Fairer distribution of income between the municipalities

The Government proposes a fairer distribution of income between the municipalities. “In this way we will ensure that municipalities all over the country can offer their residents equal welfare services,” says Minister of Local Government and Regional Development Liv Signe Navarsete.

The objective criteria that tell us how expensive a municipality is to run compared with others have not been updated for about 15 years. These so-called cost keys are being changed on the basis of new statistical analyses, so that the municipalities can receive income according to the issues and challenges they actually have today.

“Norway has changed. The composition of the population, living conditions and settlement patterns have changed. We are now changing the map to match the terrain. New criteria have been developed that are better able to capture social differences and differences in living conditions around the country,” says Liv Signe Navarsete.

Oslo for example will benefit from these criteria. So will many small municipalities.

At the same time, funding earmarked for day nurseries will now be incorporated into the financing framework with its own cost key. This will mean a redistribution of this funding between municipalities.

The changes in the objective criteria also provide a basis for adjusting the political elements in the distribution of income between municipalities. The Government therefore proposes to reduce the small municipality grant by one million kroner and also to reduce the North Norway and Namdal grant by 10 percent.

“The savings from these changes will benefit all municipalities through the per capita grant,” says the minister.

“We can also see that the largest cities face many of the same challenges. We therefore propose to introduce a new city grant to Oslo, Bergen, Trondheim and Stavanger,” says Navarsete.

At the same time the capital city grant, which only Oslo has received until now, will be reduced. The part that is based on national child welfare assignment will be continued.
The Government also proposes to reduce the tax portion of the municipalities’ income.

“One of the major differences in income levels between municipalities is the difference in tax income. In 2009, as many as 364 municipalities had tax income below the national average. It is thus self evident that when we propose to reduce the tax portion of total income from 45 to 40 per cent, this will even out the income differences between municipalities and provide a better basis for more equal welfare services all over the country,” says Navarsete.

A fairer distribution of income between municipalities means that not all municipalities will win in the longer term. These municipalities are evenly distributed across the country. In order to help these municipalities, 400 million kroner of the growth in unrestricted income will go to municipalities that lose more than 100 kroner per capita from the changes in the income system. This will be a permanent scheme until the new revision of the income system.

“When you include the growth in the municipalities’ unrestricted income in 2011, no municipality will have its income reduced from 2010 to 2011,” says Liv Signe Navarsete.

• Local government proposition 2011.

For more information, call the Ministry of Local Government and Regional Development at +47  22 24 25 00