Commonwealth Local Government Forum

Local government finance

Resourcing local government remains a central challenge to effective decentralisation. This section has content relating to different models of fiscal decentralisation, options for identifying new sources of local revenue, such as local property tax; and strategies for improving collection and deployment of own-source revenue. It also offers information about improving the borrowing potential of local government, innovative financing models such as municipal bonds, shared services, and public private partnerships.



Is Decentralization Good For Development?: Perspectives from Academics and Policy Makers

This book offers insights and lessons that help us understand when the answer is “Yes”, and when it is “No”. It shows us how decentralisation can be designed to drive development forward, and focuses attention on how institutional incentives can be created for governments to improve public sector performance and strengthen economies in ways that enhance citizen well-being. It also draws attention to the political motives behind decentralisation reforms and how these shape the institutions that result. The book's purpose is to marry policy makers’ detailed knowledge and insights about real reform processes with academics’ conceptual clarity and analytical rigor. This synthesis naturally shifts the analysis towards deeper questions of decentralization, stability and the strength of the State. The book explores these in Part 1, with deep studies of the effects of reform on state capacity, political and fiscal stability, and democratic inclusiveness in Bolivia, Pakistan, India, and Latin America more broadly. These complex questions—crucially important to policy makers but difficult to address with statistics—yield before a multipronged attack of quantitative and qualitative evidence combined with deep practitioner insight. How should reformers design decentralisation? Part 2 examines these issues with evidence from four decades of reform in developing and developed countries. What happens after reform is implemented? Decentralization and Local Service Provision turns to decentralization’s effects on health and education services, anti-poverty programs, etc. with original evidence from twelve countries across Africa, Asia, and Latin America.

Author: Jean-Paul Faguet and Caroline Pöschl Publisher: Oxford University Press Publication year: 2017

Local-level finance: improving the accountability and effectiveness of urban development programmes

This paper aims to inform future policy by providing a critical analysis of grassroots finance models. It argues for more locally centred and driven sustainable development but also considers the limitations: What are the critical challenges of participation, scale and the translation of savings into development resources? By concentrating on activities with a high degree of community leadership, this paper looks at the challenges of shaping localised arrangements to fit with structured development programming.

Author: Wayne Shand Publisher: International Institute for Environment and Development IIED Publication year: 2017

Reducing Urban Greenhouse Gas Emissions: Effective Steering Strategies for City Governments

In the IMFG Perspectives Paper (No. 16), Reducing Urban Greenhouse Gas Emissions: Effective Steering Strategies for City Governments, Sara Hughes reviews the unique strategies of three cities leading the charge: Toronto, New York City, and Los Angeles. The paper identifies three strategies that have proven effective: Building and maintaining a broad-based coalition of governmental and non-governmental actors working toward a common goal; Investing in capacity-building, data collection, and education; and Embedding new ideas, financial tools, and standards into local formal and informal decision-making institutions. “Cities are critical climate change actors, and will be for the foreseeable future,” says Hughes. “Given the jurisdictional and financial constraints local governments face, their climate change goals will demand creative partnerships, new tools and systems, and innovative institutional cultures.” This paper is part of a series of IMFG publications and events focusing on cities and climate change.

Author: Sara Hughes Publisher: Institute of Municipal Finance and Governance, University of Torronto Publication year: 2017

Revenue mobilization and management in sectors

The report that follows begins with a background chapter, contributed by our expert looking at
the political economy of revenue raising in line ministries. Working with the GIZ, we engaged
four countries to contribute case studies, using user fees and charges as the revenue source for
examination. The purpose of fees and charges varies from cost recovery to attempts at changing
behavior. For example, the Serbian chapter deals with charges that are aimed at implementing the
‘polluter pays’ principle to reduce types of commercial waste and increase recycling. The political
economy of charges suggests that the public in formerly planned economies may be suspicious
of their imposition, fearing that they will not be matched by any reduction in overall taxation levels.
As well as making it difficult to increase charges as circumstances change, this suspicion
requires politicians to be transparent about how tariffs are set if reasonable collection rates are to
be achieved. Much may depend on the nature of the good or service being provided and how the
public perceives it. Case studies are compareed from Albania, Serbia, Moldova and Germany.

Author: Tamara Simiæ Publisher: Centre of Excellence in Finance Publication year: 2017

Decentralizing for a deeper, more supple democracy

We review recent evidence regarding decentralization and state strength and argue that decentralization can deepen democracy without compromising state strength if adequately designed. We examine how decentralization affects five key aspects of state strength: 1) Authority over territory and people, 2) Conflict prevention, 3) Policy autonomy and the ability to uphold the law, 4) Responsive, accountable service provision, and 5) Social learning. We provide specific reform paths that should lead to strengthening in each. Decentralizing below the level of social cleavages should drain secessionist pressure by peeling away moderate citizens from radical leaders. The regional specificity of elite interests is key. If regional elites have more to lose than gain from national schism, they will not invest in politicians and conflicts that promote secession. Strong accountability mechanisms and national safeguards of minority rights can align local leaders’ incentives with citizens’, so promoting power-sharing and discouraging local capture or oppression. “Fragmentation of authority” is a mistaken inference; what decentralization really does is transform politics from top-down to bottom-up, embracing many localities and their concerns. The state moves from a simpler, brittler command structure to one based on overlapping authority and complex complementarity, where government is more robust to failure in any of its parts. Well-designed reform, focusing on services with low economies of scale, with devolved taxation and bail-outs prohibited, should increase public accountability. Lastly, we advance a novel way that decentralization can strengthen democracy: by allowing citizens to become political actors in their own right, the small scale of local politics should promote social learning-by-doing, so strengthening political legitimacy, state-building, and ‘democratic suppleness’ from the grassroots upwards.

Author: Jean-Paul Faguet, Ashley M. Fox, and Caroline Pöschl Publisher: Journal of Democracy Publication year: 2015

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