Report on Regional Democracy in Finland - CPR (6) 2 rev Part II

Rapporteur: Josef LEINEN (Germany)

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EXPLANATORY MEMORANDUM

I. Executive Summary

Finland is a country with a strong and long-lasting tradition of local self-government. Even though it did not participate in the elaboration of the European Charter of Local Self-Government (ECLSG), since it only became a member State of the Council of Europe in 1989, it did sign and ratify this Convention very shortly after its accession to membership in the Council of Europe. Signature took place on 14 June 1990 and ratification was completed by 8 June 1991, showing the importance given by Finland to the respect of the principles embedded in this text.

Finland nowadays encompasses 452 local authorities, whose situation causes no concern as regards European standards set forth by the Council of Europe. The regional situation is less clear and could to some extent call for an appreciation in the light of European standards of democracy and self-government. For that reason, the Bureau of the Congress of Local and Regional Authorities of Europe (CLRAE) decided, along the lines of CLRAE Resolution 31 (1996), to appoint a special Rapporteur on the situation of regional democracy in Finland, in the person of Mr Josef Leinen, Member of the Regional Chamber of the Congress. He visited Finland on 29 and 30 September 1998, accompanied by Mr. Nicolas Levrat, expert from Switzerland and Mr. Riccardo Priore, Administrator in the Council of Europe Secretariat. The Rapporteur established in co-operation with the above-mentioned expert, a preliminary draft report that was sent to the Finnish government and served as a basis for discussion during a second visit of the delegation from 23 to 25 February 1999.

As regards the territorial structure of power in Finland at regional level, the Rapporteur agrees with the opinion of government officials that the present stage of regional government does not represent genuine regions (see below §§ 11 to 25 for a detailed survey of the current legal and political situation). On the basis of article 13 of the ECLSG, its provisions apply to the so-called Finnish regions1. In the light of these considerations, the present institutional setting at regional level appears satisfying, as long as regional Councils are considered solely as «joint municipal boards», and not as a genuine level of regional self-government. No major encroachment to democratic rules can be observed in Finland at regional level. However, such conclusion remains valid only as long as the scope of competencies of the «regional councils» remains strictly limited. If larger competencies or responsibilities in the allocation of funds were to be recognised or delegated to this level of co-operative government, the issue of regionalisation should then seriously be considered in Finland, with due regard to fundamental European democratic principles.

General remark :

The issue of regional democracy and self-government naturally also concern the situation of the Aaland. However, since these Islands on the one hand enjoy a specific statute recognised in international law, and are on the other hand dealt with by a specific legislation in Finland (Act 1144 on the Autonomy of Aaland, 16 August 1991), the issues raised and discussed in the present report concern the general situation of regional government in Finland, to the exception of the specific regime of Aaland.

The visits of a delegation from CLRAE (September 1998 - February 1999)

As can be seen from the programme of the visit of the special Rapporteur from CLRAE on29 and 30 September 1998 (see Appendix I), the delegation had the opportunity to meet representatives of the different concerned actors, at a high level. Discussions were held with senior representatives of the Finnish Association of Local and Regional Authorities, including Mr Jussi-Pekka Alanen, Managing Director of the Association. The delegation had the very rare opportunity to attend the annual Conference of the Chairpersons and managing Directors of Finnish Regional Councils (in Gustavelund). Members of the delegation had the opportunity to better understand the relations between these «regional representatives» and the Finnish Association of Local and Regional Authorities on the one hand and the Ministry of the Interior on the other hand. The Minister for Administrative Affairs, Mr. Jouni Backman, gave a speech to the Conference of the Chairpersons and managing Directors of Finnish Regional Councils, and the members of the delegation had afterwards the opportunity to discuss issues linked with management of regions with senior civil servants from this Ministry.

As regards the definition of a level of regional government, the following issues do not yet seem to have been definitely settled :

Concerning the size of regions, the advocated number varies from the 19 «joint municipal authorities» created at the level of the so-called regions, to 6, based on the new (since 1st September 1997) structure of state provincial administration and alliances of regional Councils (4).

Concerning their competencies, the conceptions vary from competencies delegated from local authorities (this is what is currently envisaged for intermunicipal co-operation by Chapter 10 of the Finnish Local Government Act from 17 March 1995 (hereafter FLGA - section 76), to specific competencies attributed by law (as is for example the case with section 3 of the Finnish regional Development Act of 17 March 1994 (hereafter FRDA), which confers a responsibility for regional development to «regional council»), or to a co-operative form for performing State functions, in co-operation with specialised Ministries.

Furthermore, the link of such regional governments with State administration (or alternatively their compulsory role in fulfilling State functions) and with municipalities located within their territory («joint municipal boards» are nowadays constituted by representatives of member local authorities, according to sections 81 and 82 of FLGA) and are also the topic for discussion.

The financing of regional government is also a topic for future debates. At present, it seems clear that regions have no resources of their own (no right to taxation). Depending on the concept of «region», they either receive funding from municipalities when they perform their tasks in the framework of an intermunicipal co-operation (see section 83 FLGA), or from State budget if they are to perform State competencies at their own territorial level. Regional Councils however play, according to section 6 of the Regional Development Act, an important role in the allocation for regional development funds, whether coming from State budget or from European subsidies. In this respect, a discrepancy could be observed between the importance of regional Councils in allocating such resources, and the weakness of their democratic legitimacy.

The diverging views on these topics expressed very openly to the CLRAE Rapporteur did not allow him to have a clear-cut position as regards regional democracy in Finland after this first visit. It was proposed and agreed that the Rapporteur, with the support of an expert and assistance from the Council of Europe Secretariat, should produce a first draft report, reflecting his understanding of the current situation of regional government in Finland and underlining the possible discrepancies between the existing solutions and the requirements embedded in the Council of Europe standards relevant for regional democracy. This draft report would then be communicated to Finnish authorities, and the issues raised in the report would serve as a basis for discussion. A second visit of the CLRAE delegation to Finland would then take place, allowing for a report on the situation of regional democracy in Finland to be submitted to CLRAE.

The second visit took place on 23 to 25 February 1999 (see programme of the visit in Appendix 2). Representatives of the Ministry of the Interior discussed in much detail the opinions expressed in the draft report. They formally opposed the evaluation of the situation of Regional democracy in Finland according to the criteria set forth in the ECLSG or the draft European Charter of Regional Self-Government (DECRSG). The main argument put forward by the Finnish officials and the Minister for Administrative Affairs, Mr. Backman, is that «so-called regional councils» are not a genuine level of government, but only a co-operation structure between local self-government, at regional level. Therefore, only the provision of article 10 § 1 should apply to the «so-called regional councils», which should in legal terms only be considered as joint municipal boards. The main opposition to the idea of transforming through a regionalisation process the existing joint-municipal boards called «regional councils» into genuine regional self-government is the fact that since it is considered necessary that each level of government possesses a right to taxation, the recognition of such genuine regions would then require giving a taxation power to «regional councils». The current global level of taxes in Finland is sufficiently high so that State authorities do not feel it necessary to add additional burdens to the citizens with the creation of new set of regional taxes.

Meetings with the representatives of the regional Councils were very interesting and allowed the delegation to have a better idea of the effective tasks performed by these regional administrations. These meetings also showed the close co-operation between regional councils administration and State administration at regional level in several fields. Particularly interesting was the co-operation between the Business and Development Centres (now 15 throughout Finland) and regional Councils.

As a general comment, the Rapporteur was very satisfied with this second visit, which allowed to clarify many of the issues raised in the draft report. He however regrets that all the meetings of this second visit were held with officials (except for Minister Backman and a meeting with two Members of Parliament), and that it was not possible to meet local elected representatives.

Appraisal of the situation of «regional government» in Finland

The report hereafter tries to offer a view of the current situation of regional government in Finland, based on the existing legal Acts. This presentation tries to understand the dynamic of the process of allocation of power to regional government in Finland.

Regional bodies in Finland : The result of a specific process combining bottom-up and top-down approaches

Development of local self-government and territorial administration of the State

The population of Finland is around 5 million inhabitants, which places the country in the lower-range of mid-size countries in Europe. The territory of Finland is however very large compared to its overall population and has geographic peculiarities. Almost 180'000 Islands, and very vast portions of territory where the density of population is extremely low. (Since Finland joined EU in 1995, a specific situation justifying EC intervention in favour of regional development has been recognised for regions where population is below 8 inhabitants per square kilometres, a situation which occurs in no other European country, except for Sweden and Norway). These demographic and geographic specificities seem to have prevented Finland, like other Nordic countries, from developing regions with their own organs and own competencies, as the practice produced in most parts of Europe. The absence of formal regional structures was met by two mechanisms.

On the one hand, the local authorities were encouraged to develop intermunicipal co-operation for achieving joint operation of some of their tasks. The current Finnish Local Government Act from 17 March 1995 (FLGA) devotes a complete chapter (sections 76 to 87) to these modes of co-operation between local authorities. We shall see that 3 modes of co-operation are co-existing, one of them leading to a structure which has its own legal personality («joint municipal board», according to section 80 of the FLGA). These joint municipal boards, or at least some of them, could constitute the embryo of genuine self-governing regional structures.

The three forms of intermunicipal co-operation provided for by the law cover:

    · performance of one local authority’s function by another (FLGA, section 76, on the basis of an intermunicipal agreement);

    · creation of joint organs between several municipalities within the authority performing a task for the others (FLGA, section 77);

    · or creation of a joint municipal board (FLGA, section 78 to 86).

This last form is the only relevant one as regards possible evolution from an intermunicipal co-operation structure to a form of regional authority. A joint municipal board does have a legal personality separate from that of its member municipalities, and therefore can fulfil tasks and contract obligations under its own name (FLGA, section 80). Joint municipal boards shall be created by a «Charter» (agreement) between the concerned municipalities (FLGA, section 78 and 79). In general, it is created on the initiative of local authorities (FLGA, section 76.3), but the law may make participation in such a joint municipal board compulsory (FLGA, section 76.4). The main organ of a joint municipal board (its General Assembly) is composed of representatives of partner municipalities (FLGA, section 81), which «shall be elected by the board of each member local authority or by some other municipal organ specified by the Council» (FLGA, section 81.3); to be elected to such general Assembly, persons should meet the same criteria as for municipal elections, but do not have to be elected councillor at local level, except if specified in the Charter of the joint municipal board (FLGA, section 82). In practice, the delegation was informed that members of joint municipal boards were, for 90%, locally elected councillors. Furthermore, between the two visits of the delegation, an Act of Parliament was adopted in December 1998 rendering compulsory for members of «so-called regional councils» to be elected councillors (at local level). Therefore, even though regional councils remain legally speaking joint municipal boards, some specific legislative provisions take into account their more «political» functions than other common joint municipal boards.

The joint municipal boards have no capacity to ensure their own financing, and section 83 of FLGA specify how and to what extent member local authorities should share financial responsibility. This issue appeared to be of crucial importance for State representatives (from government as well as from Parliament) that met the delegation. There is no political will for allowing the «regional councils» to raise their own resources (through taxation) and the application of the rule of article 83 of FLGA to «so-called regional councils» seems to correspond to the wishes of the political class. Finally, Section 84 of FLGA provides for resignation of a municipality from a joint municipal board.

These elements allow us to conclude that, despite the fact that Section 80 of FLGA recognises a contractual capacity (and therefore a legal personality) to joint municipal boards, they do not amount to a level of genuine self-government structure covered by the Council of Europe principles for local or regional self-government.

On the other side, the central government developed regional offices to perform some of the services falling within the competencies of central authorities, but which would benefit being performed and/or controlled by regional offices. These state offices were developed, depending on the tasks to be performed, at different levels. Leaving out the administration of Aaland which obeys to special rules, the territorial administration of the State is divided between «regions» and «provinces». The regions amount to 19 (+ Aaland); at this level coexist State regional administration and «joint municipal authorities». At provincial level, the central government had organised its administration between 12 «provinces»; these have been reduced to 5 provinces (+ Aaland).

The current situation therefore consists of various territorial structures, at levels between local self-government (defined in the FLGA) and central State administration; State administration (mostly but not only at provincial and regional levels) on the one side, and various forms of co-operative government between municipalities on the other side, also at different levels. A possible evolution of such situation could be the development of one territorial level as a focal point for actions which, at some point, may have to be considered as falling outside the realm of competencies of either local self-government or State authority, and would then deserve genuine self-government. 

Evolution of public administration at local and State levels in the 90’s

During the 90’s, Finland underwent tremendous evolution, both as regards its political, legal and economic situation. Finland became a member of the European Union on 1 January 1995, and was among the first countries entering the Economic and Monetary Union on 1 January 1999.

The development of the relations between municipalities and the State also continued during that period. The new Finnish Local Government Act that entered into force in 1994 further emphasised the autonomy of municipalities as regards their competencies as well as recognising the fact that they can independently make decisions on the organisation of their own activities. The system relating to State grants allocated to municipalities was amended so that the grants are now allocated on the basis of scientific calculation (objective criteria), instead of the grant system based on the costs that was the earlier practice. This evolution culminated in the new legislation on the State grants that entered into force at the beginning of 1997.

In the early 90’s, Finland's economy was hit by an unprecedented depression and a bank crisis. This was due, for example, to the collapse of the trade with Russia as well as the deregulation relating to foreign exchange legislation. Unemployment increased from 4% to 18% in a few years. Tax revenue for the State and the municipalities was consequently reduced and both the State and municipalities had to rely on loans. As a result of unemployment, social expenses dramatically increased. These developments led to carrying out projects rationalising administration and services; they resulted in streamlining the administration of the different levels of government, and while producing positive effects, also resulted in layoffs and dismissals of numerous civil servants. However, the effect on the quality of services provided to citizens was marginal and it can be said that most of the services - that were to a certain extent guaranteed under the fundamental rights reform that entered into force in 1995 - overcame the depression. The depression hardly had any effect on the delegation of functions between the municipalities and the State, except for the Regional Development Act (see below §§ 23 to 25). On the other hand, the State grants have been substantially reduced. During the past few years however, the overall economic situation has been improving; the unemployment rate has fallen down to around 11% and, as a result of the economic recovery, tax revenues of the State and municipalities have increased.

The fact that municipalities' autonomy is guaranteed and continuously developed makes it possible for municipalities to overcome financial difficulties by themselves as far as possible, sometimes by means that are very different in each municipality. At the same time, participation in the European Union, rationalisation of the State administration at regional level and new competencies recognised to some bodies of intermunicipal co-operation led to the creation of the «so-called regions»; these result from the combination of the legal form of joint municipal board and the exercise of former State competencies at regional level, according to the provisions of the Regional Development Act.

The Regional development Act : an important step towards the creation of functional regions

In March 1994, Finland adopted a Regional Development Act (FRDA), which in our view constitutes a decisive step towards the creation of a genuine regional level of government. This act aims at fostering economic development at regional level, providing for the creation within the State budget of «Regional Development Funds» (FRDA, section 6); these concern all the «different branches of government» (FRDA, section 6) which are active at regional level. The use of these funds in each region are left under the control of State authorities (FRDA, Section 6, 2nd sentence), but «is co-ordinated and channelled in the programme agreements». These «programmes for regional development» are described in Section 4 of FRDA, which set forth that «Regional development programmes shall be approved by the regional development authority» (FRDA, Section 4, last sentence). And, this is the main issue as regards the development of regional government, Section 3 of FRDA provides that «the Regional Council is, instead of the Provincial State Office, responsible for the general development of the region in which it operates as the regional development authority».

This Act therefore confers a very central and important role to «regional councils», which become not only a «regional level» with competencies defined by a law, but also de jure have to co-ordinate the actions of central government administrations operating at regional level through the approbation of the programme for regional development, as well as the initiative of private or local self-government actors on their territory, since FRDA provides in Section 6.2 3rd sentence that «the regional development authorities will determine the use of allocations within their own regions». Regional Councils therefore have important planning and implementation functions in the process of regional development.

These important tasks conferred to regional Councils define some regional authorities from a functional point of view. Institutionally however, the regional councils are defined as «joint municipal boards», a co-operative structure between municipalities which is defined in the FLGA (see above §§ 14 to 16). Their organs are constituted by representatives of member municipalities, and they cannot finance their tasks themselves, but shall rely on municipalities (for their «structural financing») while at the same time they are to decide for the allocation of regional development funds to municipalities. Further, section 2, § 1 of the FRDA states that «[m]unicipalities and the State shall be responsible for regional development as decreed in this Act». This wording reveals the intent of the Law, not to confer any political responsibility to the regional councils, which are solely considered as operating structures, not political bodies. Therefore, even though one could consider that important tasks are left to these regional councils, these shall not be considered as self-government of any type, which otherwise would imply according to article 3 of the ECLSG, that they would have «the right and ability [...] to regulate and manage a substantial share of public affairs under their own responsibility and in the interest of the local population». The regional councils in Finland, as clearly expressed in the FRDA, do not act under their own responsibility, and probably not in the direct interest of the local population, but rather in the interest of the members' municipalities.

V. Draft conclusions

The present situation of «regional government» in Finland does not appear to the Rapporteur as a stable and long-lasting solution. The fact that a regional level is not properly defined could create confusion among different public actors. The discussions the delegation had the opportunity to have with the Finnish Association of Local and Regional Authorities, some Presidents of Regional Councils and civil servants from the Ministry of the Interior during its first visit to Finland, show that competing conceptions of regional government are coexisting in Finland, creating discussions about the proper level for regional action, the exact structure of regional government, the powers to be recognised to such government, its relations to other levels of government and its relation towards citizens. A clarification of these issues through a legislative action creating a genuine regional level of self-government may be at some stage advisable, particularly if additional tasks were to be delegated to the regional level.

However, the Rapporteur clearly understands that all the civil servants, the Minister for Administrative Affairs and a great number of representatives of the Finnish Association of Local and Regional Authorities who met in February 1999 are quite satisfied with the present situation and do not envisage in a foreseeable future the creation of a genuine level of regional self-government. The main argument put forward is that any genuine level of self-government shall dispose of its own right to tax the citizens, and the current fiscal pressure on Finnish resident is sufficiently high for not adding any additional burden to taxpayers.

The Rapporteur perfectly understands this argument ; he nevertheless wishes to underline that the current structure of regional administration (joint municipal boards) imply numerous transfers of funds between levels of government (The State pays grants to municipalities, which in their turn finance democratic «regional councils»). The Rapporteur understands that this system works in a satisfactory manner but recommend to monitor closely the efficiency in the allocation of resources in that system ; if «regional councils» were to be recognised additional functions, it may prove that direct financing of their policies would prove more cost-effective. Furthermore, the present system renders the democratic control of citizens on the decision of regional councils more difficult. Considering these elements, the Rapporteur suggests that the evolution of the situation of «regional government» in Finland shall make the object of another evaluation by the Congress in five years time.

APPENDIX I

MINISTRY OF THE INTERIOR

Department of Municipal Affairs

The visit to Finland of the representatives of the Council of Europe, 29 September – 1 October 1998

Programme

APPENDIX II

MINISTRY OF THE INTERIOR

The visit of Mr. Leinen, Mr. Levrat and Mr. Priore to Finland 22-25.2.1999

Draft Programme

 

1 It has to be noted that Finland did not issue a Declaration when signing or ratifying the Charter, as allowed by article 13 ECLSG, which specifies "the categories of local or regional authorities to which it intends to confine the scope of the Charter or which it intends to exclude from its scope".



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