Making Decentralisation Work

Annex D. Decentralisation and recentralisation processes in selected OECD countries

Table A D.1. Decentralisation and recentralisation processes in selected OECD countries

Belgium	● 2001: Revision of the Constitution Special Act. Lambermont Agreement provides regions with more tax autonomy, regulatory powers. 2011: 6th State reform, transferring in 2014 additional responsibilities to regions (labour market policies, mobility and justice) and communities (family allowance, long-term care, health) and increasing own-source tax resources. The regions had already several responsibilities on labour market policies and mobility, and the 6th state reform transferred additional responsibilities to the regions in these fields (but they remain mixed responsibilities). Justice remains a mainly federal matter. However, the so-called “justice homes” have become a responsibility of the communities since the 6th state reform and not a responsibility of the regions. Concerning health, certain aspects of the healthcare policy have been transferred to the communities, but the major part of health remains a federal (central government) responsibility. ● Since 2014, regions are able to raise additional “enlarged” percentages of individual income tax revenue. Since 2014, the regions can levy a regional personal income tax (PIT) by means of a regional additional tax on PIT. Personal income tax consists now of two major components: federal (central government) PIT and regional PIT. ● Region’s tax competencies are also increased regarding tax bases and exonerations. ● Both Flanders and Wallonia are engaged in local government reforms (decrease in responsibilities and taxing power at the provincial level; more autonomy, scope of action and revenues for municipalities).
Chile	● 1992: Adoption of two organic constitutional laws, one creating a “mixed” regional government system and the other on the first elections at universal suffrage of mayors and municipal councillors held in 1992. ● 1999: New constitutional law extended municipal powers and responsibilities in the field of economic development, environment, planning, equal opportunities, etc. ● 2009: New push towards a decentralisation agenda, especially through the constitutional reform establishing direct election by citizens of regional councillors, creating a democratically-elected body to manage regional development. The first direct elections took place in 2013 and regional councillors took office on March 2014. ● 2017: Publication of the law establishing transforming the “mixed” regional system (deconcentrated and decentralised) into a full self-government system thanks to the direct election of the regional executive (governors) by popular vote every four years. Transfer from the national government to the new self-governing regions of responsibilities in three areas (economic development, social development and infrastructure and housing) should follow as well as a reform of the funding system.
Czech Republic	● 2000-2002 decentralisation reform: Creation of a new regional tier in charge of secondary education, regional roads, economic development and planning, health); the Municipal Act 128/2000 defines the legal framework, organisation and responsibilities of municipalities. The Local Finance Act 243/2000 defines the regional and municipal financing system based on tax sharing. ● 2005 and 2013: Fiscal reform increasing of municipal tax revenues. ● 2015: Some municipal responsibilities transferred from small municipalities to larger municipalities (to overcome municipal fragmentation) and to the central government in the framework of the social reform.
Denmark	● 1970-2000: Several waves of decentralisation reforms between 1970 and 2000, including the 1998 reform: “Denmark as a case study for a renewal of the public sector to boost quality and efficiency at all levels and introduction of market-oriented mechanism or competitive public management”. ● 2007 reform: Municipalities gained responsibilities for social welfare and education, making them responsible for most citizen-related tasks. The five new regions were granted responsibilities for healthcare services, regional development, regional transport and the environment. Establishment of a new financing and equalisation system: municipal tax revenues were modified while new regions lost their taxing power, replaced by central government transfers.
Estonia	● 1989: Re-establishment of decentralisation by the 1989 Local Government Act, followed by the 1993 Local Government Organisation Act which abolished counties as local government tier. ● 2001: Municipalities (and central government) are not more responsible for healthcare which is privatised (limited companies or foundations). ● 2016: Territorial-Administrative Reform Act adopted; the number of municipalities decreased from 213 to 79. This territorial reform could be accompanied by a reform of tasks and financing framework.
Finland	● 1995: A new enabling Local Government Act gave local governments more freedom to organise their affairs, based on the experimentation of the “Free Commune Act” (1988); major reform of grants system. ● 1999: Local autonomy is guaranteed by the 1999 Constitution. ● 2007: PARAS reform (Act on Restructuring Local Government and Services). ● 2013: Municipal Structure Act. ● As of 1 January 2019: Creation of 18 autonomous elected regions (replacing the joint municipal bodies) having responsibility for the organisation of healthcare and social services (transferred from joint municipal authorities, local authorities and central government) as well with responsibilities in the area of regional economic development, transport, environment and rescue services.
France	● 1982-83: Decentralisation laws establishing the principle of “free administration”, and organising the transfer of responsibilities (education, social affairs, etc.) and resources (staff, finances), in particular to the departments and the regions, created as self-governing bodies by the above-mentioned laws (“first Act” of decentralisation). ● 2003:-04: “second Act”: New responsibilities transferred to departments and regions (social sector; spatial planning and regional development; local and regional transport and national roads; vocational training, etc.), more financial autonomy and the ability of local governments to carry out experiments in several areas. ● 2010 reform: Multi-faceted local government reform, including a clarification of responsibilities; the setting up of common “territorial councillors” for regions and départements; a reform of the local taxation system (reduction of local taxing power) and equalisation mechanisms; a streamlining of inter-municipal co-operation; the creation of a new status of métropole, etc. Important parts of the 2010 legislative package were revoked. ● 2013-15: “Act III of decentralisation”: New territorial and decentralisation reform resulting in the law on metropoles (2014), regional mergers (2014) and the law NOTRe (2015) which modifies allocation of responsibilities across levels of subnational governments, reinforcing those of regions (economic development, territorial planning, environment protection, vocational training).
Germany	● 2006 Federal Reform (Föderalismusreform I): Länder gained additional responsibilities regarding economic activities and trade, education (universities), environmental protection, crime punishment, staff management, etc. The reform also clarified the distribution of responsibilities between the federal and the states governments. ● 2009 federal reform (Föderalismusreform II): New changes introduced, in particular, new financial arrangements. ● 2001: Introduction of the “debt brake” to reduce future public debts. ● Municipalities are governed by länder’s legislation.
Greece	● Principles of decentralisation and local autonomy mentioned in the 1975 and 2001 Constitutions. ● 1986: Creation of the current regions as a second-level administrative entities, complementing the prefectures. ● 1997: Kapodistrias reform of local and regional government gave more powers to the regions and merged municipalities. ● 2010: Kallikratis reform (entered into effect on 1 January 2011), creating 13 full self-governing regions with new responsibilities in the area of regional planning and development including structural funds (transferred from the prefectures) and merging municipalities. The reform also transferred some responsibilities relative to local development, child protection, elderly care, and social assistance to jobless and poor people and health prevention to municipalities.
Hungary	● 1989-95: Restoration of the autonomy of municipalities and counties, notably through the 1990 Act of Local Government. The local governments are given broad responsibilities and autonomy in terms of financial management. ● 2012 Constitutional reform and 2011 Cardinal Law on Local Governments: Recentralisation process: counties lost several major responsibilities (healthcare, notably hospitals, social initiatives and secondary education) to be now in charge of regional development for the most part. Municipalities are no longer being responsible for primary education. The central government took over a vast array of subnational responsibilities and reinforced its oversight over legal compliance and administrative functioning of subnational governments. ● 2013: Reform of the subnational financing system: reduced and stricter system of central government transfers from an income-based system to a task-based system (earmarked funds); setting up of an authorisation framework for borrowing. ● 2010: In parallel, the central government launched an important State Territorial Administration Reform (STAR), thus fundamentally reshaping the jurisdictional, organisational and human resource foundation of public service delivery at all levels of the public sector in Hungary.
Iceland	● Local self-government is guaranteed by the constitution and legal arrangements governing municipalities are laid down in the Local Government Act of 1998, amended several times. ● 2011: municipalities gained new responsibilities regarding service provision and support for disabled people. Other transfers are currently discussed (e.g. elderly care, entire healthcare sector) but the obstacle is the small size of many municipalities; Local Government Act (LGA) established new fiscal rules for municipalities together with enhanced arrangements for fiscal oversight of municipal finances and new fora for central-local fiscal co‑ordination.
Ireland	● 2001: Local Government Act introduced the range of reforms set out under “Better Local Government” White Paper. ● 2012: “Reforming Local Government” plan and “Putting People First Report” deal with issues of structures, functions, funding, efficiency and service, and governance and accountability, the goals being to strengthen local authorities' responsibilities, functions, leadership and financing mechanisms. ● 2013: Introduction of a local property tax with rate-setting powers at the margin. ● 2014: Local Government Reform Act merged 114 local councils into 31 local governments, abolished the previous 8 regional authorities (replaced by 3 regional assemblies, not elected by universal suffrage) and clarified the allocation of responsibilities, reassignment of water services to Irish Water, recentralisation of some functions and allocation of several new responsibilities for local and community development, in addition to an enterprise support and economic development role.
Italy	● 1990s: Important decentralisation process, including the 1990 law on the “Regulation of Local Autonomies” and the 1997 Bassanini reform which implemented the subsidiarity principle through different laws, referred as “administrative federalism”, and significantly modified fiscal, administrative and political framework at the subnational level. ● 2001: Major move towards decentralisation through the constitutional reform which entrenched regions, provinces and municipalities in the constitution, placing them on the same level as central government. A clause listing the responsibilities of the central government was introduced while regions receive all residual competencies. Several implementing decrees were not adopted, however (“unfinished agenda”). ● 2006: National referendum rejecting the constitutional reform further strengthening of the regions, leading the way to a federal state. ● 2009: Adoption of a new framework law on fiscal federalism, reshaping subnational government functions and relations across levels of government as well as fiscal framework. ● 2014: Abolition of provinces by Law 56/2014 as self-governing entities. They are transformed into inter-municipal co‑operation bodies, which also became “metropolitan cities” in each of the ten metropolitan areas designed by the law. ● 2016: National referendum rejecting the constitutional reform which intended to clarify the allocation of responsibilities between the central government and ordinary regions, abolishing “concurrent competencies” and recentralising several responsibilities (e.g. transport, labour, public finance and taxation).
Japan	● 1995-2000: Decentralisation Promotion Reform launched in 1995 and supported by the Decentralisation Promotion Committee led to the adoption of the “Omnibus Decentralisation Law” of 2000 which abolished the system of agency-delegated functions (in which regional governors and mayors serve as regional representatives of the central government) and increased subnational autonomy and responsibilities. This law introduced revisions to more than 475 anterior laws. ● 2002-06: Trinity Reform laid the financial component of the decentralisation reform, with three major components: creation of a tax-sharing system between the national and subnational level, a reform of the equalisation tax (local allocation tax) and the abolishment of several national earmarked grants. ● 2006: Launch of the Second Decentralisation Promotion Reform, complementing the first reform to grant further authority to local governments, rationalise their functions and continue municipal mergers.
Korea	● 1987: “Declaration for Democratisation” followed in 1988 by the reform of the Local Autonomy Act and the Local Finance Act. ● 1991-95: First local elections held for local councillors (1991) and local executives (1995). ● 1999: Launch of a large reform of the public sector which included a comprehensive decentralisation programme, monitored by a Special Committee on the Devolution of Government Affairs. ● 2004: Special Act on the Promotion of Decentralisation, enacted under the impulsion of the Presidential Commission for Decentralization, clarified principles and methods for decentralisation, transferred new functions to local governments and abolished special administrative agencies. ● 2005: Fiscal reform establishing the “Special Account for National Balanced Development” which transformed many specific-purpose grants into integrated national grants for regional development; rationalisation of the national and local tax system. ● 2017: Autonomy and decentralisation was selected as a core task within the Top 100 national tasks of the Moon Jae-In administration. ● 2018: A new Presidential Committee on Autonomy and Decentralization was set up in January 2018. The revised bill of the “Special Act on Autonomy and Decentralization and Local Administration System” was promulgated on March 2018. Constitutional reform is proposed, including adding to Article 1 of the Constitution the mention “Republic of Korea promotes decentralization” and giving local governments more autonomy.
Lithuania	● 1994 and 2002: Local Government Act defining municipal functions and ensuring their autonomy. ● 2010: Elimination of state counties leading to the transfer of their competencies to municipalities (primary healthcare, education and social services) and to the central government. Counties have been replaced by regional development councils composed of municipal councillors. ● 2014: Full responsibility for social assistance is given to municipalities (funding and management).
Mexico	● Late 1980s: Fiscal and regulatory decentralisation, including devolution to states of basic education (1992) and healthcare (1996) responsibilities; reform of the National System of Fiscal Co-ordination in 1998. ● Municipal autonomy recognised by the constitutional reforms in 1983 and 1993. ● 2007 Fiscal reform: States were given more taxing powers; simplification and improvement of the incentives embedded in the formulas for the distribution of federal transfers. ● 2013: Nation-wide political reform introducing, among other things, re-election of mayors; bill transforming the federal District of Mexico into a state, with the same legal and administrative status. ● 2014-15: Fiscal reform (part of Pacto Por Mexico) improving the tax system, strengthening the fiscal responsibility framework and overhaul rules for states and municipal debts.
Netherlands	● 2002: Act of “dualisation” separating composition, functions and powers of the deliberative council and the executive. ● 2007: Decentralisation programme transferred new responsibilities to provinces and municipalities. ● Since 2015: Start of a new decentralisation process with large responsibilities to be transferred to municipalities in the social sector (youth health, long-term care and employment support for young disabled people). Creation of a new fund for social affairs to accompany the decentralisation in the social sector; revitalising and strengthening the role of the provinces with more focused powers in regional planning, economic development and co‑ordination.
New Zealand	● 1989: Local Government reform, monitored by an independent Local Government Commission, consisting in a large restructuring of local governments and special-purpose bodies, by reducing significantly the number of local authorities, creating regional councils and allocating functions. ● 2002: Local Government Act introduced a framework for local authorities, establishing responsibilities of local government and increasing their autonomy by providing them with a general power of competency. ● 2013: Local Government Act clarified responsibilities between regional councils and territorial authorities and includes several managerial measures, in line with the Better Local Government New Zealand Reform. ● 2018: Productivity Commission to investigate Local Government funding and financing.
Norway	● 1992: Local Government Act sets the basic legal framework for municipalities and counties. ● 1999: Abolition of the national corporate income tax as a local tax in 1999. ● 2001: Recentralisation of the responsibility for hospitals from the counties to the central government in the framework of the national healthcare reform. ● 2003 and 2010: New responsibilities – and transfers – granted to counties (spatial planning, regional development and innovation policy) and municipalities (health and social care). ● 2014-20: start of large local government reform, resulting in the mergers of regions (from 18 counties to 11 from 2020, including Oslo municipality) and municipalities (from 428 in 2015 to 356 at the end of the process in 2020). Adoption of a new municipal law in June 2018, strengthening municipalities and relations across levels of government. Government plan to allocate new tasks and instruments to the new regions in order for them to become “stronger regional community developers” (scheme to be presented in October 2018).
Poland	● 1990: Act on Municipality re-established municipal autonomy, giving them large responsibilities. ● 1998: Act on Local Government revenue, further reformed in 2003 and 2004 to provide subnational governments (SNGs) with more fiscal autonomy. SNGs gained more financial autonomy, with a decrease in the share of central transfers (and of earmarked grants), and increased shared tax revenues (higher proceeds from PIT and corporate tax). ● 1999: Local Government Organisation Act created the regional and intermediate levels (voivodeships and powiats), transferring to them several responsibilities (secondary and higher education, public health, social aid, roads, regional economic development). ● 2009: Decentralisation of new tasks to regions (regional rail transport, waste and water management, and environmental protection). ● 2013: Adoption of strict fiscal rules applying to subnational governments.
Portugal	● 2007: Reform of the Local Finance Act, expanding municipal competencies and reforming the grant system. ● 2013: Local Government Reform giving additional responsibilities to municipalities regarding healthcare, park management and city planning; Regional and Local Finance Laws (effective in 2014) were enacted with the goals of strengthening fiscal sustainability and increasing transparency and accountability. ● Since 2015, a new programme of decentralisation is under preparation, including the transfer of responsibilities to local councils in a wide range of areas as well as new Local Finances Law. ● 2018: Approval of Law no. 50/2018, august 16 (framework law on decentralization of competences to municipalities and inter-municipal communities) and revision of the Local Finance Law (Law no. 51/2018, August 16).
Slovak Republic	● 1990: Municipal Autonomy Act. ● 2001: Decentralisation of new responsibilities to municipalities (social assistance, urban planning, housing, environment, primary schools, recreation, etc.) and creation of the regions (Higher Territorial Units), entered into force in 2002, now in charge of secondary, professional and vocational education, social welfare, regional roads and transport and regional economic development and territorial planning. ● Project of Further Decentralisation of Public Government for the years 2003-06 confirms the decentralisation process. ● 2005: Act on Local Financing deeply modified the subnational financial system by raising both shared taxes and own-source taxes, and reduced central government transfers to sub-national governments. ● 2014: ESO Programme (efficient, reliable and open state administration) restructuring the central government territorial administration to promote cost-efficiency and simplification, including better multi-level governance at the local level in public services delivery to citizens.
Slovenia	● 1993: Adoption of the Local Self-Government Act. ● 2005: Reform of the Local Self-Government Act to determines the principles of regulation of municipalities and increase decentralisation. ● 2007: Financing of Municipalities Act reinforced fiscal decentralisation, introducing additional resources for municipalities and consolidating the system of vertical equalisation. ● 2008: Draft bill creating 13 regions rejected by referendum.
Spain	● 2000-02: Transfer of education (2000) and healthcare (2002) to autonomous communities. ● Reforms of autonomous communities’ status case by case (e.g. Catalonia and Valencia in 2006, Andalusia, Aragon and Balearic Islands in 2007, etc.) ● 2009: Law 22/2009 on the financing of autonomous communities (in effect since 2011): increase in the share of national taxes allocated to autonomous communities; reform of the equalisation system and intergovernmental. ● 2012: Organic Law 2/2012 on Budgetary Stability and Financial Sustainability introducing strict fiscal rules for subnational governments. ● 2013: Law 27/2013 for Rationalisation and Sustainability of Local Administration (following the work of the Commission for the Reform of Public Administration, CORA) aimed at clarifying of competencies between municipalities and provinces and preventing duplications; adoption of the law on funding municipalities and provinces.
Sweden	● 1991: Local Government Act. ● Since 1997: Experimentation of asymmetric decentralisation in different waves, according to a bottom-up decentralisation process. Different regionalisation options were developed in different regions through four main waves. ● Different reforms of the equalisation system in 2005, 2012 and 2014. ● 2019: All county councils are responsible for regional development matters in their own region.
Turkey	● 2004 and 2005: Package of reforms aimed at the restructuring of the Special Provincial Administrations (strengthened powers), the municipalities (additional responsibilities to them in the area of economic development and education infrastructure), the village administrations, the Local Government Unions and the Metropolitan Municipality. ● 2008: Law on Allocations from Tax Revenues under the General Budget to Special Provincial Administrations and Municipalities. ● 2012: New local government reform, in particular through the new Metropolitan Municipality Act.
United Kingdom	Regional level ● 1998: Devolution process creating three devolved nations in Northern Ireland, Scotland and Wales with a directly-elected “national assembly”/parliament and their own government and major competencies transferred to them. It created an asymmetric decentralisation across devolved nations (they do not have the same powers) and with England (no regional governments). ● 2004: Regionalisation process in England suspended in 2004 following the rejection of a referendum held in the north-east of England. ● 2007: Devolution restored in Northern Ireland. ● 2010: Extension of the powers of the Welsh Assembly after the 2010 referendum. ● 2012: New powers transferred to the Scottish Parliament by the Scotland Act 2012 (possibility to raise own taxes to come into effect in full in 2016 and introduction of a range of measures to strengthen the devolved administration in Scotland). Local level ● England: Decentralisation under the form of “localism” emerged gradually emerged since the 2000s, leading to the adoption of the Localism Act 2011 aimed at pushing decentralisation forward through a general power of competency for local authorities, new responsibilities (housing, social protection, health) and resources (localisation of the council tax, business rates retention as of 2013, grants’ reform). The Cities and Local Government Devolution Act allows greater devolution of powers to combined authorities (housing, transport, planning and policing powers) and introduces directly-elected mayors. ● Northern Ireland: 2012-15 Local Government Reform devolving new powers and responsibilities to the new 11 councils.

Sources: OECD elaboration based on research, OECD (2017[5]), Multi-level Governance Reforms: Overview of OECD Country Experiences, https://doi.org/10.1787/9789264272866-en; OECD-UCLG (2016[6]), Subnational Governments Around the World: Structure and Finance, http://www.oecd.org/regional/regional-policy/sngs-around-the-world.htm.

References

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[3] Hooghe, L., G. Marks and A. Schakel (2010), The Rise of Regional Authority. A Comparative Study of 42 Democracies, Routledge, London.

[2] Hooghe, L., G. Marks and A. Schakel (2008), Regional authority in 42 democracies, 1950-2006: A measure and five hypotheses, pp. 111-302.

[1] Hooghe, L. et al. (2016), Measuring Regional Authority: A Postfunctionalist Theory of Governance, Oxford University Press, Oxford.

[6] OECD (2018), Subnational Governments in OECD Countries: Key Data (brochure), OECD, Paris, http://www.oecd.org/regional/regional-policy.

[5] OECD (2017), Multi-level Governance Reforms: Overview of OECD Country Experiences, OECD Publishing, Paris, https://doi.org/10.1787/9789264272866-en.

[7] OECD-UCLG (2016), Subnational Governments Around the World: Structure and Finance, http://www.oecd.org/regional/regional-policy/sngs-around-the-world.htm.