Environment and Planning C: Politics and Space

The methodology of optimal control theory is used to highlight some of the current policy issues raised in the United Kingdom by the central government's allocation of grants to local authorities. It is shown that there is a link between the number of policy variables and targets and the freedom of action of individual local authorities. One consequence of current policy is shown to be that it makes optimal control theory an even more relevant tool for the analysis of the rate support grant system. Another is that the demise of local control appears to be the logical outcome in the long run.

This paper presents the results of an initial investigation into the expenditure responses of a group of local authorities in England to a loss in grant income. The Government has restricted grant aid to local authorities in an attempt to secure restraint in the expenditure of these authorities, but (until recently) local authorities have had the opportunity to make good any loss in grant income by increasing local taxes. A central issue is, then, how much restraint in local authority expenditure is secured by a given reduction in grant aid. Reduction in grant aid is measured in this paper in terms of its impact on the local tax rate (and the average local domestic tax bill) if a local authority is to maintain the real value of its spending. An incremental budgeting type model is developed and the empirical work is concerned with the financial years 1982–1983 and 1984–1985. It is found that in the later year local authorities have been less willing to reduce their expenditure in the face of loss of grant aid. It is also found that the response of the local authorities has become more political in the sense that a statistically significant difference has developed between the responses of Labour and those of non-Labour controlled councils.

Local authorities in England have been set spending targets. If they exceed these targets, their central government grant is reduced, thus sharply increasing the local tax rate. The resulting spending decisions of local authorities have been analysed, in an attempt to explain their behaviour in terms of a model of rational spending behaviour in line with neoclassical consumer theory. Various families of indifference curves indicating preferences between expenditure and local tax rate increases have been tested for consistency with the actual spending decisions of the authorities, and evidence found to support such a model. Empirical results are presented. But there is evidence that other variables, such as past spending decisions and expectations about the future, also have a significant impact on spending decisions.

The use of game theoretic concepts is applied to the theory of central grants to local governments, when the total amount of grants distributed by central government is constrained. It is shown that inefficiencies exist and that local governments spend too much on public services relative to the efficient level. This inefficiency is shown to disappear as the number of local governments increases. Relative to the situation where there is no central constraint on the total amount of grant available, it is demonstrated that a closed-ended grant results in less expenditure on local services.

Rate capping was introduced by the British Conservative Government in 1984 to impose a legally enforceable ceiling on the rating power of local authorities. It is a discriminatory measure. High-spending authorities, as assessed in accordance with current and historic data, are given annual rate limits by central government, with rights of appeal and negotiation. The process has generated great controversy, with some local authorities threatening municipal bankruptcy and all showing great reluctance to operate within the system. But the financial impact has so far been marginal: The government moved gingerly, and creative accounting has helped postpone financial difficulties.

In this paper cost-benefit rules for public transport subsidies are considered. Recent applications of cost-benefit analysis to the appraisal of bus service provision are surveyed, and justifications for public transport subsidy considered. The authors derive the cost-benefit ratio appropriate for considering the benefits to public transport users of a fare reduction financed through increased local taxation on housing services. The cost-benefit rules are then extended to allow for the impact of Central Government assistance through grants-in-aid, and to incorporate allowances for external benefits in the form of reduced road traffic congestion and for income distributional considerations. A cost-benefit rule appropriate for assessing the case for service-level improvements which reduce passenger waiting times is also noted.

Italian local authorities share with those of other European countries a considerable degree of fragmentation. In addition, they suffer from the well-known North-South differential in economic conditions. On top of this, their management has long been split between the left-wing (mainly Communist) and the conservative (mainly Christian Democrat) political philosophy. This has rendered their performances and behaviour quite heterogeneous and has complicated the task of securing an equitable system of central-local financial relationships. For decades most of the southern authorities and the ‘red’ fraction of the centre-northern authorities have taken advantage of the possibility of borrowing for balancing the budget on the current account. This was a major loophole in the system until 1977. Bankruptcy was avoided ony through ‘entente’ between the Christian Democrats and the Communists in early 1978 (at the time of Mr Moro's murder), whereby all outstanding debt of local authorities was cancelled and transferred to the Central Government. In spite of an officially proclaimed ‘restraint’ there followed a period of real ‘Renaissance’ in local budgets, especially on the capital side. Borrowing—this time for capital expenditure—was again at the root of this development. Part of the deal was a revival of the ‘fiscal effort’ on the local side, making use of the few sources of own revenue left to local authorities after the fiscal reform of 1973–1974. Meanwhile, the ‘equalisation issue’ was raised with regard to the distribution of the general grant. Distribution criteria have been constantly changing since 1982. A completely new approach is now under consideration at the Ministry of Interior, based on the notion of ‘equal grant’ for ‘normal’ local authorities. Such an approach will eventually put aside the ‘past expenditure’ criterion which is still at the core of the grant distribution. While waiting for this reform, local authorities will almost certainly get a new local tax (‘tax for the financing of services’) starting in 1986.

This paper presents a description and critical analysis of the nature and scope of policies concerning the employment and treatment of foreign workers and their families that have been pursued by the national governments of the Federal Republic of Germany, Austria, and Switzerland. Elements of a materialist theory of the state are drawn on to unravel the forces, interests, and conflicts which have shaped migration policies at different times in these countries. Emphasis is placed on the processes of transformation, whereby demands upon the state apparatus are translated into political and administrative action. Analysis reveals that a dominant trend throughout has been the pursuit of the economic goal of providing a low-cost flexible labour force. Confronted with human beings rather than economic units, concerns of integrating the migrant population and maintaining the nations' cultural integrity entered into play in the determination of policies; but essentially only as secondary goals. It is concluded that neither the overriding goal nor the ad hoc nature of migration policies will change in the near future.

Under the optic of North-South cooperation, the impacts that optimistic policies and assumptions have on future economic growth of centrally planned economies, nations of the Organization of Petroleum Exporting Countries (OPEC), less developed nations (excluding OPEC nations), and developed capitalist nations are examined using a simulation of a four-region world econometric model, COLD. Special focus is given to developing and developed regions, and it is suggested that the level of effort required to implement a North-South cooperation is relatively modest and economically viable for the donor developed region while being significant for the development of the recipient less developed region. The conclusion suggests that—being morally correct—North-South cooperation, if wisely and creatively implemented, may have a favorable economic effect on the donor region while helping decisively to improve the situation of the Third World.

In this paper, changes in travel behaviour in Sheffield-Rotherham (1972-1981) and Manchester-Salford (1976–1982) are compared with special reference to the effect of bus fare levels in real terms, which fell by about 70% in Sheffield-Rotherham but remained constant in Manchester-Salford. The analysis is directed to seven distinct household types, and overall changes in bus trip rates, estimated elasticities, effects on traffic congestion, city centre use, mobility of low mobility groups, and income redistribution are examined. The conclusion is made that although reducing real fares resulted in higher levels of bus patronage, evidence for the other beneficial effects was absent.