Local Control of Government Spending

Local control of government spending can improve responsiveness and accountability, but it raises questions of economic inequality.

If infrastructure and public services are locally managed, they could be more responsive to local needs but there are economic problems in funding them equitably.  A service would need to be able to control both its income and its spending to be autonomous.  Without such autonomy it is difficult to fully incentivise good management practice.

●  A local council could be held accountable if it raised all its own taxes, but there are some services which have to be co-ordinated across wider areas and which have a national element – like law enforcement, for example (2.8.5). It is impractical to get total alignment between the management of the activities that are spending public funds and the control of their income, which comes from taxation.

●  Tax income is higher in wealthy areas – which would tend to have better than average services, such as education and policing, if they were financially autonomous with local control of government spending. For greater equality between different areas of the country, tax receipts can be redistributed by bureaucrats – but the formulae they use can never perfectly respond to an area’s needs.  In the example of the UK, this is briefly explained in the BBC article: What is the Barnett formula?

The policy decisions on these questions are political, as examined later (6.6.2).



This page is intended to form part of Edition 4 of the Patterns of Power series of books.  An archived copy of it is held at https://www.patternsofpower.org/edition04/3453.htm