25th SESSION

Strasbourg, 29-31 October 2013

CG25(5)5PROV AMDT

28 October 2013

AMENDMENTS

Local and regional authorities
responding to the economic crisis

Current Affairs Committee

Rapporteurs: Svetlana ORLOVA, Russian Federation (R, EPP/CCE)

    Barbara TOCE, Italy (L, SOC1)

Draft resolution (for vote) AMENDMENTS 1-4 3

Draft recommendation (for vote) 8

Summary

The financial and economic crisis has had a particularly severe dual impact on local and regional authorities as they have had to face substantial decreases in their budgets – due to a shrinking revenue base caused by the economic downturn, cuts in budgetary transfers from national governments, decreasing local tax authority and the need to manage sometimes excessive debt burden – and, at the same time, an obligation to increase social assistance to citizens in economic distress. The report examines the current situation, takes stock of existing local and regional responses to the crisis, and puts forward recommendations to both national governments and local and regional authorities for further strategies and policy measures.

[…..]

The report calls for local and regional authorities to be recognised as fully-fledged stakeholders in dealing with the crisis, and for the establishment of regular consultations between them and national governments to ensure coherent development policies and measures in response to the crisis, focusing on reviving investment to stimulate local and regional economic growth, innovation and employment. The report recommends greater decentralisation of competences and fiscal devolution to the local and regional levels, in particular in terms of budgetary autonomy and local tax authority, reinforcement of equalisation mechanisms, revision of government financing to ensure a steady level of transfers to local and regional levels, and exemption of local and regional social services from fiscal consolidation programmes, among others. The report urges that governments stop using the crisis as an excuse for recentralisation and forced mergers of local and regional authorities, and calls for increasing citizen participation in decision making at local and regional levels.

Specific recommendations to local and regional authorities concern local expenditure management, revival of investment, promotion of entrepreneurship and business development, rationalisation of service networks and improvement of service cost efficiency, greater transparency in governance (in particular in public procurement), social assistance management (in particular through partnership with the voluntary sector), development of inter-municipal and inter-regional co-operation to benefit from economies of scale, and the building of partnerships with both the private and non-governmental sectors.

DRAFT RESOLUTION2

1. The financial and economic crisis which hit the world in 2008 has had a particularly severe impact on local and regional authorities as they have had to face at the same time a shrinking revenue base due to the economic downturn, cuts in budgetary transfers from national governments, decreasing local tax authority, mandatory participation in fiscal consolidation programmes and the need to manage debt – excessive sometimes because of so-called “toxic loans” – as well as the obligation to increase social support to citizens, against the background of growing demands for assistance to vulnerable groups affected by the crisis.

2. In 2009-2010, local revenues fell in many countries across Europe, in some by as much as 20%. Regional output also shrank on average by 3.4% in 2008-2009, with such extremes as a 20% fall in Latvia, but saw an upswing in most regions in 2010-2011. A weak economic recovery in 2010, with a 2% GDP growth in the EU, tapered to 1% in 2011 and reversed into 0.1% recession in 2012, with a further 0.4% recession forecast for 2013. Over 2008-2012, local budget investment fell by an average 14%, with as much as 30% in some countries, against the backdrop of an almost 5% decrease in intergovernmental transfers in 2011 alone, which almost completely offset a 5.5% rise in local tax revenues.

3. Local and regional authorities are faced with increasing social costs such as housing and utility allowances, safety net payments to the unemployed and others eligible for minimum income guarantees, and emergency aid to distressed families. In 2012, the number of households where essential household costs (such as rent, mortgage payments and utility charges) exceeded 40% of income grew by 13%, pushing local social expenditure on these households up by 16%, against the background of rising unemployment, which exceeded 12% in 2013 in the Eurozone alone, with a high end of 27% in Spain and Greece. Extremely high unemployment, in particular among young people, which reached 62% in Greece and 56% in Spain, is threatening to undermine prospects for long-term sustainable growth.

4. The Congress of Local and Regional Authorities is deeply concerned about the impact of the crisis on local communities and regions of Europe, and in particular about the significant social problems caused by the reduction of social welfare programmes in many European countries and lower investment levels in strategic policy areas, such as education, health and social assistance to vulnerable population groups.

5. The Congress is convinced that local and regional authorities are crucial stakeholders and actors in ensuring European economic revival, due to both their economic and social roles. Local and regional authorities represent 65% of all public investment and 30% of public spending (including 60% of all public spending on education and more than 30% on health), and account for some 16% of public debt and almost 13% of public deficits. They hold key responsibilities with regard to social protection of citizens, including housing, health care, education, sickness and disability, care for the elderly, family and children, measures against unemployment and exclusion.

6. The Congress welcomes the fact that the important role of local and regional authorities in economic recovery was recognised by the Ministers of the Council of Europe member States responsible for local and regional government at their Conference in Utrecht (Netherlands) in 2009, and reaffirmed at their Conference in Kyiv (Ukraine) in 2011, with the approval of the “Kyiv Guidelines” and proposal for an Agenda in Common, which identifies as the top priority joint action by national governments and local and regional authorities in responding to the economic crisis.

7. The Congress expresses its concern that the crisis has had an adverse impact on the financial autonomy guaranteed under the European Charter of Local Self-Government (CETS No. 122), in particular its provisions relating to the financial resources and budgetary authority, equalisation, devolution of competences, as well as consultations with local authorities on matters affecting them and local financing in particular. The Congress stresses that the full implementation of the Charter must be ensured in particular in this time of crisis, when local and regional authorities face greater responsibilities in providing services and assistance to households in need.

8. In this context, the Congress is particularly concerned about the tendencies for recentralisation of local and regional competences, forced municipal amalgamations and regional mergers, imposition of severe austerity measures and fiscal consolidation rules, and slow-down of decentralisation and regionalisation processes as a response to the crisis.

9. The Congress shares the position of the EU Committee of the Regions, expressed in its Opinion of 12 April 2013 on “Devolution in the European Union and the place for local and regional self-government in EU policy making and delivery”, that the economic crisis and austerity measures cannot be used as an excuse to further centralise or devolve powers without providing corresponding financial resources, and that the allocation of powers not linked to corresponding financial resources or to income-raising powers cannot be used as an argument for centralisation.

10. The Congress is convinced that decentralisation is a key to better economic performance and growth and that many local communities and regions in fact did not have enough means and responsibilities to respond adequately to the crisis. The five years of the crisis have shown that, while decentralised economies are no more immune to its impact than the centralised ones, they recover better as they adapt more quickly to changing circumstances and show greater resilience overall. Local and regional authorities know best the needs and circumstances of their communities, and they are in a position to act more effectively and efficiently and to ensure an optimal use of local resources – not least also for reason of better transparency and accountability to citizens.

11. The Congress is therefore convinced that any crisis exit strategies must be based on the following principles:

a. recognition of local and regional authorities as key stakeholders in joint action of all tiers of governance to devise common responses and to ensure coherence of response policies and measures as well as solidarity in equitable burden-sharing, through the process of regular consultations and dialogue;

b. further decentralisation of competences in keeping with the principle of subsidiarity, as well as greater budgetary autonomy and tax authority at local and regional levels;

c. reviving investment to stimulate employment, innovation and economic growth;

d. increasing citizen participation in decision making at local and regional levels through elements of direct democracy, in particular through greater use of new information technologies;

e. building partnerships with the private and non-governmental sectors, as well as with other local and regional authorities in the process of voluntary inter-municipal and inter-regional co-operation.

12. The Congress notes with deep concern the 2013 findings of the International Labour Organisation, indicating that government austerity policies have been accompanied since 2010 by increasing wage inequalities, in which middle-income groups’ revenues declined while those of top salary earners began to grow again, posing a threat to the social fabric of European societies and increasing the risk of social unrest, which rose within the EU alone from 34% in 2006-2007 to 46% in 2011-2012.

13. In this context, the Congress supports the position of the Council of Europe Parliamentary Assembly, expressed in its Resolution 1886 (2012) on the impact of the economic crisis on local and regional authorities in Europe, as well as in its Resolution 1884 (2012) on austerity measures – a danger for democracy and social rights, and welcomes the recent recommendations of the European Commission aimed at shifting the economic policy emphasis from austerity to structural reforms.

14. The Congress also welcomes with caution reform measures entailing decentralisation of competences, being undertaken or planned in a number of member states, while expressing its concern that they are not always accompanied by the decentralisation of resources to finance new competences.

15. The Congress further welcomes the 10 recommendations for regions to overcome the crisis, adopted at the 3rd Summit on Regions and the Economic Crisis (Paris, 16 May 2013), organised by the Assembly of European Regions, which are aimed at using the potential of future-oriented sectors as a key for the regional economic revival, designing youth-oriented regional policies to reinvigorate the economy, promoting regional entrepreneurship, assuring a more sustainable regional and local financing, developing socially inclusive regional economies, regaining citizens’ trust and building partnerships with other tiers of governance.

16. In view of the above, and in reference to its Resolution 347 (2012) on the right of local authorities to be consulted by other levels of government, the Congress calls on European local and regional authorities and their national associations to lobby their national and, where appropriate, regional governments to establish mechanisms for regular consultations and dialogue on developing anti-crisis policies and measures, in order to ensure coherence of policy responses to the crisis and to provide their input and innovative ideas aiming in particular to:

a. obtain greater competences, especially in local and regional economic policy and social protection areas, and in particular in the fields of infrastructure, health care, education and research, social welfare, and recreation and culture, including first and foremost an increase in local and regional tax authority and greater budgetary autonomy, also within internal stability pacts where appropriate;

b. obtain in particular local tax authority over property taxes based on statutory real estate values in countries where this is not yet the case, and reduce the dependence of local budgets on highly volatile tax bases such as corporate profits and property transactions, using as guidance the 2005 Committee of Ministers’ Recommendation REC (2005)1 on the financial resources of local and regional authorities;

c. ensure a steady level of intergovernmental transfers into local and regional budgets, without disproportionate cuts, and a minimum one-year advance notice from national authorities in cases when such transfers are to be reduced;

d. maintain a balanced mix of intergovernmental transfers and local and regional taxes to finance local and regional budgets;

e. reinforce the equalisation and regional solidarity systems among states, and revise national equalisation systems and programmes to improve burden sharing between different tiers of governance and to alleviate better the excessive strain on economically weaker regions and local communities;

f. revise government financing of the local and regional levels to provide a balance between allocations into social support programmes and investments into projects to stimulate innovation and economic growth;

g. revive investment in local and regional infrastructure and generally increase local and regional budget investment as a priority in order to promote local competitiveness, encourage private sector investment and stimulate employment;

h. follow the example of some countries and exclude priority social services such as health, education and social protection for vulnerable groups (families in economic distress, the unemployed, children, young people, people with disabilities, the elderly) from local and regional budget expenditure limits, and exempt them from fiscal consolidation programmes and rules, as well as ensure that vulnerable groups are well protected and that their opportunities in life are not diminished by budgetary measures;

i. remove legal requirements which impose expensive service provision or make sure that, in cases when central authorities do impose uniform standards of service provision at local and regional levels, such as for health care, education and social welfare, the required expenditure is matched by national government financing;

j. design special measures and programmes to alleviate the excessive local and regional debt burden, through a combination of budget deficit limits and ‘debt ceilings’, restrictions on borrowing and on the issue of municipal or regional bonds, creation of special funds for dedicated local government loans, and the introduction of ‘debt brakes’ to ensure that local and regional budgets are financed without structural deficits;

k. make sure that restraints on local and regional government borrowing are based on prudential criteria, which assess capacity for repayment on an objective and non-discretionary basis, and that every tier of governance is responsible for financing its own deficits and debt positions;

l. design special measures to deal with the recovery of local and regional authorities in financial difficulty, including cases of insolvency, using as guidance the 2004 Committee of Ministers’ Recommendation REC (2004)1 on financial and budgetary management at local and regional levels, and including the availability of special financial assistance;

m. achieve a balanced level of centralisation of competences and put a stop to the trend for recentralisation of competences towards central authorities and for slowing down decentralisation and regionalisation processes;

n. put a stop to forced amalgamations at local and regional level while encouraging and facilitating voluntary inter-municipal and inter-regional co-operation aimed at sharing administrative resources, service provision and procurement between adjoining authorities;

o. make sure that decisions on territorial reforms, including on the creation of new tiers of governance or abolition of existing ones, are taken only after consultations with the authorities and citizens concerned, and promote a regional governing guideline, allowing regions and local communities in general to directly manage their development policies.

17. The Congress welcomes the strategies and measures already developed by local and regional authorities in response to the crisis, and further calls on local and regional authorities to:

a. in partnership with local and regional economic actors including banks, business enterprises and research and training institutions, develop a shared vision of economic opportunities and a strategy for the economic development of the community, aimed at reviving investment in infrastructure and environmental quality to promote competitiveness, encourage private sector investment and stimulate employment, and paying particular attention to the development potential of future-oriented sectors such as green economy, e-health and creative industries;

b. increase citizen participation in decision making by introducing elements of direct democracy, including through greater use of new information technologies, regular consultations with citizens and their associations, and the use of participatory budgeting;

concerning efficiency savings:

c. develop stronger inter-municipal and inter-regional co-operation to benefit from economies of scale by seeking efficiency gains through shared service provision and administrative costs as well as through joint procurement, and to facilitate labour mobility, cross-investment and business networking;

d. devise procedures to increase transparency in public procurement and other uses of public funds through, for example, online competitive bidding, electronic auctioning, the use of benchmarking to restrain expenditure, etc.;

e. to develop, at regional level in particular, competition between regions, using as incentives tax rates on income and profits, supply policies and service delivery costs, to increase effectiveness and efficiency of public spending;

f. seek efficiency savings through innovation and greater use of new technologies by, for example, computerising public services, ensuring online service provision and developing e-governance in general;

g. pay particular attention to investing in energy efficiency and developing strategies for cost-saving energy uses;

concerning business development:

h. give priority to promoting local and regional entrepreneurship and providing assistance to enterprise development, in particular to small and medium-sized enterprises, through, for example, simplified administrative procedures for setting up a company, assistance to new enterprises during the start-up process, development of micro-credits, tax exemptions or discounts, interest rate subsidies, employment subsidies, lease of business incubator premises, and free or subsidised provision of land and/or utility connections;

Amendment 1

Presented by Gudrun MOSLER-TÖRNSTRÖM, Austria (R, SOC)

Signed by: John WARMISHAM, United Kingdom (L, SOC), Michael O’BRIEN, Ireland (R, SOC),

Helena PIHLAJASAARI, Finland (R, SOC), Knud ANDERSEN, Denmark (R, ILDG)

In sub-paragraph 17.h, after the words “small and medium-sized enterprises”, add the words “as well as support to youth entrepreneurship in accordance with para 9.c of Congress Resolution 346(2012) on “youth and democracy: the changing face of youth political engagement” ”.

The sub-paragraph would read as follows:

17.h give priority to promoting local and regional entrepreneurship and providing assistance to enterprise development, in particular to small and medium-sized enterprises, as well as support to youth entrepreneurship in accordance with para 9.c of Congress Resolution 346(2012) on “youth and democracy: the changing face of youth political engagement” through, for example, simplified administrative procedures for setting up a company, assistance to new enterprises during the start-up process, development of micro-credits, tax exemptions or discounts, interest rate subsidies, employment subsidies, lease of business incubator premises, and free or subsidised provision of land and/or utility connections;

i. develop policies and projects aimed at the regeneration of disused public areas;

j. increase allocations to vocational training, including through apprenticeship, with a focus on digital skills, to improve employability, the skills base and thus competitiveness;

Amendment 2

Presented by Amy KOOPMANSCHAP, Netherlands (L, SOC)

Signed by: John WARMISHAM, United Kingdom (L, SOC), Michael O’BRIEN, Ireland (R, SOC),

Helena PIHLAJASAARI, Finland (R, SOC), Knud ANDERSEN, Denmark (R, ILDG)

In sub-paragraph 17.j. replace “including through apprenticeship, with a focus on digital skills,” with “and apprenticeship which focus on digital skills, especially for young people who continue to face difficulties in accessing the labour market, so as;”

The sub-paragraph would read as follows:

j. increase allocations to vocational training and apprenticeship which focus on digital skills, especially for young people who continue to face difficulties in accessing the labour market, so as to improve employability, the skills base and thus competitiveness;

concerning fiscal policies:

k. take measures to increase their own taxes or fees (when they have sufficient autonomy to do so), and further increase revenue by fighting tax evasion;

l. improve the administration of property taxation and maintain local and regional taxes on business enterprises, while making sure that their rates do not exceed those of personal taxes;

concerning social responsibilities:

m. use good practices in cutting employment costs, but not employment thus avoiding layoffs, including through salary cuts, pay or vacancy freezes, fewer work hours or abandoning bonus payments, among others;

Amendment 3

Presented by Johan van den HOUT, Netherlands (R, SOC)

Signed by: John WARMISHAM, United Kingdom (L, SOC),

Clemens LAMMERSKITTEN, Germany (R, EPP/CCE), Amy KOOPMANSCHAP, Netherlands (L, SOC),

Farid MUKHAMETSHIN, Russian Federation (R, ILDG)

In sub-paragraph 17.m, after the words “among others”, add the words “, while respecting the provisions of the Council of Europe’s Revised European Social Charter (ETS No.163) with regard to employment rights”.

The sub-paragraph would read as follows:

m. use good practices in cutting employment costs, but not employment thus avoiding layoffs, including through salary cuts, pay or vacancy freezes, fewer work hours or abandoning bonus payments, among others, while respecting the provisions of the Council of Europe’s Revised European Social Charter (ETS No.163) with regard to employment rights;

n. take great care when closing underused service institutions so as to avoid adverse social consequences (for example, in cases of rural schools or minority language schools);

o. give consideration to targeting social assistance subsidies for the provision of public services to those most in need, by applying means tests and allocating subsidies directly to households and individuals based on their financial means, rather than to service providers;

p. also give consideration to using community care rather than institutional care for the elderly and people with disabilities, with the support of voluntary and family carers and non-governmental organisations active in community care;

Amendment 4

Presented by John WARMISHAM, United Kingdom (L, SOC)

Signed by: Clemens LAMMERSKITTEN, Germany (R, EPP/CCE),

Gudrun MOSLER-TÖRNSTRÖM, Austria (R, SOC), Farid MUKHAMETSHIN, Russian Federation

(R, ILDG), Amy KOOPMANSCHAP, Netherlands (L, SOC)

In sub-paragraph 17.p, after the words “in community care”, add the words “, while ensuring that carers are able to balance work, private life and caring responsibilities and are protected from exploitation and discrimination, in line with the provisions of the Council of Europe’s Revised European Social Charter (ETS No.163);”.

The sub-paragraph would read as follows:

p. also give consideration to using community care rather than institutional care for the elderly and people with disabilities, with the support of voluntary and family carers and non-governmental organisations active in community care, while ensuring that carers are able to balance work, private life and caring responsibilities and are protected from exploitation and discrimination, in line with the provisions of the Council of Europe’s Revised European Social Charter (ETS No.163) ;

q. increase partnership with the non-governmental sector, in particular organisations involved in specialised forms of social and health care, through special partnership agreements for service provision.

18. The Congress instructs its Monitoring Committee to continue including in its monitoring and post-monitoring activities the question of the impact of the economic and financial crisis at local and regional levels, and in particular its consequences for the effective implementation of the European Charter of Local Self-Government, and to address this issue in its draft recommendations to national governments.

19. The Congress further instructs its Governance Committee and its Current Affairs Committee to keep the question of the impact of the economic and financial crisis and responses at local and regional levels under constant review, and to ensure the dissemination of relevant good practices to local and regional authorities, including through their European and national associations.

DRAFT RECOMMENDATION3

1. The financial and economic crisis which hit the world in 2008 has had a particularly severe impact on local and regional authorities as they have had to face at the same time a shrinking revenue base due to the economic downturn, cuts in budgetary transfers from national governments, decreasing local tax authority, mandatory participation in fiscal consolidation programmes and the need to manage debt – excessive sometimes because of so-called “toxic loans” – as well as the obligation to increase social support to citizens, against the background of growing demands for assistance to vulnerable groups affected by the crisis.

2. In 2009-2010, local revenues fell in many countries across Europe, in some by as much as 20%. Regional output also shrank on average by 3.4% in 2008-2009, with such extremes as a 20% fall in Latvia, but saw an upswing in most regions in 2010-2011. A weak economic recovery in 2010, with a 2% GDP growth in the EU, tapered to 1% in 2011 and reversed into 0.1% recession in 2012, with a further 0.4% recession forecast for 2013. Over 2008-2012, local budget investment fell by an average 14%, with as much as 30% in some countries, against the backdrop of an almost 5% decrease in intergovernmental transfers in 2011 alone, which almost completely offset a 5.5% rise in local tax revenues.

3. Local and regional authorities are faced with increasing social costs such as housing and utility allowances, safety net payments to the unemployed and others eligible for minimum income guarantees, and emergency aid to distressed families. In 2012, the number of households where essential household costs (such as rent, mortgage payments and utility charges) exceed 40% of income grew by 13%, pushing local social expenditure on these households up by 16%, against the background of rising unemployment, which exceeded 12% in 2013 in the Eurozone alone, with a high end of 27% in Spain and Greece. Extremely high unemployment, in particular among young people, which reached 62% in Greece and 56% in Spain, is threatening to undermine prospects for long-term sustainable growth.

4. The Congress of Local and Regional Authorities is deeply concerned about the impact of the crisis on local communities and regions of Europe, and in particular about the significant social problems caused by the reduction of social welfare programmes in many European countries and lower investment levels in strategic policy areas, such as education, health and social assistance to vulnerable population groups.

5. The Congress is convinced that local and regional authorities are crucial stakeholders and actors in ensuring European economic revival, due to both their economic and social roles. Local and regional authorities represent 65% of all public investment and 30% of public spending (including 60% of all public spending on education and more than 30% on health), and account for some 16% of public debt and almost 13% of public deficits. They hold key responsibilities with regard to social protection of citizens, including housing, health care, education, sickness and disability, care for the elderly, family and children, measures against unemployment and exclusion.

6. The Congress welcomes the fact that the important role of local and regional authorities in economic recovery was recognised by the Ministers of the Council of Europe member States responsible for local and regional government at their Conference in Utrecht (Netherlands) in 2009, and reaffirmed at their Conference in Kyiv (Ukraine) in 2011, with the approval of the “Kyiv Guidelines” and proposals for an Agenda in Common, which identifies as the top priority joint action by national governments and local and regional authorities in responding to the economic crisis.

7. The Congress expresses its concern that the crisis has had an adverse impact on the financial autonomy guaranteed under the European Charter of Local Self-Government (CETS No. 122), in particular its provisions relating to the financial resources and budgetary authority, equalisation, devolution of competences, and consultations with local authorities on matters affecting them and local financing in particular. The Congress stresses that the full implementation of the Charter must be ensured in particular in this time of crisis, when local and regional authorities face greater responsibilities in providing services and assistance to households in need.

8. In this context, the Congress is particularly concerned about the tendencies for recentralisation of local and regional competences, forced municipal amalgamations and regional mergers, imposition of severe austerity measures and fiscal consolidation rules, and slow-down of decentralisation and regionalisation processes as a response to the crisis.

9. The Congress shares the position of the EU Committee of the Regions, expressed in its Opinion of 12 April 2013 on “Devolution in the European Union and the place for local and regional self-government in EU policy making and delivery”, that the economic crisis and austerity measures cannot be used as an excuse to further centralise or devolve powers without providing corresponding financial resources, and that the allocation of powers not linked to corresponding financial resources or to income-raising powers cannot be used as an argument for centralisation.

10. The Congress is convinced that decentralisation is a key to better economic performance and growth and that many local communities and regions in fact did not have enough means and responsibilities to respond adequately to the crisis. The five years of the crisis have shown that, while decentralised economies are no more immune to its impact than the centralised ones, they recover better as they adapt more quickly to changing circumstances and show greater resilience overall. Local and regional authorities know best the needs and circumstances of their communities, and they are in a position to act more effectively and efficiently and to ensure an optimal use of local resources – not least also for reason of better transparency and accountability to citizens.

11. The Congress is therefore convinced that any crisis exit strategies must be based on the following principles:

a. recognition of local and regional authorities as key stakeholders in joint action of all tiers of governance to devise common responses and to ensure coherence of response policies and measures as well as solidarity in equitable burden-sharing, through the process of regular consultations and dialogue;

b. further decentralisation of competences in keeping with the principle of subsidiarity, as well as greater budgetary autonomy and tax authority at local and regional levels;

c. reviving investment to stimulate employment, innovation and economic growth;

d. increasing citizen participation in decision making at local and regional levels through elements of direct democracy, in particular through greater use of new information technologies;

e. building partnerships with the private and non-governmental sectors, as well as with other local and regional authorities in the process of voluntary inter-municipal and inter-regional co-operation to benefit from the economies of scale and to facilitate labour mobility, cross-investment and business networking.

12. The Congress notes with deep concern the 2013 findings of the International Labour Organisation, indicating that government austerity policies have been accompanied since 2010 by increasing wage inequalities, in which middle-income groups’ revenues declined while those of top salary earners began to grow again, posing a threat to the social fabric of European societies and increasing the risk of social unrest, which rose within the EU alone from 34% in 2006-2007 to 46% in 2011-2012.

13. In this context, the Congress supports the position of the Council of Europe Parliamentary Assembly, expressed in its Resolution 1886 (2012) on the impact of the economic crisis on local and regional authorities in Europe, as well as in its Resolution 1884 (2012) on austerity measures – a danger for democracy and social rights, and welcomes the recent recommendations of the European Commission aimed at shifting the economic policy emphasis from austerity to structural reforms.

14. The Congress also welcomes with caution reform measures entailing decentralisation of competences, being undertaken or planned in a number of member states, while expressing its concern that they are not always accompanied by the decentralisation of resources to finance new competences.

15. In view of the above, and in reference to its Recommendation 328 (2012) on the right of local authorities to be consulted by other levels of government, the Congress asks the Committee of Ministers to invite member States of the Council of Europe to establish mechanisms for regular consultations and dialogue with local and regional authorities on developing anti-crisis policies and measures, in order to ensure coherence of policy responses to the crisis and to take into account their input and innovative ideas aiming in particular to:

a. ensure that local and regional authorities receive greater responsibilities, especially in local and regional economic policy and social protection areas, and in particular in the fields of infrastructure, health care, education and research, social welfare, and recreation and culture, including first and foremost an increase in local and regional tax authority and greater budgetary autonomy, also within internal stability pacts where appropriate;

b. ensure in particular local tax authority over property taxes based on statutory real estate values in countries where this is not yet the case, and reduce the dependence of local budgets on highly volatile tax bases such as corporate profits and property transactions, using as guidance the 2005 Committee of Ministers’ Recommendation REC (2005)1 on the financial resources of local and regional authorities;

c. ensure a steady level of intergovernmental transfers into local and regional budgets, without disproportionate cuts, and a minimum one-year advance notice from national authorities in cases when such transfers are to be reduced;

d. maintain a balanced mix of intergovernmental transfers and local and regional taxes to finance local and regional budgets;

e. reinforce the equalisation and regional solidarity systems among states, and revise national equalisation systems and programmes to improve burden sharing between different tiers of governance and to alleviate better the excessive strain on economically weaker regions and local communities;

f. revise government financing of the local and regional levels to provide a balance between allocations into social support programmes and investments into projects to stimulate innovation and economic growth;

g. revive investment in local and regional infrastructure and generally increase local and regional budget investment as a priority in order to promote local competitiveness, encourage private sector investment and stimulate employment;

h. follow the example of some countries and exclude priority social services such as health, education and social protection for vulnerable groups (families in economic distress, the unemployed, children, young people, people with disabilities, the elderly) from local and regional budget expenditure limits, and exempt them from fiscal consolidation programmes and rules, as well as ensure that vulnerable groups are well protected and that their opportunities in life are not diminished by budgetary measures;

i. remove legal requirements which impose expensive service provision or make sure that, in cases when central authorities do impose uniform standards of service provision at local and regional levels, such as for health care, education and social welfare, the required expenditure is matched by national government financing;

j. design special measures and programmes to alleviate the excessive local and regional debt burden, through a combination of budget deficit limits and ‘debt ceilings’, restrictions on borrowing and on the issue of municipal or regional bonds, creation of special funds for dedicated local government loans, and the introduction of ‘debt brakes’ to ensure that local and regional budgets are financed without structural deficits;

k. make sure that restraints on local and regional government borrowing are based on prudential criteria, which assess capacity for repayment on an objective and non-discretionary basis, and that every tier of governance is responsible for financing its own deficits and debt positions;

l. design special measures to deal with the recovery of local and regional authorities in financial difficulty, including cases of insolvency, using as guidance the 2004 Committee of Ministers’ Recommendation REC (2004)1 on financial and budgetary management at local and regional levels, and including the availability of special financial assistance;

m. achieve a balanced level of centralisation of competences and put a stop to the trend for recentralisation of competences towards central authorities and for slowing down decentralisation and regionalisation processes;

n. put a stop to forced amalgamations at local and regional levels while encouraging and facilitating voluntary inter-municipal and inter-regional co-operation aimed at sharing administrative resources, service provision and procurement between adjoining authorities;

o. make sure that decisions on territorial reforms, including on the creation of new tiers of governance or abolition of existing ones, are taken only after consultations with the authorities and citizens concerned, and promote a regional governing guideline, allowing regions and local communities in general to directly manage their development policies.

1 L: Chamber of Local Authorities / R: Chamber of Regions

EPP/CCE: European People’s Party Group in the Congress

SOC: Socialist Group

ILDG: Independent Liberal and Democratic Group

ECR: European Conservatives and Reformists Group

NR: Not registered

2 Preliminary draft resolution and preliminary draft recommendation approved by the Current Affairs Committee on 26 June 2013.

Members of the committee:

F. Mukhametshin (President), A. Kordfelder (1st Vice President), A. I. Alos Lopez (2nd Vice President),

S. Madzharova (3rd Vice President), E. Ozkarsli (4th Vice Président), A. Boff (5th Vice-President), C. Abela Baldacchino,

S. Aliyeva, A. Ambros, E. Ampe, A. Antosova, P. B. Andersen , L. Andrysiak, G. Arnardottir, E. Argiris, S. Barnes, J. Barska, A. Beskow, L. Blaskovicova, , S. Bohatyrchuk-Kryvko, K. Bille, E. Campbell-Clark, M. Catovic, L. Caveri, Y. Celik, P. Chesneau, A. Cook,

Z. Dragunkina, N. Dirginciene, J.-N. Gaultier, J. V. Den Hout, B. Fleck, D. Ghisletta, K. Gloanec-Maurin, G. Grzelak, M. Gombosi,

D. Healy-Mcgowan, H. Himmelsbach,A. Koopmanschap, M. Kazandzhiev (alternate: H. Hristov), L. Kovacs (alternate : G. Illes),

V. Konstantinov, H. Kuhn-Theis, V. Lazary (alternate: A. Magyar), J. Landberg, I. Linge, M. S. Luca, M. Mahnke,

H. Marva (alternate: S. Janatuinen), Y. Mishcheryakov, M. Miros, C. Naudi Baixench, J. Neumann, C. Oppitz-Plörer, S. Orlova, I. Parea, E. Pajaziti, A. Pellizzari, L. Perikli, N. Pilius C. Popa, N. Rafik-Elmrini, C. Raimbert, A. Ravins, F. Ramos, M. Reyes Lopez, P. Receveur, R. Rohr, N. Rosu, Y. Renström (alternate), N. Rybak, M. Ryo, Y. Rzayeva, E. Sahin, A. Sokolov, J.-L. Testud, G. Tkemaladze,

R. Toccaceli, B. Toce, M. Toscani, V. Udovychenko, L. Vecchi, R.Vergili ,L. S. Vennesland, P. Vrizidou, J. Warmisham, J. Watson,

P. Weidig, E. Yeritsyan

N.B.: The names of members who took part in the vote are in italics.

Secretariat of the committee : D. Marchenkov, J. Hunting

3 See footnote 2



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