Local governments in Europe

Focus on their autonomy to and accountability from national governments. A short comparison between the United Kingdom, France and Germany.

When it comes to political governance, assessing the role of the local governments seems fundamental. Elected by the people, these bodies are particularly close to the citizens. They mostly correspond to the scales of cities and regions. Assessing the autonomy of local governments from the national level enables us to understand to what extent different levels of governance work together to provide services. How independent are local governments in Western Europe? The accountability of local governments is the condition of having to answer to an individual or body for one’s action¹. Do they act transparently and efficiently enough with the public money?

• Autonomy from national government

The constitution in countries which have one is the highest level in the law hierarchy -combined with the European Law. Every German State gets a Constitution which guarantees independency to the regions. Local governments should be autonomous. Is it really the case?

The Federal Constitution states that “the communities are guaranteed the right to regulate all the affairs of the local community on their own responsibility within the framework of stature law” and guarantees the communities “the fundamentals of financial responsibility”². In the same way the autonomy of French Territorial Communities is also constitutionally guaranteed³; their existence and financial means are protected so that the national government cannot disband them or change their status without modifying the Constitution.

On the contrary there is no proper reference to local governments in the un-codified British Constitution. The national Parliament is the only political organ, which is entitled to determine the status of local governments⁴. With the Prime Minister and his Cabinet, they propose and vote bills affecting local authorities⁵. The legislative framework automatically submits local governments to the will of national institutions. Between 1979 and 1997, the autonomy of local authorities was drastically reduced by the Cabinet, which shaped their new prerogatives. Since 2003 and the public report of the Audit Commission though, there has been a “turning point in the balance of power in the central/local relations debate” as it pointed out the “financial pressures experienced by local authorities were generated by central government”⁶.

British local governments are also financially tied to the national government. The Council tax is the only tax they can set and in 2005/06 only 15% of their income came from the Council tax⁷. In 2012 the national government transferred less grants to local authorities following the Austerity Plan taken in 2010. Councillor Coyne (Green) estimates that Liverpool City Council underwent a loss of 28% of its income.

On the contrary German local authorities get fixed shares of personal income tax, value added tax, trade tax and real property tax which are automatically transferred to the local authorities⁸. Furthermore, municipalities can determine their own rate for real property and trade tax and thus receive a stable revenue base⁹.

In France the local tax system is in-between: local authorities are assigned shares of local property taxes and of tax on businesses. They can determine the rate to some extent but not the tax assessment like in Germany. The share of the national subsidies has been growing over the last few years¹⁰ due to new competences local governments received from the national level e.g. railways. In accordance with the Constitution “whenever power are transferred between central government and the territorial communities, revenue equivalent to that given over to the exercise of those powers shall also be transferred”¹¹. At the risk of increasing the financial dependence from local governments, the State has transferred further subsidies.

• Accountability from local governments

Since the 1980s new tools and management techniques have been developed to increase the accountability of local governments, first in the United Kingdom, then in France and Germany.

New Public Management has been adopted in British national and local governments over the 1980s. One of the key ideas was to introduce “managerialist principles”¹² acquired in business management by setting performance aims and indicators to evaluate the work done. Although this system obviously enables a more transparent accountability at the local level, performance indicators have sometimes been proved to be rather inadequate¹³.

In a slightly different way when the French LOLF (national legislation governing public finance and introducing performance and efficiency) was implemented in 2001, local governments were also encouraged by the national institutions to become more accountable.

German municipalities appeared as forerunners in the reformation of their financial systems¹⁴. Amongst others they implemented, independently from the national State, a commercial accounting system developed by the controlling departments established within municipalities. This new system shows more clearly how public money is spent or invested.

Finally citizens can vote and thus force their local governments to be more accountable if they want to get re-elected. In Germany especially, direct democracy is central: binding local referendums on local policies are usual e.g. referendum on the “Stuttgart21” project.

Moreover there are public structures conducting audits. In Britain the Audit Commission, a watchdog, makes audit from various public structures and operates separately from the government¹⁵. Local governments are regularly controlled by this public body, which points out the problems in local accountability through public annual reports.

But is that is enough and efficient? Indeed the turnout at local election is low: in Britain it dramatically fell during the 1990s to reach 32% in 2012¹⁶. Elections are supposed to enable voters to express their interest and agreement or disagreement on local policies, so this phenomenon is to consider with attention.

Even if the introduction of rigid indicators and strict performance in Britain shows that accountability from local governments to national governments has increased over the last decades, the accountability to the citizens can still be questioned given the low turnout for local elections. The German solution which introduced a transparent accountancy at the local level and at the same time strengthened direct democracy appears as an effective way to have a reliable accountability driven to the people and ensuring the autonomy of local governments.