PUBLIC SECTOR PRICE CEILINGS

One of the - in my view - iron laws of public policy is that if the state provides a service, for which the citizen pays a price, and that price is legally capped, then the price will very quickly end up at that maximum. A good example was university tuition fees in the U.K., which were initially capped at £3,000 pa when first introduced, and then raised to £9,000 pa. No university today charges less than that.

So too in Denmark. Local authorities have to provide for citizens who can't look after themselves, either because they are old or because they are handicapped. But citizens have to make a contribution if they want full board. On 1 July 2009 that contribution was capped at kr.3,000 (roughly £300) a month, cheap by British standards. The maximum has since been raised to take account of inflation and today stands at kr.3,374.

Local authorities may not charge more than the actual cost of providing the service. But that has never really been the issue; high Danish wages will quickly make that irrelevant. The more pertinent question is whether they subsidise the service, so that the contribution is below the permitted maximum. Surprise, surprise, hardly any do.

Walter Blotscher