3.4.5 The Hierarchy of Government Spend and Taxation
The subsidiarity of government spend and taxation – the degree to which the different levels of government can make their own decisions – affects both the autonomy and the prosperity of different parts of a country. Multinational bodies such as the European Union (EU) have similar issues with regional policy.
The cost of government administration is a drag on the rest of the economy at any level (184.108.40.206). There is a trade-off between incurring the cost of co-ordination at higher levels of administration versus the costs of duplication if similar departments are replicated at lower levels.
As described in the following sub-sections, there are different benefits from local autonomy compared to having a centralised national policy:
- Centralisation offers equality of service, co-ordination and the benefits of scale (220.127.116.11).
- National governments can try to support regions which are less prosperous, but grants are problematic (18.104.22.168).
- Localisation brings decision-making closer to the people who are affected and can be more responsive (22.214.171.124).
- Multinational groupings can benefit from smoother trade but they have their own administrative challenges (126.96.36.199).
- Nationalist separatism might appeal to politicians but it doesn’t appear to offer any economic benefits (188.8.131.52).