Municipalities receive more grants than necessary

For the first time researchers have conducted a study of how central government grants as a whole are distributed among municipalities. Some municipalities receive considerably more money than others, and the distribution reveals a striking pattern. This can be seen in the 2011 Atlas of Central Government Grants to Municipalities (Atlas rijksuitkeringen aan gemeenten 2011) that COELO (Centrum voor onderzoek van de economie van de lagere overheden) will present today. COELO, a centre for research into the economies of local authorities, is a research institute connected to the University of Groningen.

Taxes in the Netherlands mainly go to central government, whilst the 418 municipalities provide the greater share of public services. To be able to fund this, they receive EUR 27 billion from the state via 91 different grants. The big question is how that money is distributed. Some municipalities need more money than others, but who actually receives what? It is well known how a number of individual grants are distributed, but, strangely enough, the distribution of the grants as a whole has never been researched. Are all resources widely distributed among the municipalities or do some municipalities or groups of municipalities receive much more than others? COELO’s Atlas, which is published for the first time this year, shows this.

Number of grants

No single municipality receives all 91 grants. Rotterdam takes the lead with its 59 different grants. Eight municipalities receive more than 50 grants, and seven municipalities each receive 14 different grants. The rest are somewhere in between.

Amounts received

Rotterdam does not just receive the largest number of grants but also the largest amount of money. Per inhabitant, Rotterdam receives 92 percent more than average for all the grants added together. Big (Amsterdam) and poor (Heerlen) municipalities receive a relatively large amount, as do West Frisian municipalities (Schiermonnikoog). They are confronted with high costs for a number of different reasons. Small, rural and rich municipalities receive very little, relatively speaking; Scherpenzeel (Gelderland), for example, receives half the national average per inhabitant.

Total grants per inhabitant as a percentage below (negative) or above (positive) the average grants per inhabitant

Surprising distribution

Municipalities receive one big grant: the general grant (algemene uitkering) from the Municipalities Fund (gemeentefonds), which represent 57 percent of the total sum of money given in grants. They are allowed to decide themselves how they spend this. The remaining 90 grants are related to certain policy areas concerning, for example, social security, language coaches, gay rights or playgroups. COELO researchers looked at how these grants are distributed and came to the surprising conclusion that the distribution of these 90 smaller grants added together is more or less the same as the distribution of the general grant from the Municipalities Fund. This begs the question of whether the existing grant system is efficient. If the distribution is almost the same anyway, would it not be better to add these 90 smaller grants to the general grant?

Number of grants can be drastically reduced

In his inaugural lecture yesterday COELO Director Prof. Maarten Allers looked at what would happen if these 91 different grants were merged into one big grant. This would tie in well with the Cabinet’s goal of smaller, cheaper and more transparent government. Possible objections to merging these grants would be that the government would then be less able to steer the municipalities and that the distribution of resources might not then be optimal. However, these objections did not prove to be founded. Allers concluded that the number of different government grants to municipalities could easily be reduced.