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Monday, 27 September 2010

Warning On Local Government Cutbacks

Council of Europe's definition of EuropeImage via Wikipedia
Government plans for reducing public debt should not “lay the groundwork for future bigger, social crises,” the Council of Europe has warned.

The organisation will unveil research from its 47 member states outlining the impact of the global recession and the scale of the financial difficulties now facing local administrations at a Strasbourg conference of European experts on 11-12 October.

“Every local government system in Europe is experiencing some financial downturn,” said a spokesman for the inter-governmental human rights agency.

“The current strain on local government is not a temporary blip. Longer term measures to cope with fiscal pressure and to make the most of lower resources have to be considered.

“The next few years will be a crucial time as national and sub-national governments search for measures which not only strengthen their recovery from the crisis but also help steer clear of the dangers of insolvency.

“Fiscal solutions to the current crisis need to ensure that the avoidance of current fiscal catastrophes does not simply lay the groundwork for future, perhaps bigger, social crises.”

The British government has already signalled its intention to impose widespread spending cuts. This has raised concerns that budgets for public transport schemes and policing in London, for example, could be hit by as much as 25 per cent.

Other European governments could follow the United Kingdom’s example, increasing further the financial pressure on their local authorities.

The Council of Europe's research underlines the struggles of municipal controllers to meet the higher costs of servicing debt.

In Serbia, the cost of the local government debt service rose by 26 per cent in 2009.

Elsewhere in Europe, the reduced availability of bank loans and fiscal austerity measures squeezed capital expenditure. Local taxes on property sales have fallen sharply in France and Bulgaria, according to the Council of Europe’s research.

Rising unemployment and business failures have hit local administrations’ share of personal income taxation and reduced the municipal take from taxes on business profits and turnover in Germany, the Czech Republic, Finland, Poland, Portugal and Hungary.

The Council of Europe reports that local governments could respond to the financial crisis through better property tax collection, improvements in accountability and auditing and “efficiency gains.”

The organisation’s local government experts predict that “the longer term period of recovery will probably demand increases in local taxes and charges” across the region.

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