Provincial Denmark to receive funding boost

Wealthy councils should give up more of their tax revenue to subsidise poor regions of Denmark, the government is proposing

Poor councils are to receive an additional 400 million kroner a year according to the government’s proposal to alter the current redistribution of council funds.

In addition to block grants from the government, Danish councils raise their own taxes, though much of it is redistributed so that councils burdened with large infrastructure plans, high unemployment or a dwindling tax base are not left to fend for themselves.

The economy minister, Margrethe Vestager, is presenting the proposal in parliament today and said it was important to more evenly redistribute funding so that poor councils can afford expensive programmes that tackle poverty and protect vulnerable children, for example.

“As far as I am concerned it is important that the equalisation system takes the expenses of special welfare programmes into account,”  Vestager said. “Ensuring that marginalised children are given the help that they need is a national responsibility. It is important that councils who have the task of helping these children experience a solidarity with other councils who can help them pay the bills.”

Vestager also said the proposal would address distribution issues with the government’s employment subsidy. Councils are responsible of financing unemployment benefits but are compensated through the subsidy.

But because of the way it is designed, some councils in Copenhagen and eastern Zealand actually end up with a surplus of 177 million kroner in subsidies while those in northern Jutland lose 95 million kroner a year through paying the benefits.

“We need to fix the system so that subsidies are distributed in a way that fully compensates councils for their expenses from unemployment benefits, as it was originally intended,” Vestager said.

The government’s proposal is addressing concerns raised by 39 small councils in 2007 after a council reform that led them to losing out on funding.

Langeland Council is one of the 67 councils that will benefit from the government’s plan. Its mayor, Karsten Nielsen, said the changes were welcome.

“We have long fought for social redistribution and it seems the government has listened to what we have been saying,” Nielsen told DR. “Langeland faces many social problems with large numbers of unemployed and people receiving social welfare. I think it’s reasonable that there is greater redistribution.”

The increased redistribution has to be paid for, however, meaning many wealthy councils will have to part with more of their tax revenue.

“I think the level of redistribution we have to fund in our council is unnecessarily high,” Hans Toft, mayor of the wealth council of Gentofte, told DR. “We hand over 92 percent of our tax revenue for redistribution to other councils. It’s not equalisation, it’s confiscation.”

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