Swedish conservatives bucked the recession by lowering taxes – and won re-election

Fraser Nelson reviews the week in politics

For decades, conservatives have played an important role in Swedish politics: they are there to be defeated. They advocate lower taxes, and are duly accused of planning savage cuts. So the voters traditionally stick with the Social Democrats who have held power for seven of the last eight decades. Every other decade Swedish conservatives come on for some light entertainment, before being booted out after a term. Never in modern Swedish history has a conservative prime minister been spared this fate. Until now.

This week Fredrik Reinfeldt, a bald and deeply dull 45-year-old who communicates with David Cameron by text message, is celebrating the first re-election in history of his party, the Moderaterna. He is also celebrating the success of an extraordinary experiment. His response to the recession was to cut taxes, a move his critics said the country could not afford. The European Commission warned him it would end in tears. But instead, the lower taxes were a spur to growth and Sweden now has the fastest-growing economy in the Western world.

When elected four years ago, leading a four-party coalition, Reinfeldt had a striking slogan. ‘We are the new workers’ party,’ he said, meaning he would cut taxes for those in employment, but not for those on benefits. When faced with protests about how the poorest would be paying a higher marginal tax rate, he appealed to voters’ innate sense of fairness – and resentment at the high level of welfare dependency. At every stage, his ministers would explain the basics of low-tax economics. Cut tax on wages, and you increase the incentive to work. ‘This will increase employment,’ Reinfeldt said. ‘Permanently.’

Not that he was believed – at first, anyway.