There are important lessons to take from Sweden. Ed Miliband must take the right ones, says Jonathan Todd

Just as David Cameron jetted off to India during last month’s parliamentary recess, Ed Miliband was making his way to Sweden. The destinations were deliberately chosen: for each leader, each country represents something about where he sees Britain and where he wants to take it. Why, asks Cameron, must the UK rid itself of costly European Union regulation, reform welfare and improve schools? Because countries like India are bringing vast armies of cheap, motivated and increasingly well-educated workers to the ‘global race’. We must reduce our labour costs by trimming regulation and welfare, he argues.

In contrast, Miliband rejects this race to the bottom. He claims to be less interested in Sweden’s ‘high taxes’ – it is ‘fair taxation’ he wants for the UK – than in the Swedish institutions that have allowed it to be an open, trading country, while securing more equal labour market outcomes than in the UK. It is a laboratory of predistribution in the minds of those who seek a more equal Britain in fiscally constrained times. As TUC economist Duncan Weldon has written: ‘What is really required is not just changes to our taxation system or spending priorities but a fundamental redesign of our national business model … The UK requires not just an immediate boost to demand but also fundamental changes to banking, industrial policy, corporate governance, skills policy.’ It is in these senses that Britain under Miliband would look more like Sweden or ‘a mainstream north European economy’, as the Fabian Society recently put it.

The rhetorical foundation of this transition – ‘One Nation Labour’ – may, ultimately, also take more from Per Albin Hansson, the 1920s Swedish social democratic leader, than Benjamin Disraeli. As Swedish columnist Katrine Kielos has argued, like Miliband, Hansson inverted a previously rightwing term – the people’s home – to associate it with leftwing notions like belonging. Miliband’s refashioned patriotism now claims something similar to what Hansson claimed in 1921: ‘There is no more patriotic party than [the social democrats] since the most patriotic act is to create a land in which all feel at home.’

Reframing is one thing. Fundamentals are quite another. While the more Swedish Britain that Miliband seeks may be more about institutional reform than the traditional macroeconomic levers of tax and spend, we might ask: how viable is this reform as a policy package in post-2015 Britain? And how politically sellable is it in a Britain in which Labour continues to be associated with profligacy?

Miliband’s policies may be less about tax and spend than might be expected but the political terrain upon which he will seek a mandate for them will be about little else. And what the public think about the government’s cuts is somewhat contradictory: according to YouGov, while 60 per cent think they are unfair, almost the same number think they are necessary. If something is necessary, can it really be unfair?

How the conflict between necessity and unfairness resolves itself will be vital to the next election. It remains worrying that 10 per cent more voters blame the last Labour government for the cuts than the current government. While voters may be more convinced by Labour on fairness, doubts about its capacity to do the necessary persist.

If not properly understood, the Swedish analogy could open Labour to attack as a tax-and-spend party. It is also important, though, to understand Sweden is not what it once was; in fact, it is what it has become that could solve Miliband’s political problem and serve as a template for the future.

Miliband is right to take rhetorical inspiration from Hansson, and Weldon justifiably lauds the Swedish institutions that make real predistribution and long-termism. But the government’s share of GDP in Sweden has dropped by 18 percentage points since the 1990s. Public sector reform – including a universal system of school vouchers – has delivered excellent services on a reduced share of national wealth. Swedes responded to their own fiscal crunch in the 1990s with bold, far-sighted innovation. Their budget deficit is now a puny 0.3 per cent of GDP and their public services are popular because they are fantastic.

If the key political characteristic that Labour must exhibit in coming years is the strength to take necessary decisions, then the critical policy lesson is that improving social outcomes does not depend upon an ever-bigger state. The new Swedish model could provide this, but the challenges it presents are those of thoroughgoing institutional reform, which no sacred cow should be allowed to frustrate. In recognising that traditional, high-spending social democracy was incompatible with its 1990s fiscal crisis, Sweden was remade through such reform.

As much as anything else, let us hope that Miliband picked this up in Sweden and succeeds in demonstrating Labour’s commitment to fiscal responsibility. Otherwise the possibility increases that Cameron will create a very different kind of Britain from that which Miliband hopes for.

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Jonathan Todd is economic columnist for Labour Uncut

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Photo: Florian Prischl