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Financing Local Government

image of Financing Local Government
Decentralisation is now taking place in the public administrations of most countries of the world. A critical determinant of the effective performance of local governments is finance – their ability to both mobilise financial resources and to use those resources effectively and efficiently.



This book explores the variety of methods used to ensure that fiscal decentralisation takes place alongside administrative decentralisation. It considers the range of revenue sources available, the design systems of intergovernmental transfers between central and local government, and the kinds of rules and procedures necessary to ensure that local governments use their financial resources appropriately.



The experiences described in this book will help local government managers, and national policymakers charged with local government finance issues, to ensure that they follow good practice in their own programmes of local government reform.

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Revenue Sources for Local Government

Local governments need resources in order to finance the services and activities for which they are responsible. This may include the direct provision of goods and services where the market fails to provide satisfactorily (e.g. ‘public goods’ and ‘merit goods’, such as health and education), or contracting or subsidising the private sector to provide them. Local governments also have a variety of regulatory roles, such as building and development control and consumer protection, which have to be financed. Moreover, local governments may need to subsidise certain services for low-income groups, even though redistribution is generally regarded as primarily a function of central government.

English

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