Post-1970 ‘budgetary cooperation’ between central and local government in Denmark

As the result of a major local government reform in 1970, most welfare functions in Denmark are dealt with at the local level of government, effectively turning the extensive danish ‘welfare state’ into ‘welfare communes’ as municipalities are called in the Scandinavian languages. With more than half of the country’s total public expenditure being spent by local authorities, regulation of local government budgets has become a major concern in the economic policy of the Danish central government. Since the early 1980s the realization of the goal of limited growth in Danish local governmeemnt spending has been quite successful. One explanation for this comparatively successful regulation or local government spending in Denmark can be found in the combined effects of two factors: 1) Danish local authorities have the independent right to levy taxes, and 2) the regulation of local budgets is the result of a negotiated agreement between central and local government actors, known in Danish as ‘budgetary cooperation’.