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relatively limited in France and Italy (although increasing in both countries), and very
constrained in the United Kingdom, Ireland, Portugal and Greece. The other extreme is
represented by the northern countries and Luxembourg, where the local autonomy is in
fact the basis of the administrative system, although in Denmark the national government
is increasingly assuming control. Relatively much autonomy for the local authorities is
also a characteristic of the three federal states and Spain. In case municipalities enjoy a
high degree of autonomy the adjustment among municipalities in the same urban region
tends to be more difficult, especially in matters of spatial economics or transport.
Fragmentation of policy (reported for Spain, for instance), and intra-regional competition
(in Austria for one) work counter-productive on the development of functional urban
regions. In the United Kingdom, local autonomy has been seriously curtailed, and in
Portugal and Greece the local level has hardly any competency at all. In the Netherlands,
finally, the policy freedom of municipalities has also increased, but that finds no direct
expression in the financial relations between state and local government, although some
national grants have gradually been combined into generic payments, which gives
municipalities more freedom to decide how to spend the money.
Urban finance
The degree of local autonomy is largely tied up with the financial relations. This topic
appears to be extremely complex, and to deal with it in detail would be beyond the scope
of this exercise. Therefore, we will content ourselves with presenting some indicative
results, based among other sources on the summary of a recently published comparative
analysis of local public finance in the EU member states (Pola, 1996). There seems to be
an infinite variety of ways to acquire local revenue. Taxation is an important source, but
not always the most important, as is evident from the situation in six member states. In
Swedish and Spanish cities, tax returns account for over six tenths of the municipal
budget. Austria, Denmark, Finland and France follow close (about five tenth). Income
from taxation is relatively low (about one tenth) in the Netherlands, Greece, Ireland, Italy
and the United Kingdom (Committee of the Regions, 1996). However, high tax returns do
not always mean more autonomy, for often the levy of taxes is merely the execution of an
imposed task. Other important sources of income are the grants and subsidies allotted by
higher administrative levels. Their share in municipal income varies from very low in
Sweden, Austria, Spain and Germany (about one fifth) to very high in the United
Kingdom, Ireland, Italy, Greece, and the Netherlands (between six and eight tenths). In
many countries, block grants have gradually been replaced by specific grants. In
Germany, the United Kingdom and the Netherlands a considerable portion of the grants is
still paid in the shape of specific grants. The third, ’non-tax-non-grant’, source of income
consists of charges for services and commercial transactions. Especially in Luxembourg,
Germany and Austria, that category contributes quite a lot to municipal income (over
three tenths). In several countries (the Netherlands among them) such revenues are
needed to compensate for the loss of income from the state which attends the
decentralisation of tasks. Furthermore, the private sector is increasingly involved in the
implementation of policy, for instance through public-private partnerships (in many
countries) and the privatisation of public services (in particular in the United Kingdom).
Finally, borrowing is an accepted way to find funds for investment in most (but not all)
member states.