After a fling with the right, Swedes likely to renew their vows with the left on Sunday amid anger at the role of the private sector in public services

It might not appear the most obvious place to launch an election campaign. Most of those present are teenagers not old enough to vote, slouching on beanbags, texting or nodding their heads to the beat on their headphones.

In a classroom plastered with posters of boybands, trainee hairdressers barely look up from their model wigs as Stefan Löfven, a Social Democrat who wants to be Sweden's next prime minister, whizzes through the room.

Yet in many ways Stockholm's Grillska high school is the perfect launchpad for the centre-left party to orchestrate a political comeback after eight years out of government, the longest spell in its history. The school encapsulates Sweden's much-admired public-private approach to solving the social-budgetary conundrums facing European economies – and its shortcomings.

Formerly called John Bauergymnasiet, Grillska used to be one of Sweden's publicly funded but privately run friskolor (free schools) until its owner, the Danish private equity company Axcel, filed for bankruptcy last April.

Since then, the school has been managed – and improved – by Stockholm's Stadsmissionen, a non-profit charity. But the John Bauer scandal has made many Swedes question the pro-privatisation policies of the government, led by the Moderate party's Fredrik Reinfeldt.

The famed Nordic model, mixing universal welfare and strong unions with an open economy and free trade, has long been admired by European neighbours. Sweden's cities regularly top quality of life surveys, and its benefits system is progressive and inclusive. Sweden was the first country to introduce a gender-neutral parental leave allowance, and up to 90% of Swedish fathers now take time off to look after their babies. The World Economic Forum lists Sweden as one of the countries with the narrowest gender gaps in the world. Its economy recovered smartly from recession, and it has accepted more asylum seekers per capita than any other European country – and attitudes towards immigration have also remained more positive than anywhere else on the continent.

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Its free schools have been championed by British politicians as the model to emulate, and when the banking crisis struck, it was Sweden that offered answers, having resolved its own debt mess a generation earlier. It is the only EU country that has lower public debt now than in 2006.

But with an election on Sunday, many presumptions are being challenged. Over the past three years, cracks have shown in the Nordic model, most notably with last year's riots in the suburbs of Malmö and Stockholm, and the rise of the far-right Sweden Democrats, which is polling at almost 10%. Income gaps have increased by a third, more than in any other OECD country, and unemployment benefit has fallen below the European average.

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A series of scandals has made many Swedes question the private sector's role in public services. Axcel was accused of trying to maximise profits by saving on teachers' wages and lowering the teacher-student ratio below the national average; the privately run Hälsans chain of preschools was reported to serve its pupils crispbread and water for lunch, having budgeted only nine kronor (87p) a student for food.

No other state in Europe had been as generous in allowing the private sector free access to its pupils. The proportion of employees in privately provided services rose from 5% in 1993 to 23% in 2011.

"Overnight, the debate changed," said Roger Jakobsson, Grillska's head of education. "For years, people had been accusing schools run by private equity of pocketing the state's money and putting it into their offshore bank accounts. But now it looked like these companies weren't even capable of running a business properly."

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The education changes ushered in by the conservative government in 1992 promised to improve the quality of teaching in Swedish schools. Instead, the Programme for International Student Assessment saw the homeland of the Nobel prize drop below the OECD average in maths, reading comprehension, natural science and problem solving. Grade inflation, meanwhile, was rampant.

The care sector also suffered a privatisation scandal in 2011, when the Dagens Nyheter newspaper reported that an elderly care centre in Koppargården, run by the private company Carema, was catastrophically neglecting its customers, allegedly weighing their diapers to see if they could be used for longer, thus ensuring maximum usage and lower costs.

In his book Folk dör här (People Die Here), the journalist Thord Eriksson pointed out that weighing diapers is common practice across the sector, arguing that the care sector's shortcomings had little to do with private or public ownership. Yet in the public eye, the narrative had changed.

Complaints about poor service and frequent delays on the high-speed train between Malmö and Stockholm also swung the mood against rail privatisation of the railways. How was it, some asked, that information centres were closing at train stations while Sweden's popular, 100% state-owned Systembolaget alcohol stores could afford staff who advised on which wine went best with reindeer stew?

The government is most likely to bear the brunt of the resentment. The rise of the Moderate party had rested on the promise of a slimmed-down version of the Nordic model, with added tax cuts. "All Swedes are Volvo cars, in a sense," said Moderate politician Anna Kinberg Batra, on the day her party launched their manifesto at Finnboda shipyard in suburban Nacka. "We are stable, some would say boring. In my party we are all proud of the fact that Sweden is known for egalitarian qualities. But we are keen to combine the Volvo with free trade and competition."

Under prime minister Reinfeldt, Sweden for the first time discovered an appetite for tax cuts. Wealth tax, income tax and corporate tax were slashed. Tax breaks for domestic services such as cleaning or babysitting (RUT) and relief on household renovations (ROT) have been popular with the middle classes. At Pressbyrån newsagents, there are now shelves brimming with interior design magazines. Moderate party posters warn of a Social Democrat victory with the slogan "RIP RUT".

But surveys show that Swedes' willingness to pay higher taxes has risen recently. As columnist Fredrik Virtanen said in Aftonbladet newspaper: "Taxes are the price we pay for civilisation. Not only is it cool to pay taxes, it's sexy."

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Even Reinfeldt has bowed to the polls and vowed there would not be further tax cuts until 2018. Finance minister Anders Borg is still popular, and Sweden's public debt, at 40% of GDP, is half that of Germany, but unemployment remains a problem in spite of liberal reforms in the labour market.

"The Moderates and their allies have gradually lost the argument about the future," said Eric Sundström, political editor of Dagens Arena website. "They have failed to recognise how even the middle class is upset with the perceived general decline of schools and welfare services."

Facing defeat on Sunday, Reinfeldt recently broke with Sweden's pro-immigration consensus, saying the cost of more asylum seekers would leave little room for spending more on jobs and schools. Many saw the comments as an ill-judged nod to the Sweden Democrats, who have until now been sidelined by the other parties.

"Sweden is still different to the rest of Europe in that respect," said Sundström. "If any mainstream party endorses the Swedish Democrats' anti-immigration message, there would be an outcry even from the rightwing tabloids."

Yet whether the Social Democrats will automatically profit from the swing of public opinion is far from clear. While the pendulum has swung, it may have swung too far left for Löfven's Social Democrats. Many of the educational reforms being scrutinised were implemented when the centre-left was last in power.

"The Social Democrats have spent 30 years trying to learn to sail with the wind blowing from the right," said Daniel Suhonen, a political journalist with close connections to the Social Democrats. "Now the wind has turned, and they don't have their sails in the right position."

Unlike the Greens and the Left party, they have been reluctant to call for a ban on for-profit providers in the education sector. Instead, the Social Democrats insist on more quality controls: companies keen to run free schools will have to open up their books and prove that they can provide financial stability for ten years, as well as committing to a minimum student-teacher ratio.

Retaining the basic principle of free school model, at least, has plenty of support among the education establishment. Grillska's head of education Jakobsson, who used to work for private company Academedia before switching to the non-profit sector, questioned whether there would be enough charities like his to take over if for-profit providers were banned: "If you closed down all the free schools now, it wouldn't work. You would get a revolution among pupils and parents, even here in Sweden." Nearly four out of 10 upper secondary schools are now privately owned.

The direct link between Sweden's drop in education rankings and the introduction of the free school model, too, remains disputed. Pisa's own in-depth study of the country's result maintains that "the percentage of students enrolled in private schools is not related to a system's overall performance". Unlike private schools in Britain, Sweden's free schools remain non-fee-paying, and are only allowed to allocate spaces on a first-come, first-served basis.

But the Social Democrats' suggestions on how to restrain the private sector also have their critics. Some of the free schools with the best results in Sweden, such as Academedia's Vittra school in Helsingborg, have pioneered communal teaching methods that involve a much higher student-teacher ratio than those demanded by politicians.

Calling for more quality controls and oversight, as both the Moderate party and the Social Democrats have done in response to the Pisa scandal, could rob the current system of its one strength: Swedish schools, feted abroad for their autonomy, could become a lot more un-free.

At worst, the Social Democrats could end up neither solving the problem nor profiting from the scandal politically. Having announced a 35% share of the vote as its goal, the party is polling at 30%, the same result as at the 2010 election, the worst performance in its history.

Löfven [umlaut on o], a former welder with a boxer's nose, faces the difficult challenge of trying to win back Social Democrat voters without looking like what Swedes call a betongsosse, or concrete socialist of the olden days.

The manifesto handed out at rallies, promising investments of up to 40bn kronor (£3.5bn), is entitled Dear Future and illustrated with photographs of children with safety helmets running through open fields; the Social Democrats, it insists, offer safety and freedom.

Yet critics within the party suggest that for every former voter the party has won back, it has lost supporters among the young. At Norrköping, the second stop for Stefan Löfven's campaign bus after the manifesto launch, there was a noticeable lack of energy in the half-empty university lecture hall where the candidate gave his speech, while students chatted in the crowded cafe next door.

The Left party and the Greens are set to make gains on the 2010 election, while some polls have the Feminist party, run by the former Left party leader Gudrun Schyman, mounting the 4% hurdle to enter parliament for the first time.

Stockholm, a Social Democrat stronghold, may for the first time see the Greens emerge as the strongest party.

The collapse of the centre-right alliance is still likely to give the Social Democrats victory on Sunday. They will face the task of assembling and keeping together a rickety alliance of their own. For Sweden, the concrete era seems to have passed for good – the future will look more like politics.

The election in brief



Seven million voters are eligible for Sunday's election to choose the 349 MPs. A centre-right alliance led by the Moderate party is under pressure to retain power, which it has held since 2006. Latest polls show the grouping trailing the centre-left alliance by about eight percentage points, though it is not certain that a red-green coalition has the numbers for an absolute majority.

Another factor to watch is the new Feminist Initiative party which, if it enters parliament, would be the first feminist party to hold seats in a major national parliament within the EU. Sweden already has a higher proportion of women in parliament than any other EU country. Alberto Nardelli