Local Government Finances: Options for Reform [antikvár]

PREFACE The three authors of these Papers first met in Budapest nearly ten years ago. The occasion was a discussion of proposals for a democratic local government system which Tamas Horváth and Gábor Peteri had been helping to prepare. Their friendship and professional association has continued, since 1991 under the auspices of the British Know How Fund programme of support to local government reform in Hungary. The proposals discussed in 1988 became a reality two years later - more rapidly than their authors dreamt. The 1990 Local Government Act, and the subsequent legislation on local government competences, property and fináncé, represented an imaginative and ambitious programme of reform. They gave the newly created local authorities a scope of responsibility and autonomy far ahead of those in other central and eastern European countries. The breadth of these responsibilities and the nature of local government services in Hungary put heavy pressure, however, on their financial framework. The funding system introduced in 1991 was conceptually sound, but has since come under strain from two sides, macroeconomic and institutional. The macroeconomic pressure has stemmed from the programme of fiscal austerity imposed by the Government in 1995 in response to a major national budget deficit; this has reduced local government expenditure by 21% in real terms over four years. The institutional problems were design faults inflicted on the local government system by the political euphoria of 1990. They comprise a proliferation of small settlements claiming municipal status under the 1990 Act, and a lack of clarity over the assignment of íunctions between towns and counties. It is not easy to find a fair and efficient method of funding small municipalities which lack scale economies, or services which do not have a fixed location within the structure. Not surprisingly, local government funding has been a continuing focus of debate. The papers in this book have resulted from a number of requests to the Know How Fund for cooperative research and dialogue in this field. In 1995 Kenneth Davey and Gábor Peteri prepared proposals for the reform of local taxation at the request of the ministries of Fináncé and the Interior. In 1996 Gábor Peteri prepared suggestions for the improvement of the Deficit Grant, again in discussion with the same two ministries. In 1998 the Fund has contributed substantive reviews of the intergovernmental transfer and local revenue systems to a Workshop convened by a partnership of donors under the Subnational Development Programme. Papers on the institutional framework of local government and the organisation of municipal service delivery were alsó commissioned for this Workshop.