JHL (31.03.2015 - Heikki Jokinen) The privatization, or outsourcing, of municipal services in Finland has not exactly been a success story. Many municipalities are either considering reclaiming services which have previously been outsourced or have already done so.
The trend to reclaim (i.e. remunicipalise) previously outsourced services results from a number of reasons, such as high costs, doubts about quality, possible inferior terms of employment for employees, lack of democratic control and prioritising profits over the needs of citizens while ignoring the question of tax avoidance concerning some of the private service providers.
Outsourcing has been most prevalent in the fields of health and social services. One of the reasons for this is the social welfare and health care reform currently under discussion in Finland. The idea behind the reform is to create a novel service structure for Finland's public social welfare and health services.
As the new structure has not yet been clearly formulated, some municipalities have rushed into making agreements with private service providers in order to guarantee local services.
In 2013, the Social Barometer carried out a survey on how outsourcing is working at the municipal level. According to the survey, only 12 per cent of social sector directors and 14 per cent of health care centre directors believed that costs have been reduced due to the use of private services.
Moreover, some 13 per cent answered that outsourced social and health services were initially offering lower cost options but later raised the cost of services.
No more rental doctors
Particularly in recent years, the number of hired doctors in municipalities has been falling. It is not only a question of money, even though these services are more expensive than directly employed municipal staff and there might be hidden costs involved. Ever changing doctors seems to order more tests than doctors who are more familiar with their patients.
In addition to cost-related concerns, there is the patients' point of view to consider: it is more reassuring to visit the same doctor than a new one every time.
The Hospital District of Helsinki and Uusimaa, which is is a joint authority formed by 24 municipalities, stopped using rented doctors at the beginning of this year. The decision was motivated by the high price and problems in developing local health clinics.
Winning tender without beds
European Union directives and the Finnish Public Procurement Act lay down very detailed guidelines as to how public procurement procedures should be conducted. This makes the outsourcing process tedious and vulnerable, procedural complaints are common and take time.
In Kitee, the municipality issued a tender for service homes for elderly people. Attendo won the tender and, consequently, replaced the previous service provider Mehiläinen. The only problem was that Attendo did not actually have any places for the 40 elderly people.
However, their bid price was the lowest on offer and the municipal decision makers defended their decision based on the price.
Money flight to tax havens
Another aspect in this debate concerns the reputation of some of the companies providing welfare and health services. The key question is whether Finnish taxpayers' money for health care ends up in tax havens. Some of the major companies have avoided paying practically any corporate tax to Finland due to complicated ownership structures and international money transfers.
The storm around the case surrounding the private public health care services provider Mehiläinen's tax avoidance through company internal loans in 2013 sparked a debate on the need for better legislation. From the beginning of last year, the law now restricts a company's right to deduct interest payments from their corporate tax.