municipalities have lost 27 billion due to inflation 5. S argues that the investigation into the right of taxation is an infringement on local self-government 6. S believes that the government has not done enough for growth 7 and advocates for increased child and study grants 7.
Written by AI in advance and may contain errors. The numbers lead to the speech a statement builds on; check against the text below.
Civilministern Erik Slottner (KD)
Mr. Speaker! Marie Olsson has asked the Minister for Finance what advice she has for municipalities and regions that are forced to make large savings as a result of low growth and reduced tax revenues. She has also asked whether the Minister for Finance intends to take any measures to avoid these savings. The interpellation has been handed over to me.
The government has carried out successful work to bring down the inflation rate, which, for example, means reduced costs of an estimated 50 billion kronor for pensions in the municipal sector. This contributes to increased economic room for maneuver. The government's forecasts point to strengthened tax revenues for municipalities and regions in 2026 and 2027 as the economy strengthens.
Municipalities and regions are responsible for their own finances. Regardless of the economic situation a municipality or region finds itself in, it is important for them, as well as for all operations, that there is a long-term work of improvement and efficiency. The Government has taken several measures to strengthen efficiency and capacity in the municipal sector in various ways.
The government's policy aims to create more jobs and increase employment and economic growth. This benefits the economic conditions of the municipalities and regions.
Marie Olsson (S)
Mr. Speaker! I would like to begin by thanking the Minister for the answer to my interpellation.
Sweden's economy is still in a recession. The rain is still falling heavily. Unemployment remains high, and people continue to have difficulty managing their finances. Welfare faces major challenges. Savings within healthcare and school risk worsening it further. It is clear that Sweden's economy has performed much worse than what should ever be acceptable.
Since I submitted this interpellation – which I actually did over a month ago, on October 1 – SKR (Sveriges Kommuner och Regioner) has come up with a new forecast for the tax base that looks somewhat better than before. There is an improvement in the tax base this year, but we have three lost years with this government behind us.
A weak economic development means that the tax base increases less than the historical average. The forecast also indicates that the tax base growth going forward is weaker than the average. A small part of the loss over recent years, when the government pursued a policy that placed us at the bottom of the EU in terms of economic growth, is now being recovered, according to the latest forecast – but far from everything. It is still a long way to the economic recovery that would be needed.
Municipalities and regions do not really see the growth the government counted on when they determined what fiscal space exists for the state. Municipalities and regions are forced into savings because the government once again, in its budget, chooses to prioritize away the large needs within welfare, such as elderly care. The government's forecasts are more positive than most others when it comes to how they view the economic development.
Mr. Speaker! Without the inflation of recent years, the tax revenues of municipalities and regions would have been 27 billion higher this year. They have therefore lost 27 billion due to the high inflation – billions for which they have received no compensation from the government. Even though the Minister now responds that there is an increased economic room for maneuver for municipalities and regions, the fact remains that inflation until now has caused them to lose 27 billion.
Growth is still weak, unemployment is high, and the uncertainty in the world around us is great. In municipalities and regions, a transition and adaptation are underway to meet the new demographic conditions and the residents' changed needs for welfare. The challenges are great. In just the last few years, approximately 500 preschool units have been closed. This is largely due to smaller cohorts of children. At the same time, operations need to be developed. The need for elderly care will increase. The requirements from the state will not decrease during this time.
Based on this, I wonder if the Minister sees any need for further measures to support municipalities and regions in the challenges they face in meeting their commitments within the welfare sector. I hear nothing in the Minister's answer regarding concrete proposals for measures to provide municipalities and regions with the support they would need.
Civilministern Erik Slottner (KD)
Mr. Speaker! It may be time to remind Marie Olsson that inflation was over 10 percent when we took over government power. It did not occur under this government. That is actually how it sounded in the post, so it must be corrected.
In the first two budgets, we truly prioritized welfare because we saw how hard the municipal sector was hit by the high inflation. We did not want to go too far with an expansive fiscal policy and then fail in the fight against inflation. That work has been successful. Now we have brought down inflation to very low levels, which everyone benefits from. But above all, the municipal sector is the big winner in this.
Marie Olsson also said that the government does not compensate the municipalities for the rising inflation. That is also not correct. If we look at both general and targeted government grants – I should have had exact figures for this debate – it is up to 50 billion kronor.
We have strengthened the municipal sector through various general and targeted government grants, so the government has indeed invested money in welfare. One might think it is too little. I accept that. But I think it is an unfair criticism to say that the government has not compensated the municipalities at all, because we have done so. But the most important measure was to bring down inflation. Have we succeeded with that? Let us hope that it stays down now, because it has meant 50 billion for the municipal and regional sector.
The number of hours worked is increasing and growth is picking up. It is entirely correct that Sweden has had sluggish, if not low, growth. We share this with many other European countries. But we see very positive signs of how the economy is starting to pick up, growth is increasing and the number of hours worked will increase. This is predicted by various institutes to lead to the tax revenues for the municipalities increasing significantly more than they did during the previous year.
The situation is tough for many municipalities, but the toughest years are behind them. Many municipalities have balanced their budgets. This is thanks to them having built up result equalization reserves, for which we are now creating more flexible regulations so that surpluses in individual years can be used in years when there are deficits or when major investments are made.
Marie Olsson asks if I consider that there is an increased need for more interventions. I absolutely believe that there is. There were no increases in the general state grants in this budget, but within school, psychiatry, and health and medical care, there were many targeted state grants that strengthened the municipal sector, not least in the work for women's health and with shortening the care queues for cancer care and child and adolescent psychiatry. These were very important investments. We must remember that even a targeted state grant strengthens the municipalities' finances, even if it looks a bit different than if the general grant is increased.
I could also mention the efficiency delegation on the regional side. A quarter of a billion per year over a period of six years shall be distributed to regions that want to make investments that will lower the ongoing costs over time. However, there will be a cost hump at the beginning. I believe we need to work that way. Overall, the public sector needs to become much better at being well-managed and efficient and getting more quality for every tax krona that is put in. It will be absolutely necessary moving forward with the demographic change we are facing.
I must mention AI. The digitalization strategy the government presented before the summer is of great help to the municipalities regarding the broad introduction and scaling up of many digital technologies.
When it comes to public procurement, one must use the action plan that the government has decided upon. A saving of a few percent amounts to many billions for the municipal sector, and that is much more important than the increases we make in every budget.
Marie Olsson (S)
Mr. Speaker! First and foremost, the investment in women's health as a whole is in fact a reduction compared to last year. There will be less money for women's healthcare next year than there was this year. That is a fact.
For Dalarna, where I come from, the low growth that has occurred means reduced revenues because fewer people can pay tax, even though the forecast looks somewhat better now. I have two concrete examples of this. One is Älvdalen municipality, and the other is Orsa municipality.
Älvdalen needs to save 13 million next year. Orsa needs to save 14 million. That might not sound like much money, but these are quite small municipalities with around 7,000 inhabitants. Since I am from Orsa myself, I know that there is no abundance of voluntary activities that one can just remove and save money on without problems.
What we are looking at now is reduced opening hours at the library, a reduction in music education at the music school, and to a considerable extent, reduced activities at the labor market unit. This is happening at the same time as activity requirements are being introduced for those who receive social assistance, which will become problematic. None of this is something the municipality wants to do, but it is something that one is forced to do in order to get a budget into balance. The money simply does not suffice.
Neither Älvdalen nor Orsa see any reform room at all, which the government does in its budget. Municipalities and regions cannot borrow for a reform room that the government can, they must balance a budget. Preferably, it should be done with a surplus so that there is a margin for unforeseen events.
For 2025, a weakly positive aggregate result is expected for the regions, but half of the regions forecast a deficit. In recent years, many regions have had difficulty balancing the economy, and some have raised the tax rate to meet the cost developments. Furthermore, during the two tough years with weak results that have occurred, many regions' own capital has been eroded. The conditions for restoration vary between the regions, but the cost development within health and medical care is a major challenge.
What municipalities and regions can do to meet their commitments is to raise the tax. If we look at the whole thing cleared of tax shifts, we see that there have been a total of 225 tax changes over the last ten years. Of those, 55 percent have been increases. The regions have raised the tax rate by 34 öre since 2015. During that period, no region has lowered the tax, regardless of government.
At the same time as municipalities and regions face major challenges, the government is appointing an inquiry to review how to prevent municipalities and regions from raising taxes. To restrict the municipal right of taxation is not only a limitation of local self-government, but it is also an interference in local economic responsibility. The elected officials of the municipalities and regions are directly accountable to their residents both for the results of the operations and for the tax that finances them.
The Minister said in his answer that it is the regions and municipalities themselves that are responsible for their finances. I completely agree with that. But given that an inquiry has nevertheless been commissioned, I want to ask the Minister how they can be expected to take that responsibility fully if one chooses to restrict the municipal and regional right of disposal when it comes to tax rates.
Civilministern Erik Slottner (KD)
Madam Speaker! We can still remind that a region is lowering taxes next year. This is being done by the Social Democrats in Region Stockholm.
(MARIE OLSSON (S): I spoke until 2025.)
I understood that it was a different year. I just wanted to remind that even the Social Democrats, in their own way, are lowering taxes. It is well nice that it can happen sometime!
The government does not want the tax cuts we are now making for households to be undermined by municipal tax increases. We think it is very unfortunate. During the 2000s, the municipal tax increases correspond to approximately 56 billion. That is a lot of money that could have remained with the households if the increases had been avoided. I do not question that there are examples and cases where one needs to raise the tax. But that is not every time.
We have no plans to remove the municipal right to tax. It is the municipalities that raise the tax. But we have commissioned an investigator to see if one can create incentives to take other measures than raising the tax. Can we create incentives to lower the tax? That is what the investigator Annika Wallenskog will report back to the government on February 27 next year. I do not want to anticipate the investigation now and say exactly how it will look. A tax brake can look in many different ways.
I believe that the Social Democrats introduced a tax brake no fewer than three times during the 90s. So, it is not a completely foreign bird for the Social Democrats when it comes to a municipal tax brake.
Otherwise, I said most of what I wanted to say in my previous contribution. I think the government prioritized welfare and the municipal sector in the first two budgets when the economic situation was toughest for the municipal sector. When we saw that the forecasts improved – largely thanks to our success in fighting inflation – the support shifted more towards households to stimulate the economy and increase the number of hours worked.
I hope and believe that not least the latest budget, which was and perhaps for the first time this mandate period could be expansive, will have the effect that growth increases, that unemployment falls and that the number of hours worked increases. We really hope for this, because it will be very important for the municipal sector.
From this rostrum, it is often said that one wants the general government grant to be increased by 5 or 10 billion more than what the government does. But we must remember that every tenth of the inflation plays a huge role. Every reduction of unemployment by a tenth plays a huge role for the billions to the municipal sector.
There was something else I intended to say, but I lost my train of thought. I touched upon growth, hours worked, and fighting inflation, but there was something more I was going to say.
We should discuss all of this much more. It is easy for one in politics to only focus on a few per mille in the increase of state grants or not. I think sometimes it is a pity, because that is not what is important for the municipal sector.
Now I remembered what I was going to say. One could, for example, improve public procurement. Today we procure goods and services for over 1,000 billion. There are municipalities and agencies that work very strategically with procurement. By category-managing their procurements, they have been able to lower their costs by up to 10 percent. Perhaps 10 percent is too much to hope for, but let us say 5 percent. That would mean 50 billion in reduced costs in public procurement for Kommunsverige.
Regarding digitalization, we also see how different AI services can free up time, increase quality, and reduce the need for man-hours. We must become much better at working with this, because it is the long-term recipe for the municipalities to manage the very tough challenges they face.
Marie Olsson (S)
Madam Speaker! I hope the Minister has noticed that I have not spoken about increased state grants to municipalities and regions, but I have spoken about growth and the importance of growth. That has been the big problem during these years. The Government has not done enough for growth to be so great that municipalities and regions can manage their finances.
As I said before, municipalities and regions cannot borrow for tax cuts, they must have a balanced budget. Preferably, they should also have a surplus of 1.5–2 percent as a goal. They have no room for reform beyond the revenue they have.
Sveriges Kommuner och Regioner has stated that the government's budget measures are having an effect on consumption but that other measures could have provided a better effect. What is needed is an increase in Swedish growth, as we are largely dependent on domestic demand. And it is the households that constitute the engine for growth.
Speaking of growth, we Social Democrats have therefore included proposals in our budget that would have greater effects on consumption and growth. It would have a significantly greater effect than tax cuts for those who earn the most. Our investments are about strengthening household finances, including through increased child and student grants, increased housing supplements for the families with children who have it toughest, and the abolition of the care deduction. These are investments in ordinary people who consume the money they receive additionally instead of tax cuts for those who already earn a lot. There, there is a greater risk that the money is saved instead of growth increasing.
In conclusion, I have a hope that the Minister and the government take the challenges of municipalities and regions seriously. Stop mocking the municipalities and regions that are forced to raise taxes to meet their commitments within welfare! Tax increases are not something one does lightly.
Civilministern Erik Slottner (KD)
Madam Speaker! Marie Olsson and I completely agree that growth is important. I will give Olsson credit for the fact that it was actually growth that was at issue in this debate; it is rarely that the Social Democrats talk growth. Very often it is state subsidies that are up in this debate, so I did go back into old tracks – well, that is what Marie Olsson's benchmates here in the chamber think.
But we are convinced that the budget we are presenting now will strengthen growth. I believe that one makes a mistake if one thinks that it is only increased consumption that will give increased growth ahead. Then one is dangerously mistaken. We also need to work with structural measures. We need, not least, to work with integration policy, because we know that a very large proportion of the unemployed, not least the long-term unemployed, are born in another country. Here we need to work with integration policy, where I think we have many good proposals. We also make many consumption-enhancing efforts but also structural measures. It should pay to work. The drivers to move from benefits to work shall become greater. All this in a compote plays a role for growth.
We are also making a historically large investment in research and education – not to be forgotten in this context either.
We believe – and the forecasts also show – that this will increase growth. It will also be very significant for the municipal sector. But those who live [through it] will see, quite simply.
Source: The Swedish Parliament. The speeches come from the open data of the Riksdag, translated into English by AI, which may contain errors.