Scope and funding of local government

Authors

Hamed Shafiee

Ron Crawford

Date published

30 November 2019

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Local government in New Zealand has both narrow scope and a limited funding base compared to many other high-income countries (section 2). Promoters of a wider role for local government in New Zealand argue that excessive centralisation of funding and control of government functions is harmful for economic performance and local democracy (Craven, Goldingham-Newsom, & Hartwich, 2019; Forbes, 2019; Krupp, 2016).

This paper compares New Zealand to other high-income countries in the distribution of functions across central and local government; and in the sources of funding for local government. The pattern is complex. Yet, unsurprisingly, a wider scope for local government – particularly including education, health and other social services – requires both broader funding bases and greater contributions from central government (section 2).

To get a better understanding of what devolution of funding and administration of health, education and social services involves, this paper looks in more depth at local government scope and funding in Sweden. Sweden and New Zealand are opposite ends of the scope and funding spectrum. Local government in Sweden administers most health, education and social services and funds a large proportion of them through local personal income taxes (set in the order of 30% of taxable incomes) (section 3).

Even so, arrangements for policy design and local administration of these services in Sweden look less different from New Zealand than first appears (section 5). This is largely because governments in both countries face the same sorts of trade-offs between centralised and decentralised decision rights over the provision and resourcing of local services (section 1). The different formal arrangements reflect differences in history, culture and the influence of geographic neighbours.

Read the working paper: Scope and funding of local government: an international comparison

This research was carried out for our Local government funding and financing inquiry.

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