A piece of news that surely will hit the frontpages in the coming week: The Danish Liberal and Conservative Parties have agreed on a proposal for the reform of local government finances that will be part of the local government reform in 2007.
The proposal will be presented to the Danish People’s Party and the Social Liberal Party on Monday. The Social Democrats left negotiations earlier in the process and this has been interpreted as an indication of the weakness or incompetence of the Social Democratic leadership.
Local government finances are politically explosive in all of the Nordic countries as local government have the right to tax income in order to finance their extensive activities at the same time as local tax bases vary significantly.
In order to make up for the differences, governments have introduced various systems for redistributing tax income from “rich” to “poor” authorities and, needless to say, representatives for local governments that cover wealthy communities routinely complain about having to subsidize local governments in rural areas or with a high proportion of immigrants among its population.
Earlier this week the Conservative mayor of Hørsholm, which covers one of the most affluent parts of the Metropolitan area, demanded that his party should leave the government in protest against the proposed redistribution. National representatives of the party have rejected these calls.
In Sweden, the same problems regarding redistribution from rich to poor authorities resulted in a fascinating case of demonstrative politics during the 1998-2002 term when the centre-right led county council in Stockholm deliberately failed to include payments to other authorities in the annual budgets. The result was massive deficits in the authority’s economy as the Social Democratic government didn’t bail out the council.