Second GOLD Report Focuses on Local Government Finance
[1 March 2011] -- United Cities and Local Governments (UCLG) has released the second edition of its Global Report on Decentralization and Local Democracy (GOLD II), themed “Local Government Finance: The Challenge of the 21st Century.”
The report, which was undertaken with the support of Cities Alliance, builds on the broad-based overview of local government systems outlined in the 2008 GOLD I. The second GOLD focuses on a specific aspect of decentralisation: the fiscal architecture and performance of local governments.
GOLD II takes the pulse of the current state of the local public finances around the world with the main goal of identifying and analysing the principal challenges that local governments face in providing public services more efficiently and equitably. It analyses the architecture of fiscal decentralisation in 110 countries and metropolitan areas, and offers concrete recommendations for priority policy reforms at a regional and global level.
In most of these countries, local authorities are taking on more and more responsibilities in terms of public investment and in the provision of essential services for both economic development and the well-being of populations.
Despite these growing responsibilities, factors such as accelerating urbanisation and a changing world context (climate change, increasing risk of natural disaster, migration, ageing populations in some countries) are making it increasingly difficult for local governments to respond with existing levels of funding. The economic and financial crisis which began in 2008 only worsened this divide and has imposed major financial constraints on local governments, the report finds.
Guidelines for reform
In addition to providing specific regional and global recommendations, the report makes four fundamental points regarding the approach to reform in the area of local government finance:
1) Reforms should be tailored to specific countries. Each country is unique and the basic principles for reform need to be tailored to the economic, political, fiscal, and social realities of individual countries. In Europe, for example, substantial capacity exists, but there is a need for system reforms and increased access to investment finance. At the other end of the spectrum, less developed countries in several regions need to build basic institutions gradually if reforms are to take root and be sustained, although more capacity may exist in larger cities for more immediate assumption of functions and resources.
2) Cooperation among levels of government is critical. Consultation and collaboration among levels of government and other actors will be critical as efforts to strengthen local finance systems advance; each actor has an important role, but no actor alone can do what needs to be done. In particular, central governments need to treat local governments as partners, with full consultation in all issues of shared responsibilities. Local governments also need to continue the efforts they are already pursuing in many countries to reach out to citizens, to develop partnerships with non-governmental organisations and private firms, and to seek innovative means to deal with the challenges they face.
3) Decisions should be based on good information. While political factors are critical and there is no point in pursuing reforms that are politically infeasible, it is also important to make decisions about reform based on good information and evidence. Better information and analysis and broader and more transparent dissemination of such inputs can create and nurture a better environment for pursuing the right reforms over time. In addition, the success of initial modest reforms can create political momentum for the adoption of more advanced reforms with greater impact over time.
4) Strengthened global collaboration can add value. There is considerable value added from regional and global cooperation, sharing experiences, and learning by doing in pursuing local finance reform. The role of UCLG, its regional member organisations, and their individual country members, provides a strong foundation for collaborative learning at various levels, and these actors need to continue to strengthen those links going forward. Global and regional events, online access to information, country specific, regional and global networking activities, diagnostics to help countries and local governments to plan concrete productive action, and forums and mechanisms for sharing experiences and expertise would all be productive ways to support better local government finance.
Download the GOLD II Executive Summary (1.4 MB pdf)
About the GOLD Reports
The GOLD reports are part of the Global Observatory on Local Democracy and Decentralisation, an initiative launched by UCLG in 2006 as part of its objective to become a main source of information on local self-government, local authorities, governance, local democracy and the exchange of know-how. They are also the first global comparative analysis of the situation of local authorities in every region in the world.