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22.10.18

LGiU: Local government in Finland

Source: PSE Oct/Nov 2018

Finland’s local government structure is going through a set of reforms as municipalities across the small Nordic nation continue to merge. Jonathan Carr-West, chief executive of the LGiU, and Suvi Loponen, LGiU associate, examine the local government structure of Finland and how it compares to the UK.

Known as one of the happiest countries in the world, frequently scoring high in the prosperity index and responsible for a globally respected education system, Finland has caught the attention of many politicians, policymakers and citizens.

With a reputation for exploring or pursuing progressive social policies, including Universal Basic Income trials, LGiU was keen to understand the distribution of power in Finnish layers of government and find out whether any comparisons could be made to the UK. Suvi Loponen, an LGiU associate, wrote a briefing on the issue that is available to LGiU members.

In summary, the Finnish state is similar to those of the other Nordic countries in regards to its three-stage structure: the president and prime minister at the top, then parliament, followed by a legislative branch (including local government).

Finland, however, has a special local government structure that differs from that of many other European countries. It has a strong, self-governed municipal sector and the state administrative agencies are more independent in regard to the ministries than, for example, in Denmark or Norway.

Finland is one of the most decentralised OECD (Organisation for Economic Co-operation and Development) countries. Local government is responsible for more policy and delivery than in some neighbouring countries, and much of this self-governance is due to the autonomous history of the country.

Another aspect prominent in Finnish society is the dual official languages of the republic. Currently these are Finnish and Swedish, and citizens have the right to communicate in either language with government agencies, and also the indigenous Sami people are also entitled to receive all government services in the Sami language.

Demographics

How does Finland compare with the UK? In the demographic sense, it is Finland and Scotland that share many similarities. They are relatively the same size in terms of population: in the last census of 2011, the Scottish population was 5,295,000, whereas the Finnish in 2010 was 5,375,000.

However, despite the similar population size, Finland is very scarcely inhabited – with a total area of 338,424 km², compared to Scotland’s 80,077 km². The majority of the Finnish population is now centred in urban cities, with the OECD reporting the urban population to be 84% of the total population.

In general, cities in Finland tend to be smaller in size than their counterparts in the UK, and with bigger distances between them, they tend to have a sphere of influence that overlaps far less with other cities. As a result, they do not compete as much for regional services, and because of the self-governing nature of local government, municipalities are very willing to cooperate in wider, regional issues.

Municipalities enjoy considerable autonomy and their main source of revenue is taxation. Municipal income tax is the largest source of the tax revenue, in addition to property tax (7% of local tax revenue), that each municipality can set individually but within the upper and lower limits set by the central government. The total revenue from taxes forms over 44% of the municipality income, which is much higher than the OECD average of 37%.

In addition to tax revenues, municipalities receive subsidies and grants from central government for general allowances, health and social care transfers, and education and culture transfers. In total, 22% of the other revenues come from fees and charges imposed to the residents, including water supply, power, waste disposal and public transport. Basic education in Finland is free, but there are modest charges for public healthcare.

 

At the start of 2017 there were 311 municipalities in Finland. Sixteen of them are situated in Åland, which is the autonomous island on the southwest coast of the mainland. The municipalities are self-governed by local government, which is elected by residents every four years.

Centralisation of local government is becoming more evident in Finland. Some municipalities have been merged together in recent years following initiatives to provide more cost-efficient and more digital services for residents. From 2005 to 2015, 82 municipalities were joined together.

The ongoing Social, Health and Regional Government reform is one of the biggest changes and challenges facing Finnish local administrations, with the creation of a new, third level of government between central and local government and a reduction in the number of health and social service operators from 200 to 18.

The reasoning for the reform is clear: the Finnish population is ageing, costs need to be cut and services made more efficient. This will be done by integrating services and harnessing more technology in order to free workforce for other tasks. The small average size of Finnish municipalities (17,530) explains the enthusiasm and need for the cities and towns to cooperate in providing basic services to residents at regional level.

Reform is intended to both integrate and decentralise services, as well as improve competitiveness. The role of local government and its impact on the communities should be addressed better following reform in order to ensure that the municipalities can remain active and not lose their locality value for their residents. Even though the aim of the reform is to address the gaps in wealth and wellbeing in society, with the centralisation of services, some of the most vulnerable groups might find themselves at a disadvantage – with ever longer distances to travel and more complicated or digitalised processes.

Revamping the system will hopefully create a simpler, more easily understood system for the citizens and get rid of the inefficient practices. Increasing the freedom to choose, for example, which hospital or school to register in will improve not only the accessibility and range of services, but also the general wellbeing of the society.

The new Health, Social Services and Regional Government will have a profound effect on the whole structure of local government. As we have seen in the UK, it is critical for a state to deliver a sustainable health and care programme to an ageing population – yet huge reforms can come at political cost. The results of this reform will take years to become clear.

 

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