Is there conformity with the Council of Europe Guidelines for local finances?

This paper describes some recent work by the Council of Europe on local government finances in European countries. The work of the Council of Europe on local finances in Europe is grounded in the text of the European Charter of Local Self-Government resulting in a difference in emphasis than similar analytical work by the OECD and other international organisations. The Council of Europe basically seeks to register and overlook conformity with the guidelines of the Charter. On the observed use of “own” local taxes – i.e. taxes where the local authorities set their own rates – it is found that they are a significant part of local finances thus being in conformity with the Charter. But the data suggest an increase in the use of earmarked grants to local authorities – i.e. grants that cannot be used in accordance with local priorities. This is not in conformity with the Charter. Exploring the reasons for this, it is found that European governments as a rule follow a policy of funding new competences for local authorities, and that many governments prefer to use earmarked rather than general grants for such funding. In spite of this the studies conclude that member countries are in acceptable conformity with the Charter, and that governments follow responsible and sound decentralisation policies of funding new local competences.