A new wave of reforms sweeping over the Nordic countries?

Municipal reforms are gaining political momentum in the Nordic countries, which all face great social changes. Some countries have already pushed their reforms through; others are still struggling with decisions on the matter. Finland has failed after several years of trying to implement a renewed reform process. Norway is in the midst of such a process, and Greenland is reconsidering the reform it undertook in 2009. In this issue of Nordregio News, we review current initiatives on municipal reforms in the Nordic countries. What exactly is happening now, and why?

This millennium has witnessed a number of initiatives and reform attempts. In the past decade, Denmark and Greenland have made courageous decisions that have resulted in a drastic reduction in the number of municipalities. There have also been changes at the regional level in Sweden and Denmark. During the same period, Iceland, the Faroe Islands and Finland have experienced mergers of several municipalities as outcomes of voluntary local negotiations.

Where are we now, in September 2015?

In Denmark and Sweden, there is currently little discussion of restructuring at the municipal level. Denmark is the best example of a completed reform process in 2007 in the Nordic countries. Changes at the regional level are occasionally considered. However, no specific proposal is currently under negotiation.

In the past couple of years, both Finland and Norway have addressed the restructuring of their local-level administration in a very determined manner, and ambitious reforms have been launched. While the Finnish process was halted at government level in August 2015, the Norwegian process is currently in full swing.

In Iceland and the Faroe Islands, we see some early attempts to reinvigorate the rather slow but seemingly steady process of voluntary municipal mergers. Since the turn of the millennium, the number of municipalities in both countries has been reduced by one-third. However, because not only the very small municipalities but also some larger ones have merged, a wide range of sizes remains.

While Greenland underwent a full municipal reform in 2009, the actual transfer of tasks and responsibilities is ongoing. Greenland is the most recent example of how the completion of a reform process, and thus a new municipal structure, may not mark the end of the discussion.


Reflecting changing societies

The need for reform and the reallocation of tasks to the municipal level are derived from two major challenges that the Nordic countries have in common. These are: 1) pressure on the welfare system as a result of an aging population, which increases demand for public services while the tax base may simultaneously be eroding, and 2) wider functional labour markets, where new mobility patterns extend beyond municipal limits, for example expanded markets and changed commuting patterns.

Considerations regarding the appropriate administrative structure reflect the changing needs of society. Urban structure has changed, as have the needs and expectations regarding public service provision, and technology has changed the position of public administration. Obviously, there are also economic factors: a desire to cut administration costs by consolidating tasks into fewer units, or a re-evaluation of the size of the tax base necessary to carry out those tasks.

In all Nordic countries, these trends are translated into a need for larger municipal units, because a common argument for municipal mergers is that provision of public welfare services is more efficient in larger municipalities that better reflect the current everyday lives of the citizens.

Larger units, greater efficiency?

Increased efficiency and improved service co-ordination is thus a primary expected outcome of mergers. While the argument for a larger-scale economy is that larger units can provide better and cheaper services, an open question in this respect concerns the time frame for this expected return. The restructuring process itself would increase costs for a period before overall costs could be reduced. Moreover, the transition phase for institutions, practices and procedures requires time and potentially extra resources before the pay-off becomes visible. Thus, the economic argument for enlarging the municipalities is of a strategic and long-term nature. Another strategic argument for larger municipalities is their potential for planning regional development and economic growth. Larger units are perceived to have the resources necessary to implement the strategic development required in an era of globalization, urbanization and expanded labour markets. The basic argument is that larger units have more power and capacity to implement coherent plans for a larger area. This argument links back to the enlarged everyday geographical range of businesses and citizens, both of which benefit from large-scale planning.

Larger units, weaker democracy?

A final argument in the pan-Nordic debates concerns democracy, which has been advanced both for and against mergers of administrative units. One aspect of the democracy argument is the representation of citizens in the political system. Mergers of administrative units under the political control of municipal councils would obviously diminish the number of elected politicians from each locality. However, in a well-conducted reform of the whole country, this should not cause a democratic problem in terms of representation (i.e. the number of councils and thus council members would be reduced for all citizens). The other aspect of either increased or diminished distance between the municipal authority and the citizens is less clear. According to the democracy argument, the closer to the citizen the decisions are taken, the better the citizen’s opportunities to be and feel involved. Thus, this argument supports maintaining small municipalities. However, the same point can also be made in favour of municipal mergers, as fewer larger units allow administrative tasks to be shifted from the regional or state level to the local level. Thus, larger units can actually bring tasks closer to citizens.

Process is the key

The political and public debate on reforms reveals several concerns. One is the final outcome of a restructuring process. Which municipalities will be merging? What will be the effect on the interlinkages
with neighbouring municipalities, and how will the decreasing number of units modify the political landscape?

However, a more controversial issue is the process itself. How would the reform be carried out? This requires decisions on time frames, scope for influence and discussion before the decision, inclusion of various parties and actors, and the need for a referendum. Of course, the options for managing these restructuring processes are conditional upon national legislation and political culture. These fundamental aspects aside, there is an almost unlimited number of possibilities for designing a restructuring process. These range all the way from top-down decisions mainly implemented by the lower administrative tiers under strong financial incentives to purely voluntary negotiations with the main units to be merged.

However, it is interesting to note that the arguments are unidirectional: they are only in favour of larger and thus fewer units. There is no proposal to increase the number of administrative units, with the exception of current debate in Greenland, which has the potential to become an exception to the rule.

This brings us to the final question in this introductory article, namely whether a completed reform process would mark an end to the restructuring debate? This has not been the case in the Nordic countries. Even a final decision for a full reform process entails compromises. The reform in Denmark, which is the best example of a completed process in the Nordic countries, still has the potential for further mergers between municipalities that were not part of the 2007 reform. Even the potential for the complete abolition of the regional level of government in Denmark is mentioned in political debates from time to time.

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The Nordic countries share a common structure of regions and municipalities. In a European context, however, the commonly used administrative divisions in the Nordic countries slightly diverge, especially in the case of Denmark and Iceland. Source: NSIs, Eurostat, ESPON