Focus on COVID-19’s impact on territorial governance

General comparative trends

There has been much discussion^[1] about whether federal or unitary states have come through the crisis better and which mechanisms have been the most effective in managing crisis situations. Considering LRGs’ experiences as a whole as well as the accounts of CEMR’s associations, it is difficult to state with certainty whether the patterns clearly lean towards specific countries becoming more decentralised or recentralised in their response to the pandemic.^[2] However, one important finding revealed by the pandemic that is incontrovertible, is the need to coordinate any crisis response and actions between all tiers of government, to share information in a transparent manner and to organise the sharing of responsibilities as early as possible.

Tales from the past year underline how, early on during the pandemic, governments adopted a very top-down approach, resorting to centralised and rigidly controlled policymaking, in managing the crisis. Over time, as the situation evolved,LRGswere granted more opportunities to exercise decision-making, relying instead on a more place-specific, locally-led approach.

The results from 28 countries^[3] show that managing the COVID-19 crisis had had a clear impact on the remit and responsibilities of LRGs, or that it had affected the relationship and the nature of LRGs’ collaboration with the central government. In contrast, 10 countries^[4] observed that managing the COVID-19 crisis had had no impact on the responsibilities ofLRGsor had not affected the nature of their overall collaboration with the central government in their country.

Figure 10 – Impact of COVID-19 crisis on the responsibilities of local and regional governments

Source: TERRI Survey 2021 | CEMR

Given the need to respond swiftly, it is unsurprising that collaboration between and/or across tiers of government has been instrumental during the COVID-19 crisis. Associations in nineteen countries^[5] responded that managing the COVID-19 crisis increased the degree of collaboration. However, associations in ten countries^[6] also specified that the territorial structure and LRG collaboration in their country during the crisis was much more complex.

Some explained thatLRGshad had to cope with several additional tasks during the crisis and that as a consequence, they were now exercising their competences at a higher level (the case in Austria). It is worth noting however that, for many countries, any additional competences were not subsequently devolved toLRGsin any official capacity. In Sweden and the Czech Republic for example, the national associations stressed that the changes simply represented a temporary emergency strengthening of LRGs.

From information supplied by CEMR’s members and others, such as the OECD^[7] and the World Health Organisation,^[8] the countries that have been most successful in tackling the pandemic have been those able to effectively coordinate within and across tiers of government. Yet, this capacity to cooperate and coordinate between various territorial tiers of government has been sorely tested. As some examples from CEMR’s members will illustrate, even when productive, cooperation between different governmental tiers does not necessarily promise a smooth run right from the start.

In Belgium, for example, the national response to the crisis has been riddled with coordination problems, which have (re)ignited a debate about the future sustainability of the country's federal model.LRGsthere were allocated additional tasks to combat the pandemic and were subjected to greater pressures in the exercise of their regular duties.^[9]

In Austria, there were reports of mistakes being made and inconsistencies in the coordination between the governance tiers.^[10]

In the early months of the pandemic, local governments in the Czech Republic did not have a representative on the Central Crisis Staff. Following repeated requests, the government finally agreed to the participation of a representative from the Union of Towns and Municipalities of the Czech Republic (SMO ČR), the national association, in the meetings of the Central Crisis Staff. In addition, State authorities began issuing so-called bylaws rulings, involving the imposition of new restrictions on the local and regional authorities, for example, on the gathering of persons and the requiring of testing of people in workplaces in the public sector.

In Poland, the Act of 2 March 2020 stipulates that Voivodes (regional tier) can issue orders that are binding for all government administration bodies acting within a “Voivodeship”. In practice, this provision was used very often during the pandemic to delegate organisational and support tasks, particularly those that were supposed to be under the responsibility of the governmental administration, such as the organising of quarantine sites, providing support for the organisation of a COVID-19 vaccine administration system, setting up transport to receive vaccinations, as well as implementing organisational changes in healthcare entities (in hospitals for instance).

Associations in Romania highlighted the important steps made towards decentralisation, digitalisation and reduction of bureaucracy on account of the pandemic and also indicated that these changes would be maintained. For example, very few institutions accepted the electronic signature prior to the pandemic; now, many more readily consider it admissible.

While having to respond to the pandemic and manage the crisis, countries had to contend with huge social, political and legal challenges that were suddenly unleased all at once, without neglecting their responsibility to safeguard democracy, human rights and rule of law.

In response to the question of whether measures introduced to manage the emergency were introduced in an official or an informal way, associations in nine countries^[15] responded that an informal approach was used (e.g. central state guidelines,LRGstaking the lead in operations, etc.) while nine associations^[16] indicated that formal steps had been taken (e.g. legislative modification such as COVID-19 laws or State decrees, etc.). In the case of five countries (Lithuania, Poland, Portugal, Romania, Ukraine), the changes occurred in response to the crisis following a combination of formal and informal approaches.

Figure 11 – Chosen approach for COVID-19 crisis’ management

Source: TERRI Report | CEMR

Local and regional finances under pressure

The COVID-19 crisis highlighted the unique frontline position of subnational governments, which were faced with the challenge of continuing to deliver essential services while also having to develop new services and approaches, both in the field of health and beyond, often taking the lead rather than waiting to be led by the central government. In its research into the financial implications forLRGsduring this extraordinary period, CEMR’s national associations proved once again to be a rich source of valuable primary information.^[1]

At the start of the crisis, manyLRGsfaced the problem of insufficient financial resources and, in particular, municipalities often found themselves shouldering added financial responsibilities without the necessary means, due to the unforeseen fall in local tax revenues resulting from fiscal and other relief measures. However, many confirmed that this problem was later rectified.^[2]

According to CEMR’s members, LRGs’ experiences paint a mixed picture, depending on whether or not they received transfers from the state to compensate for losses owing to reduced local tax income as well as to help fund additional expenditures.

Associations in 15 countries^[3] reported thatLRGsreceived such financial transfers to reimburse their additional expenditures. However, for ten other countries (Cyprus, Italy, Luxembourg, Moldova, Montenegro, Norway, Poland, Romania, Serbia and Ukraine), no additional resources were received by their subnational governments for carrying out extra tasks.

Figure 12 – Additional financial resources provided by central governments toLRGsfor COVID-19 crisis management

Source: TERRI Survey (CEMR)

It should be noted however that, in the majority of cases, the situation concerning financial transfers from the central government to the subnational tier often proved to be more complicated. This was reported to be the case by associations in 13 countries^[4] and was primarily as a result of the differing forms of support provided by central governments toLRGsduring the crisis.

In many countries, existing rules were relaxed, givingLRGsmore financial leeway. In Portugal, for example, approval was given to relax the balanced budget and spending rules. What’s more, the authorisation process for short-term loans was simplified and recourse to medium and long-term borrowing was facilitated, suspending the need for prior agreement from municipal assemblies. In addition, local authorities could request an advance or early transfers of their portion of state taxes. In France, measures were also adopted to lessen the burden of the accounting and budgetary framework pertaining to expenses directly related to the COVID-19 crisis^[5].

These developments mirror similar actions at the EU level where the EU’s Council of Ministers activated a special clause of the EU’s Stability and Growth Pact. This clause allowed EU national governments to override the usual fiscal rules employed to keep budgetary spending below certain agreed ceilings. 

Several associations noted that although financial assistance was made available, it was not fully received by theLRGsor only applied in limited cases. CEMR’s Croatian and Slovakian associations clarified that the financial assistance from their central government was either insufficient to cover the financial costs borne by the municipalities or, when it was sufficient, that decisions were taken on an arbitrary basis, depending on the municipality concerned.

CEMR’s Austrian associations also emphasised that the reimbursements did not cover the pandemic costs incurred (testing, contact tracing, vaccinations, tests for employees, home office, etc.).

Additional financial resources were provided to local authorities across Wales (United Kingdom), enabling them to play a central role in supporting their communities, citizens and businesses in managing the impact of the crisis. It also led to a much closer working relationship with the Welsh Government, with better and more regular dialogue and engagement, leading to improved outcomes.

For some countries, it was noted that the central government announced financial compensations for the subnational level, but only at a much later stage of the pandemic. This was the experience ofLRGsin the Czech Republic, when the state decided to financially compensate the municipalities for the loss of income occurred in connection with COVID-19 measures and the arising economic crisis, but much later and only because new tax changes were introduced.

In France, the French Association of the Council of European Municipalities and Regions (AFCCRE) reported that some measures were adopted by the government in order to offset local expenses related to COVID-19; for instance, the repayment of 50% of mask expenses at the start of the pandemic. Measures were also adopted to lighten the accounting and budgetary framework of direct COVID-19-related expenses for the subnational level.

The Spanish Association of Municipalities and Provinces (FEMP) pointed out that, from the outset, there had been excellent coordination between the Ministry of Internal Issues, FEMP and the regional tier (Comunidades Autónomas). This made it easy to align actions between all government tiers to respond to safety concerns and help support citizens during the lockdown. This example illustrates good practices that emerged from the management of the pandemic.

Even in those countries where the COVID-19 crisis has had no impact on the remit and responsibilities of LRGs, there have been instances where the central government provided financial help to LRGs.

This occurred in Turkey where the central government did not delegate any extra tasks or responsibilities to municipalities nor did it provide any additional financing for COVID-19-related management. Nonetheless, the central government deferred some of the municipal payments due and temporarily waived other payments in order to support the local tier’s delivery of services during the COVID-19 crisis.

In Germany, the division of responsibilities and tasks did not change specifically in response to the pandemic at the subnational level, but the existing workload for municipalities increased and became more varied. For example, the Public Health Service for the counties and county-free cities, such as Berlin, began providing support to the Länder for COVID-19 vaccine planning, organisation and implementation by setting up vaccination centres. To mitigate the counties and county-free cities’ costs, the federal government covered accommodation expenses for jobseekers and provided compensation for the shortfall in income from trade taxes. The Federal Health Ministry also established the “Pact for the public health service” in support of the local tier.^[6]

There are key lessons to be learned about how governance arrangements have functioned in response to the pandemic and comparing the experiences of different countries has been illuminating in this respect. As previously mentioned, since the start of the COVID-19 pandemic, this topic has already been widely studied, in particular by the Council of Europe and the OECD.^[7]

There is no doubt that effective coordination and collaboration were pivotal in responding to the pandemic, particularly when underpinned by a clear assignment of responsibilities between the different tiers of government. It is also evident that adequate funding to support or compensateLRGsfor the additional responsibilities and tasks they undertook to ensure delivery of targeted and tailored responses strongly influenced the effectiveness of LRG efforts as well. These elements, rather than the degree of centralisation or decentralisation, were key determinants in attaining effective governance outcomes during the first year of the pandemic.