Dr. Dennis De Widt, Senior Lecturer in Accounting & Finance at Cardiff Business School, examines how local government associations in Germany and the Netherlands operate in different institutional contexts to local government associations in England and how this affects the way local government interests are represented and protected by central government in the different countries.
Local government associations (LGAs) are an under-researched topic, there’s no doubt about that. For the past 10 years, I’ve been researching the role of local governments in several countries with a focus on comparing England, Germany and the Netherlands.
In all three countries, the local level is responsible for roughly one-quarter of public spending but local governments operate in very different institutional contexts. England is a majoritarian system that has no formal constitutional protection for local government. Germany, with its federal constitutional system, has some formal protection for councils. In between, we find the Netherlands, a decentralized-unitary state which embeds local government in a consensual focused political system.
Different though they are, my research examines how those differences play out. Is one approach more effective at representing LGA interests at a national policymaking level?
Local versus State versus Federal Government in Germany
Out of the three countries, the German system provides the strongest constitutional protections for local government. However, several of these protections have only been in place in the last two decades. Strongly driven by a series of reforms implemented by the then Schröder government in the early 2000s, the reforms, known as the Hartz IV reforms, transferred several social welfare tasks from the federal to the local level. The reforms led to substantial financial pressures across local government, including a significant increase in local debt, and were implemented despite warnings from the German LGAs as to their local financial implications.
How did this happen? Constitutionally the German municipal level is part of the state-level administrations. The federal council, comprised of state representatives, are responsible for local interests. In the lead up to the Hartz IV reforms, German LGAs struggled to have their concerns on the local financial implications of the reforms heard by the states. Federal ministers used party political linkages to persuade state governments of the same party to support the reforms in the federal council. One LGA official I interviewed said the states:
‘…failed to demonstrate the assertiveness required to protect the financial interests of their own local government sector’.
German LGAs continued to apply ongoing pressure to the federal government until the latter formally recognised it had underestimated the local financial impact of the Hartz IV reforms. In recent years several measures have been taken to alleviate local financial pressures and reduce the risk of similar legislation being developed in future. Three to note are:
1) Since 2006, the federal government has been prohibited from directly assigning new tasks to the local level.
2) The Connectivity Principle came into play in 2004, restricting states’ powers to decentralise unfunded tasks to local government. This mechanism has been successfully used by German LGAs in state courts to compel state governments to improve their local funding. It has also motivated state governments to show more assertiveness protecting the financial interests of local governments when negotiating with the federal government.
3) New legislation requiring federal government departments to consult LGAs on relevant legislative proposals has strengthened the position of LGAs.
Membership resistance: The Netherlands
Like Germany, local authorities in the Netherlands have been increasingly involved in social welfare provision. The Association of Dutch Municipalities (VNG), often regarded as the second most influential Dutch lobby group after the Dutch Employers’ Federation, was heavily involved in the negotiations preceding the decentralisation of social welfare tasks. Ministers could have pushed through the reforms, but they were unwilling to act without the VNG’s support, resulting in a negotiation process of almost four years before the responsibilities were decentralised in 2015.
During the negotiations, many Dutch municipalities raised concerns over the financial implications of the austerity-driven decentralisation reforms. The starkest opposition played out when an agreement negotiated between the VNG’s leadership and the cabinet was rejected by 67 per cent of the municipalities participating in a vote organised by the VNG. Many local level interviewees criticized the VNG leadership for being co-opted by central government, which they accused of pursuing organisational rather than members’ interests.
The VNG’s key role in the reforms was to coordinate the decentralisation and with that came a significant increase in central government funding, far outnumbering municipal membership contributions since 2015. When its membership resisted, the VNG re-entered negotiations with central government and extracted significant financial concessions from the cabinet even though concerns remained over the reforms’ impact on municipal finances.
Protecting local financial interests
The recent decentralisations in Germany and the Netherlands show that Dutch and German LGAs play a significant role in protecting local financial interests, even though this is sometimes done retroactively. Constitutional conventions, whether established as formalised or informal practices, strengthen the voice of the local level in Germany and the Netherlands when it interacts with higher levels of government.
Competing for air time: the English LGA
Over the pond, there are fewer well-established conventions underpinning intergovernmental interactions in England. Access by the English Local Government Association to central government can be fairly described as uneven, fluctuating significantly depending on the party in government and ministerial style.
The English LGA has to work harder to get the attention of central government, competing for air space with several other interest groups.
With the massive economic uncertainties brought by the Covid-19 pandemic, English local government faces another challenging period and effective interest representation will be critical in order to defend local government interests. It remains to be seen whether the current UK government’s levelling up agenda and ambitions to reduce regional disparities will be beneficial to the position of English local government. Certainly, local government interest representation is likely to continue to be challenging given the continuing absence of reputable mechanisms for central-local interactions.
This blog post draws on findings from a larger research project, which included research interviews with Dutch, English and German officials from government and local government. Extensive research findings can be found in:
De Widt, D. and Laffin, M. 2018. Representing territorial diversity: the role of local government associations. Regional Studies 52(11), pp. 1585-1594.