Subnational finances-to-support-local-development
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Presentation on “Enhancing the role of municipalities in local & regional economies - Subnational finances to support local development” made at the Seminar on "Innovations and challenges in the management of a regional policy, held in Bratislava, Slovak Republic, 22 February 2017. Presentation by Isabelle Chatry, Regional Development Policy Division, OECD. More information: www.oecd.org/gov/regional-policy/innovations-and-challenges.htm
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Subnational finances-to-support-local-development
- 1. Enhancing the role of municipalities in local and regional economies Subnational finances to support local development Zdôraznenie úlohy samospráv v miestnej a regionálnej ekonomike – Podpora miestneho rozvoja zo zdrojov regionálnej samosprávy Seminar: "Inovácie a výzvy v manažmente regionálneho rozvoja“ Bratislava, Slovak Republic Isabelle Chatry Project Manager, territorial reforms and subnational finance Public Governance and Territorial Development Directorate OECD
- 2. The governance system of subnational government the OECD Federations & quasi-federations Unitary countries 38 960 3 818 360 579 78 2 489 1 788 2451 478310 8 186 36 004 8 176 419 31 74 11 510 446 311 314 255 338 3 197 2 935 2 109 2 320 605 402 2 874 6 272 103 105 212 213 35 countries: 9 federal and 26 unitary including 137 635 subnational governments in 2015-2016: • 133 007 municipal-level entities • 4 108 intermediary-level entities • 520 regional or state-level entities 119
- 3. • The OECD institutional landscape which has dramatically changed over the last 20 years, especially since the crisis as a result of decentralisation or recentralisation processes. The OECD: an institutional landscape very diverse and complex at subnational level 9 countries with only one level: - Municipalities 18 countries with two levels: - States/regions - Municipalities 8 countries with three levels: - States/regions - Intermediary gov. - Municipalities 9 federations and quasi- federations Australia Austria Canada Mexico Switzerland Germany Belgium Spain1 United States 25 unitary countries Estonia Finland2 Ireland Iceland Israel Latvia Luxembourg Portugal2 Slovenia Chile Korea Denmark Greece Hungary Japan Norway New Zealand Netherlands Czech Republic Slovak Republic Sweden Turkey France Italy Poland United Kingdom3 Notes: 1. Spain is a quasi-federal country. 2. Finland and Portugal have autonomous regions on part of the country. 3. There is an intermediary level only on part of England. Almost 138 000 SNGs in the 35 OECD countries in 2015-2016
- 4. MLG reforms: three interconnected dimensions Institutional: re-organising powers, responsibilities and resources Public management: re-organising administrative processes Territorial: re-organising territorial structures France, Finland Italy New Zealand Japan
- 5. Demographic factors Economic and social factors Local management and finance Political factors Institutional / administrative area Functional Area Territorial reforms: why do they happen?
- 6. Territorial reforms concern all subnational government levels Regional level Intermediary level Municipal level
- 7. Territorial reforms: a complex architecture Deconcentratedadministrations (centralgovernmentatterritoriallevel) Decentralisedadministrations (subnationalgovernments) Regional level Intermediary level Municipal level Satellites
- 8. 8 The United States and France account for 54% of 133 000 municipalities in the OECD. France 27% United States 27% Germany 8% Spain 6% Italy 6% Czech Republic 5% Canada 3% Hungary 2% Slovak Republic 2% Poland 2%
- 9. Municipal population and area: great variations between OECD countries 1 850 9 570 0 20 000 40 000 60 000 80 000100 000120 000 Czech Republic Slovak Republic France Hungary Switzerland Austria Iceland Luxembourg Spain Estonia Germany Italy Canada United States OECD34 Slovenia Norway Poland Finland Belgium Israel Portugal Greece Sweden Australia Netherlands Mexico Chile Turkey Denmark New Zealand Japan Ireland United Kingdom Korea 224 440 166 060 149 530 Average municipal population (nber of inhabitants, 2015-2016) 17 251 0 1 000 2 000 3 000 4 000 5 000 Czech Republic Slovak Republic Luxembourg Germany Austria Spain Netherlands Poland Japan OECD34 Greece Denmark United Kingdom Norway Finland Sweden Ireland Australia 12 369 Average municipal area (km2, 2015-2016)
- 10. 10 Municipal fragmentation 85% 31% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% CzechRepublic France SlovakRepublic Hungary Spain Iceland UnitedStates Canada Switzerland Austria Estonia Germany Italy Luxembourg OECD33… Norway Australia Finland Mexico Slovenia Turkey Chile Japan Israel Portugal NewZealand Denmark Poland Belgium Netherlands Sweden Ireland Korea UnitedKingdom Municipalities by population size class in OECD (% of municipalities) Less than 2 000 inhabitants 2 000 to 4 999 inhabitants 5 000 to 19 999 inhabitants 20 000 or more inhabitants
- 11. 11 « Upscaling » and/or « transcaling »… Municipal mergers and inter-municipal cooperation 0 1 000 2 000 3 000 4 000 5 000 6 000 Austria(1950,2015) Sweden(1952,1963) Japan(1953,1999) Norway(1957,1967) Denmark(1970,2007) Finland(1976,2010) Belgium(1975) NewZealand(1989) Greece(1997,2011) Turkey(2008-2012/14) Number of municipalities before the reform Number of municipalities after the reform Number of municipalities in 2015-2016 9 868 Alternative to municipal mergers Efficiency gains Costs savings I M C Better local services Staff performance / expertise Innovation / high tech Drivers of Inter-municipal co-operationSome examples of mergers policies in the OECD and EU since 1950
- 12. 12 SNGs are key economic and policy actors across the OECD 29% 45% 38% 10% 55% 20% 12% Greece New Zealand Greece New Zealand Chile Estonia Greece Denmark Japan Italy Denmark Japan Japan Norway 16,1% 37,0% 19,7% 0,5% 25,4% 4,1% 5,2% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Expenditure Staff expenditure Public procurement* Current social expenditure* Investment Tax revenue Debt** OECD (unitary countries) Minimum Maximum Slovak Republic% of general government - 2014 *: No data for Chile **: Debt OECD definition ie including, in addition to "financial debt", insurance reserves and other accounts payable. No data for Chile and New Zealand
- 13. 13 SNG expenditure in the OECD: 40% of total public spending i.e. 17% of GDP in 2014 AUS AUT BEL CAN CHL CZE DNK EST FIN FRA DEU GRC HUN ISL IRL ISR ITA JPN KOR LUX MEX NDL NZL NORPOL PRT SVK SVN ESP SWE CHE TUR GBR USA OECD34 OECD25 0 10 20 30 40 50 60 70 80 0 4 8 12 16 20 24 28 32 36 Subnationalexpenditureasashareoftotalpublic expenditure(%) Subnational expenditure as a share of GDP (%)
- 14. 14 Spending decentralisation process between 1995 and 2014 JPN IRL HUN NDL LUX EST NOR KOR GBR ISR ISL AUT USA NZL PRT CHE MEX EU28 AUS GRC FRA SVK CZE BEL ITA SVN DEU FIN DNK POL CAN SWE ESP -15 -10 -5 0 5 10 15 % ∆ 1995-2014 as a % of total public expenditure ∆ 1995-2014 as a % of GDP Subnational expenditure as a share of total public expenditure and of GDP in 1995 and 2014 (changes expressed in % points)
- 15. Wealthier countries tend to be more decentralised… TCDGIN COGKHM MLTGRM DOMJAM AZEBENMWIBFA CRI CYPTUNSEN MUSMLI JORARMPRYSLVZWE MYSCHLHNDUGA PSEKEN GRCMARTZA THA IRLTURALB CPV ECU NZL NGAKGZ GEO ISRMNE SVK PRT IDN HUNGHA SRB BGR LTUPER ROU KAZMNGMDA SVNEST CZELVA GBRFRAPHL HRVMEXCOL POL ISLKOR NLDIND ITAUKR NOR JPN AUS AUT USA VNM CHEDEUCHN ESPZAF BRA BEL FIN RUS SWE CAN DNK ARG R² = 0,3555 0% 5% 10% 15% 20% 25% 30% 35% 40% 0 10 000 20 000 30 000 40 000 50 000 60 000 70 000 SNGexpenditureasa%ofGDP GDP per capital (USD PPP)
- 16. 16 SNGs spending responsibilities in the OECD and Slovak Republic 0 10 20 30 40 50 60 70 80 90 100 ITA DNK GRC IRL FRA PRT HUN AUT FIN JPN LUX ESP OECD22 SWE DEU NOR OECD28 CHE KOR POL GBR NDL USA BEL CZE ISL ISR EST SVN SVK % Education Health General public services Social protection Economic affairs Housing and community amenities Other
- 17. 17 SNGs are major public employers in the OECD 0 20 40 60 80 100 NZL GRC IRL TUR ISR PRT LUX HUN FRA SVN SVK GBR EST ITA ISL OECD24 CZE EU28 POL AUT KOR NOR NDL OECD32 MEX DNK FIN SWE OECD8 USA JPN ESP DEU BEL CHE CAN % Subnational government Central government and social security Subnational staff expenditure as a share of total public staff expenditure in 2014 (%)
- 18. 18 In Slovakia, staff expenditure form the bulk of SNG expenditure while the share of capital expenditure is small 36% 48% 13% 13% 0 10 20 30 40 50 60 70 80 90 100 NZL TUR ISR JPN IRL KOR ITA DEU CHE FRA OECD25 HUN AUT CAN EU28 DNK GBR PRT LUX GRC OECD32 CZE SWE ESP SVN POL OECD8 NDL USA BEL FIN ISL EST MEX SVK NOR % Compensation of employees Intermediate consumption Social expenditure Subsidies & other current transfers Capital expenditure Other
- 19. 19 SNG investment as a share of public investment (2014) 59% 95% 25% 12% 00% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Canada Belgium Japan Mexico* Australia** Germany Switzerland Spain OECD9 CzechRepublic France OECD34 Korea Israel UnitedStates OECD25 Italy Finland Slovenia EU28 Poland Netherlands Sweden Portugal Austria Denmark Norway Iceland NewZealand* Luxembourg Hungary Ireland Turkey*** UnitedKingdom SlovakRepublic Estonia Greece Chile* States and Local States Local *: 2013 figures - **: 2012 figures - ***: 2011 figures
- 20. 20 Economic affairs, education and housing/communities amenities are the main areas of subnational investment 19 39 22 29 09 18 0 10 20 30 40 50 60 70 80 90 100 SWE HUN DNK LUX SVK SVN NOR CHE BEL DEU ITA FRA EU28 GBR OECD27 UWA ISR OECD21 OECD27 WA ISL OECD6 ESP EST AUT USA IRL PRT JPN GRC % Economic affairs General services Education Housing and community amenities Environmental protection Other Breakdown of SNG investment by economic function (% of total SNG investment, 2013)
- 21. 21 What are the sources of SNG revenues? Tax revenues account for 44% of SNG revenue in the OECD 11% 37% 44% 47% 70% 50% 37% 31% 18% 10% 15% 18% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Mexico Netherlands Austria Slovak Republic Turkey United Kingdom Belgium Ireland Hungary Greece Luxembourg Korea Poland Denmark Portugal OECD24 (unitary) Australia Norway Spain Israel EU28 Slovenia OECD33 Italy Japan Estonia Finland Chile OECD9 (federal) France Czech Republic Canada United States New-Zealand Switzerland Sweden Germany Iceland Taxes Grants & subsidies Tariffs & fees Property income Social contributions
- 22. 22 Subnational government tax revenue as a % of public tax revenue and as a % of GDP, 2014 AUS AUT BEL CAN DEU MEX ESP CHE USA OECD9 CHL CZE DNK EST FIN FRA GRC HUN ISL IRL ISR ITA JPN KOR LUX NDL NZL NOR POL PRT SVK SVN SWE TUR GBR OECD25 OECD34 0 10 20 30 40 50 60 0 2 4 6 8 10 12 14 16 SNGtaxrevenueasa%ofpublictax revenue SNG tax revenue as a % of GDP
- 23. 23 Subnational government debt as a % of GDP and of public debt, 2014 AUS AUT BEL CAN DEU ESP CHE USA OECD8 CZE DNK EST FIN FRA GRC HUN ISL IRLISR ITA JPN KOR LUX NDL NOR POL PRT SVK SVN SWE TUR GBR OECD24 OECD32 0 10 20 30 40 50 60 0 10 20 30 40 50 60 Subnationalgovernmentdebtasa%ofpublicdebt Subnational government debt as a % of GDP