Strasbourg, 5 November 2010                                                             LR-GG(2010)19

(English only – anglais uniquement)

                                                                                                                         

EUROPEAN COMMITTEE ON LOCAL AND REGIONAL DEMOCRACY

(CDLR)


COMMITTEE OF EXPERTS ON GOOD DEMOCRATIC

GOVERNANCE AT LOCAL AND REGIONAL LEVEL

(LR-GG)

RESULTS OF THE CONFERENCE “LOCAL GOVERNMENT:

RESPONSES TO RECESSION ACROSS EUROPE”

Secretariat Memorandum

prepared by the Directorate General of

Democracy and Political Affairs

Directorate of Democratic Institutions


This document is public. It will not be distributed at the meeting. Please bring this copy.

Ce document est public. Il ne sera pas distribué en réunion. Prière de vous munir de cet exemplaire.


THE IMPACT OF THE FINANCIAL CRISIS ON EUROPEAN LOCAL GOVERNMENT

The Conference at Strasbourg on 11 and 12 October 2010 convened by the CDLR and

LGI reviewed the evolution of local government finance in the CoE, member states since the Utrecht session of the Ministerial Conference almost a year ago. This review was based on the reports received from the network of country observers, from EUROSTAT data and presentations made at the Conference.

It was noted that the fiscal squeeze on local budgets anticipated at Utrecht had indeed occurred widely, with sixteen states reporting absolute declines in local budget revenue during 2009. During 2010, further declines were anticipated in several states including Germany and Spain.

During 2010 government fiscal deficits have become the central focus of ongoing crisis. For local governments across Europe the outlook remains uncertain because

Local governments are therefore facing the continuing challenge that the period of robust budget growth which preceded the financial crisis will not return.

The Conference discussions were organised in four workshops conforming to the themes defined by the Utrecht Declaration.

Workshop A looked at the impact of the crisis on central local financial relations and the assignment of responsibilities and resources between levels of government.  In several cases the crisis had exposed structural weaknesses in the financing system including:

The experience by some member states of such problems during the current period underlines the importance of compliance with the Recommendation (2005)1 of the Committee of Ministers on the financial resources of local and regional authorities, to which attention is specifically drawn by the Utrecht Declaration.

Workshop B discussed attempts by local government to cope with the fiscal squeeze by improvements in efficiency. There have been short term fixes, like borrowing more and delaying the payment of staff and suppliers. Freezing or even cutting staff and wage rates are commonplace. In Hungary new elections have been accompanied by a 40% cut in council membership while all public servants have lost their 13th month bonus.  More systematic reviews of operating systems have been rarer. One comprehensive review of all local revenue and expenditure has been carried out by national government, another by city government staff. Interestingly they have occurred in two of the most savagely affected countries, Ireland and Iceland.

Overhead costs have also come under fire. Underutilised institutions like small primary schools are being widely merged, while the process of amalgamating small municipalities in countries like Finland and Iceland has accelerated. More authorities are joining forces with neighbours to carry out technically demanding tasks like tax collection, procurement and development control. Three very large London boroughs are merging virtually all their services.

Attempts are also being made to rely on increased transparency to save money. All expenditure over £500 is now published on the web and exposed to the scrutiny of Windsor’s local press. Satnav equipment will help Serbian town halls keep track of municipal vehicles and curb moonlighting. Both Bulgarian and Irish authorities have cracked down on tax evaders.

Workshop C looked at the role of local government in contributing to economic recovery and sustainable development. While the downturn has generally reduced the operating surplus funds usually devoted to capital expenditure, these have been replaced in new member states and candidate countries by increasing flows of EU structural funds, and temporarily in a number of western European states by national government investment grants aimed at “fiscal stimulus” These have enabled some infrastructural investment to continue. The Conference also heard of some local alliances between local governments, the business community and educational establishments to promote technological capacity and innovation.

Workshop D considered the implications of the crisis for local governments’ social responsibilities and expenditures. The immediate consequences vary widely between countries because of differences in local budget responsibilities for social benefits. Virtually all, however, face rising long term costs of care for an ageing population. These might well demand reform of systems too dependent on expensive institutional care, and increases in the support given to community based solutions.


CDLR agreed that the Council of Europe/LGI team should continue its regular financial monitoring of local budget performance over the next year so that the ministers meeting at Kiev could be given an up to date picture of the local fiscal situation. In addition it should continue to survey developments of the themes explored by the workshops, but grouping the issues under “vertical” and “horizontal” dimensions. The vertical stream would look at changes in local competences, funding and financial management with an overall concern for local autonomy and compliance with the Charter. How far had the impact of the crisis and responses to it reduced or enhanced the freedom of local governments to conduct local affairs and manage public services in conformity with the needs and preferences of local citizens? (Interestingly the Conference had heard evidence of both positive and negative trends in this respect).

The second horizontal stream would look at the role of individual local authorities as the hub of their communities in addressing the economic and social challenges they confront post-crisis. The central concern would be their ability to harness business interests, universities, civic society organisations etc in a strategic and mutually reinforcing effort to restore economic fortunes and care for the disadvantaged.

The Conference had opened with a call by the Commissioner for Human Rights to view the crisis not only as an economic phenomenon but more fundamentally s a threat to social cohesion and socio-economic rights. The ministers at Kiev must be reminded of this and informed of the efforts being made by local government to combat any deterioration in these respects.