Rapporteur: Markku ANDERSSON (Finland)

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EXPLANATORY MEMORANDUM

1. INTRODUCTION

The European systems of local government are diverse and, therefore, difficult to categorise. Sometimes they are classified into two major groups: The southern (based on Napoleonic traditions), and the northern systems. The northern tradition is prevalent in the Nordic countries, but also for example in the Netherlands, Austria, Switzerland and parts of Germany. Event though the United Kingdom is often classified in this group, UK local government lacks the constitutional protection of municipal autonomy and local authorities have no general mandate.

The southern group includes France, Italy, Spain, Portugal, Belgium, Luxembourg and Greece. Although the distinguishing quality in relation to municipalities in the northern group is not always the lack of constitutional protection, municipalities in the southern tradition can be seen more as political organs than, for instance, providers of welfare services.

Nordic municipalities, on the other hand, and especially those in Finland, bear the main responsibility for organising and producing welfare services. That is why the CLRAE Working Group on Social Services asked the Association of Finnish Local and Regional Authorities (AFLRA) to prepare a study on the main features of a “welfare municipality” and its role in social and health care services.

This report is largely based on the AFLRA study. It describes in detail the Nordic system of social services on the example of Finland, characterised by the strong role of local authorities, responsible for the provision of social welfare, health care and educational services. It also investigates briefly the main features of the southern model on the examples of Italy and France, whilst the specific problems of the countries in transition are illustrated by the examples of Russia and Lithuania.

Caution must be exercised when comparing social security and social welfare services. Social security and social services have a wide range of concepts, which results in different interpretations and dimensions of their contents. Comparison of social security and social services in different countries is, therefore, difficult. Information on the organisation of social services in different countries may be instructive, but historical, cultural and political factors must not be forgotten in the assessment.

1.1 Welfare models in Europe

Welfare models are often classified as follows: universal (also known as Nordic), liberal, corporative, and Latin. Even though classification poses its own risks, basic characteristics can still be identified and used in trying to comprehend the functionality of different systems.

The municipalities, families, the Church, different organisations and the labour market are responsible for the provision of social services in all models. From the aspect of the role of local authorities, the differences arise depending on whose primary responsibility it is to provide the services. There are significant differences in Europe in that respect.

Welfare models and the role of municipalities

The Nordic system (Finland, Sweden, Norway, Denmark and Iceland) is based on municipalities bearing the main responsibility for organising and producing the welfare services: We can therefore talk about “service municipalities”. The labour market, insurance, the Church and other organisations complement the welfare system in this model. The Nordic model does not require that people are employed, are married to someone who works, have a previous work history or are insured in order to be entitled to the services. The municipal system with its supply of universal services offers a means to guarantee equal opportunities to various population groups.

The liability of municipalities, especially for welfare services, is much more extensive in Finland than in most other parts of Europe. In Central and Southern Europe, social security is mainly based on the following basic factors: work, insurance, family, the Church and non-governmental organisations. Families play a key role, as the social security of other family members depends on the working family member. The Church and other non-governmental organisations also play a significant role in providing social security. Besides benefits derived from having a job, there is also private social insurance in many countries.

In countries where the liberal system is in use, such as Britain, and in countries where the corporative model is used, such as Germany, Austria and Holland, municipalities are not the main providers of welfare services. This is also true for Latin countries like Italy, Spain and France: We can speak of “political municipalities” in these countries.

When assessing the different systems, it has to be noted that they are only theoretical models from which different countries deviate in varying degrees.
The situation in the transition countries of Central and Eastern Europe is so diverse that it is impossible to classify them even in these broad and simplified categories. In these countries one of the key issues is how to build a sound and efficient social security system compatible with a modern market economy. In the face of severe social problems, in part inherited from the past and in part engendered by the process of economic and political transformation, there is a pressing need for solutions. No doubt, the lessons of advanced market economies will help these countries in developing their own welfare systems and in finding the appropriate role for municipalities in the process.

The differences in the European welfare systems are largely based on different views and traditions concerning the role of the state and the municipalities. The Nordic system clearly reflects the principle of subsidiarity, in the sense that the closer to the people the matters are taken care of, the better their needs are served. That is why the Nordic system places the main responsibility of providing welfare services on local authorities.

Providers of welfare services in the different models

1.2 The Nordic Welfare Model

The Nordic system aims to improve citizens' welfare, safety and own activities through a social security system, the main features of which are comprehensiveness and a reasonable level of benefits, as well as to reduce differences in income levels. It is based on municipal social services, health care and educational services funded mainly by tax revenues and equally accessible to the entire population.

There are many similarities in the social structures of European countries. However, the Nordic countries have certain features that distinguish them from the rest of Europe: In these countries local authorities are the main providers of social services and health care. Whilst the central government is generally responsible for the national health policy, new legislation and the state share of financing, local authorities provide, organise and/or purchase the major part of the health services for their residents.

Finland is perhaps the best example to illustrate the role that local authorities can play in the provision of health and social services. The Finnish system of welfare services represents the essence of the Nordic welfare system.

Why did the Nordic countries develop a welfare society that differs from other European models? One explanation may lie in the differences in population and economic structures.

In the Nordic countries industrialisation and urbanisation came about comparatively late. For quite a long time Finland was an agricultural society, which was reflected also in the organisation of social services. In the Finnish Child Benefit System of 1942 and the National Pension Reform of 1956 for example, the benefits were allocated to “all children” and “the whole population”. Had these systems been built only on insurance-based benefits for those employed, a large agricultural population would have been left without benefits of any kind. It was in their common interest to create social benefits meant for the whole population.

2. THE FINNISH WELFARE MUNICIPALITY

2.1 The legal basis of the Finnish welfare society

The Finnish welfare society is “made by law”. There was a particularly strong increase of regulations in the 1960’s and at the beginning of the 1970’s, but legislation is still the most important instrument of regulating society. At the beginning of the 1990's the number of new laws and regulations passed annually was around 1700.

The Constitution of Finland guarantees local self-government, granting local residents the basic right to influence and participate in public decision-making. The Constitution gives local authorities a reasonable independence in their relationship with state authorities.

In July 1995, a new Local Government Act came into force in Finland. The Act guarantees, among other things, a democratic and open process of decision-making in municipalities. The municipal legislation prescribes an extensive general mandate for municipalities together with the responsibility to promote the welfare of their residents and provide them with opportunities to participate and exert influence.

Municipalities can also establish companies to carry out virtually any task and they can also purchase services from private providers. Finland and the other Nordic countries have apparently covered these fundamental rights with a more extensive legislation than anywhere else in Europe. The Constitution presupposes that welfare services and other benefits are offered to everyone (the principle of universality).

By several special laws the municipalities have a statutory liability to organise welfare services for their residents, for example social and health services, education, library and cultural services as well as consumer protection. Certain social and health services are so-called subjective rights of citizens, i.e. they have the right to claim the services from the municipality.

Municipalities can also organise social and health services by purchasing them from private providers. In practice the portion of private, insurance- or market-based, welfare services supplements the services that public authorities answer for. Parents, for example, can choose private child day care partially subsidised by the municipality, instead of the municipal service.

The Finnish health care system has an extensive network of private doctors. The consultation of private doctors is supported by, among other things, compensation from public funds for doctor’s fees, medical treatment and care (in 1997 about FIM 840 million). Medicine costs are also compensated from public funds (in 1997 about FIM 3.3 billion).

Certain private services are also regulated and monitored in the same way as public services. All units producing social and health services are subject to control by public authorities. When a municipality organises its social and health services by purchasing them from private producers, the same requirements apply to the quality, personnel, costs, etc. as when the services are organised by the municipality.

Though the constitutional self-government gives municipalities a reasonably extensive independence, the state controls the municipalities by legislation and other regulations. Finland is a member of EU, which also means that EU regulation is part of the Finnish legislation.

The general control and supervision of the municipal social welfare and health services are the tasks of the Ministry of Social Affairs and Health and the Provincial State Offices. Principally the Provincial State Offices have the right to intervene in municipal operations when a citizen or an authority considers that the municipality has violated the law.

The Finnish Government controls municipal social welfare and health services by approving a four-year plan and action programme for social welfare and health services. This programme comprises directives for the proceedings within social welfare and health care. In addition, the Government annually decides how much state support the municipalities will get for organising their social welfare and health services. Law prescribes the municipalities’ rights to state subsidies and the grounds for receiving these subsidies.

The Basic Social Security Committee, subordinated to the Ministry of Social Affairs and Health, has been assigned to follow the essential basic service functions in the municipalities. The committee is composed of representatives of the State, municipalities and customer organisations. If the basic services are insufficient in a municipality, the committee can request the municipality to correct the situation. If a municipality clearly neglects to fulfil its statutory obligations, the Provincial State Office can order the municipality to rectify the situation and may impose a fine.

2.2 The organisation of welfare services

The principles of constitutional state and local democracy have strongly influenced the development of the welfare society in Finland, as well as in other Nordic countries. Legislation has played an important role in the creation of welfare systems. The welfare services are mainly funded by tax revenues and the service fees are strongly subsidised.

The most important principle in the Nordic model is that public authorities, especially municipalities, must have a strong role, particularly in the organisation, production and financing of welfare services. The Nordic municipalities are “service municipalities” producing most of their own services. Public authorities guarantee citizens basic services and a basic economic security for the whole life cycle (“from cradle to grave”).

At the beginning of 1999 the population of Finland was approximately 5.1 million. The country is divided into 452 municipalities, the smallest having 131 and the largest about 540,000 inhabitants. There are also 290 joint municipal authorities, and the municipal sector as a whole employs about 420,000 people. Approximately 80% of them work in welfare services, including the cultural field. In 1997 the number of personnel working in municipal social and health services was almost 230,000. Additionally, the 1,800 private producers of social services employed about 15,400 people. (For a comparison, the Finnish State employs about 120,000 people.)

Municipal social services and health care staff by field in 1997

The extent of municipal functions is illustrated by the following figures from the year 1997:

¾ 575,000 pupils attended primary school and 130,000 attended secondary school
¾ There were 31 million outpatient calls and 8.0 million bed-days at health centres
¾ There were approximately 6 million outpatient calls and 5.9 million bed-days at polyclinics of hospital districts
¾ The number of children in day care was approximately 177,000
¾ There were about 132,000 families receiving home care allowance
¾ The number of books borrowed from libraries was 100 million

In Finland approximately 50% of the expenditures of municipalities and joint local authorities are funded by municipal tax revenues, whereas state funding amounts to about 15% of the expenses. The remaining part is covered by operating revenues and loans. Municipal tax revenues include local income tax, real estate tax and the municipalities’ share of corporate (business) taxes.

Total municipal sector expenditure in 1998 was FIM 142 billion, about 16 % of GNP. Welfare services, i.e. social and health services and cultural services, formed about 70 % of all municipal expenditures. Investment and operating expenditures of social and health services alone accounted for half of the total.

According to the principle of municipal autonomy, each municipality looks after its own residents and is responsible for the provision of social and health services. Social services are statutory, obligatory tasks, but the municipality can largely decide to which extent it provides different services and how much resource it allocates to different services (except for “subjective right” services).

Health services included in the national health care system are also statutory and obligatory tasks of the municipalities. The responsibility to organise health services is primarily prescribed in the Public Health Act, the Act on Specialised Medical Care and the Mental Health Act. In the health services field, the municipality can also largely decide how much resource it allocates to different functions. The municipalities’ liability for provision of health services is extensive and comprehensive.

The main part of social and health services is provided within the limits of the resources defined in the budget. For various social and health services, the clients have a statutory, subjective right to receive adequate services. If necessary, the client can, by virtue of this right, claim the service to be performed by court ruling.

Day care for children under the age of seven must be provided, for example, if the parents apply for it. For severely disabled persons housing services, transportation services and interpretation services must be arranged if they apply to the municipality. Everyone is entitled to urgent medical care and other emergency services when needed.

Citizens have a subjective right to the following benefits:

1. The right of a person in need of urgent and acute social or health care to have adequate service
2. Child maintenance allowance (to be paid on basis of neglect of maintenance)
3. Subsistence allowance to secure minimum necessities of life
4. Transportation necessary for the basic care of disabled persons
5. Compensation for the necessary appliances in the dwellings of severely disabled persons
6. Service housing and transportation services including escort services for severely disabled persons
7. Interpreter services for severely disabled persons
8. Day care for children under 7 years
9. Day care for children under 4 years or, alternatively, home care allowance
10. The provision of housing, including repairs, and sufficient subsistence for families receiving child welfare services
11. After-care benefits for children and young people receiving child welfare services, including sufficient subsistence and housing repairs
12. Housing for young people receiving child welfare services.

In Finland public welfare services and benefits are universal, i.e. “meant for everyone”. “Everyone shall have the right to” or “the law guarantees everyone the right to” are key words when defining the fundamental constitutional rights in welfare services as well as in sickness insurance and unemployment protection. Income or property does not affect the availability of social, health or education services.

For example, the parents of a child who is below school age are entitled to a place in municipal day care service for the child, regardless of their employment situation. The municipality must provide housing or institutional services for old people according to their needs; children are not financially or otherwise responsible for the maintenance of their parents. The universal concept also means that society sees to it that nobody is abandoned.

This welfare model, based on the principle of universality, enjoys a strong support among the population. According to different studies, citizens were rather opposed to cutting down welfare services, even during Finland’s recession years in the early 1990’s.

The welfare system in the Nordic countries, which is based on the universality of services, differs from the systems in most other countries: The share of welfare services in the GNP is consistently higher than the average in other European countries. A distinct feature of the Nordic welfare model is the higher share of welfare expenditures and the lower share of security spending within the total public expenditure. OECD statistics in 1996 show that Finland’s general administration and security spending was 4,6% of GNP. In the rest of the Nordic countries this figure was 5,5%, in the EU countries 5,6% and in the USA 8,5%. Welfare spending in Finland reached 15.4%, in other Nordic countries 16%, in the EU-countries 11.9% and in the USA 6.2 % of GNP.

Labour organisations and the collective labour agreement system have played a significant role in the welfare policy in Finland. The concept of “tripartite co-operation” is applied in the negotiation procedure between the government, the employers and employee organisations in formulating social policies.

Whilst employment policy has traditionally aimed at full employment, a comprehensive system of social security and unemployment protection has also been developed. In such a system a comparatively high rate of taxation has to be maintained.

The recession, the growing public debt and the strong increase in unemployment have made it difficult to pursue a full employment policy and to maintain the high level of unemployment protection. The unemployment rate in Finland (about 10 %) is higher than in other Nordic countries and around the average of EU-countries.

2.3 Funding of social security expenditures

There are considerable differences in financing social security. In Finland, Denmark, Norway and Sweden the municipalities’ share in the total financing of social expenditure is higher than in other countries. (Iceland is the only Nordic country where the State's share in financing is relatively high, with 50 %. In Finland the State's share is only 28 %).

In Finland the employers’ share in social security contributions represents the European average, whereas the share of the households is exceptionally low, just like in other Nordic countries. Of the EU countries Denmark funds its social security almost exclusively with taxes.

A considerable majority of the Finnish citizens is still willing to use tax revenues, according to the current model, for the financing of the universal basic security of welfare, either at the present or at a higher level. Even though the economic recession at the beginning of the 1990's made attitudes more reserved, according to studies prepared in 1994, the majority of citizens still preferred to maintain the level of taxation for financing social security. In the latest studies, the recession having subsided, the favourable attitudes to welfare society have further strengthened.

The income disparities decreased significantly in Finland until the mid-1980's. Then, as in most OECD countries, income disparities have gradually increased until the middle of the 1990's.

The distribution of income is still more equal in the Nordic countries than in Europe in general. International statistics show that in Finland the share of poor people out of the entire population is the lowest in Europe. In all Nordic countries the proportion of poor people is well under 10 % of total population.

The smaller income disparities are largely due to the equalising effects of social security benefits and taxation. Underpriced and free universal services have also made it possible to even out income disparities. The client fees for social and health services cover approximately 10% of the costs.

The level of public expenditure as a percentage of GNP is an indicator of the social policy pursued, even if the public and social expenditure ratios do not give a full picture of the content of social policy. For example, the social expenditure ratio of GNP does not indicate how protective the social security system is, nor does it show how it focuses on different population groups.

It has been, nevertheless, common practice to study the social expenditure ratio of GNP when comparing the social security systems of different countries. Even though the indicator is not accurate, it can still be used in long-term comparisons.

Especially in the 1980's, the growth of both the economy and the public expenditure ratio of GNP in Finland has been one of the fastest in Europe. The reason for the growth of the public expenditure ratio was the extension of welfare services.

Due to the economic recession and the cutback in total production, the Finnish social and public expenditure ratio of GNP surpassed the European average in the 1990's. Owing to the recent good economic performance and the cuts in public expenditure, Finland is now getting close to the average level of EU countries. (Social expenditure ratios in 1996: Finland 32 %, Sweden 35 %, Denmark 31 %, Norway 26 %, Iceland 19 %, EU-countries average 28 %).

2.4 The sustainability of the welfare municipality

In the Nordic model the individual seeks welfare services and claims other fundamental rights from either the state or the municipality, whose statutory responsibility is to provide the benefits. The welfare rights provide security and increase citizens’ freedoms and possibilities of action in society.

On the other hand, liberal and corporative systems are based on the belief that the State and municipalities must not interfere in a person’s life other than by protecting his or her personal integrity and sphere of freedom. This is a different aspect of the subsidiarity principle, which prescribes that society shall avoid regulating the activities of families, individual persons and the market. According to this principle, the state must not expand the public sector into social policies, as this is seen as interfering in a person’s protected zone. These services are supplied mostly by the families and other private actors instead of public authorities.

In the Nordic countries it has often been considered as a problem that the responsibility of public officials, the principle of transparency, legal protection and other requirements stemming from the role of public authorities are not automatically fulfilled in a market-driven environment, in which private actors produce the services. The basic requirement is that public and private service providers should be subject to similar requirements.

The duties and role of municipalities in society differ greatly in different parts of Europe. In general, the status of municipalities is stronger the more northward one moves in Europe. In the Nordic countries the municipalities have a comprehensive mandate and an extensive responsibility for the production of public services.

In the context of the Nordic welfare municipality, it may be justified to ask, what added value is gained by the system in which common “local” issues are dealt with by means of local, direct democracy.

Why is the welfare society founded upon municipalities? Can welfare services be secured without municipalities? Should municipalities take care of the welfare services as well as produce them themselves? Can welfare services be produced in other ways, given that the municipality guarantees their availability? Do we know how to make use of the municipal added value?

Do residents for example benefit from schools, health care and social activities, town planning and construction being in the same “municipal organisation”? Does local democracy add new content to municipal services? Does the tax base of the municipality secure the resources for welfare services better than state financing or insurance and other premiums?

Do we need the municipality in its present Nordic extent? Could the family, the Church, other organisations and the market more efficiently act as organisers and producers of social and health care services, as is the state of affairs in liberal and corporative welfare models?

The following can be said in favour of the Nordic welfare municipality. Universal services promote the equality between the sexes, the employed and the unemployed, the sick and the healthy. As employment, marriage to an employed person, work history or insurance are not conditions for welfare services, the starting point is that services are offered to everyone.

Universal services have also permitted the safeguarding of the service needs of special groups. In Finland the implementation of equality has also been ensured by statutory, subjective rights meant for specific groups and supplementing the universal services. As the services are offered to everyone, joint responsibility is increased and the basis of support for the system is strengthened.

The most important justification for the welfare municipality is perhaps the aim to offer welfare services to everyone, together with the overall responsibility for the promotion of citizens’ welfare at the local level. The local needs must be assessed somewhere and decisions on the allocation of resources must be made. In Finland, with its relatively strong municipal autonomy, it is believed that the local level is better prepared to make the right decisions than the national level. Centralisation and overall responsibility also result in efficiency benefits.

From a Nordic point of view the biggest drawback of liberal and corporative systems is perhaps the lack of overall responsibility and also the lack of joint responsibility. Families, organisations, the Church, insurance systems and the market are significant actors, but they do not have an overall responsibility for the welfare of citizens. When there is no universal supply of services, also the concept of joint responsibility may be narrowed.

In local democracy, residents can participate in and influence the decision-making. The needs and wishes of residents are mediated to the decision-makers, whose actions are supervised by the residents of the municipality. An essential element of democracy is that it is controlled by citizens, who are given the opportunity to follow, influence and react to decision-making.

In an ideal situation every citizen gets quality services, allocated to meet the needs and in accordance with the wishes of residents. Local democracy offers good opportunities for these kinds of decisions. The closer to the residents the matters are taken care of, the better their needs are identified and served.

A topical question in Finland is whether part of the services provided by municipalities could be replaced by new production methods. It has been proposed, among other things, to shift the system towards insurance-based health services. A possible extension of the family’s maintenance liability for children’s day care and care of the elderly has also been discussed. The extension of private services has also been considered important.

How would these production methods, replacing municipal services, affect equality and income transfers? Would, for example, the objectives of equality and distribution of income be jeopardised? Would the quality of service be improved? Would total costs be reduced? How would access to information about decision-making and financing be guaranteed? How would legal protection be assured?

The extreme alternatives are a municipal monopoly on the one hand, and a mainly market based system on the other. Municipality-led models are being justified with socio-political objectives as described above. On the negative side the stiltedness of municipal services, the lack of alternatives and the lack of cost-consciousness are listed. Officials are generally not considered as being very service-oriented: The extensive public responsibility for citizens' welfare obscures their own responsibility.

Systems replacing municipal services are often being justified with the need for better services and with the incentive effects of competition and flexibility. A condition for the efficiency of these models is that citizens have enough information to base their rational choices on and that the market has genuinely several producers. In education, for example, critics quote that the individual is too valuable to be exposed to companies that might be unprofitable and fail, a risk which is characteristic of the market economy. The same criticism may be applied to market-based social and health care services.

3. EXAMPLES OF THE SOUTHERN MODEL
3.1 Italy

In Italy, a debate is in progress in Parliament on federalism as regards public health financing, which may involve:

¾ abolition of the present financial transfer from the state to the regions, to be replaced by a larger municipal share in directly levied taxes on petrol, on the annual income of residents, and on transfer of property and delivery of services;

¾ abolition of the present National Health Fund.

Public health spending has evolved as follows from 1945 to the present day:

1. Reimbursement by the benefit funds, resulting in poor efficiency of health service providers, excessive expenditure and a growth in private services;

2. Budgetary funding (with the establishment of the National Health Service); again poor efficiency of operators, too much hospitalisation, growth in expenditure and in use of human technical resources, no attention to the quality and quantity of the services supplied;

3. Payment of DRG classified benefits (diagnosis related groups). This choice was made by the Italian Government in 1992 on the model of the industrialised countries, and has achieved higher operational efficiency and lower hospital admissions. But re-scaling of the Italian hospital system has not eventuated, with the result that the balance sheet shows quite a number of bankrupt hospitals. Admittedly the DRG system is complex and operators do not always adapt to new professional and ethical rules.

The introduction into Italy of arrangements for rationing social and health services and containing public spending has socio-political effects and should be steered so as to avoid generating tensions among the citizens.

The field of social assistance, very schematically, is to be understood as the complex of administrative functions, distinct from social security and health protection, which are designed to provide services and benefits for dealing with situations of social hardship. It is shared between the central government, the provinces and the municipalities.

This apportionment of responsibilities is not founded on clear separation of policy-making and programming functions from administrative functions. Indeed, although section 9 of law 142/90 assigns “principally” to the municipalities “all administrative functions” relating to “social services”, some functions are retained by the state and the provinces because the attempted institutional reform to the sector was unsuccessful. There is the added fact that in exercising their own legislative power the regions, instead of attending strictly to programming activity, have granted themselves a “programme financing” power that gives them a role very much akin to direct management.

More specifically, where the state is concerned attention can be drawn to the recency (instituted by law on 27 December 1997; financial provisions made in 1998) of the Social Policies Fund which makes available to the Ministry of Social Affairs resources approved by special laws and managed by various other ministries. Nevertheless, seen in relation to the explicit postponement of the institutional reform in the welfare sector, and further considering the limited financial commitment, this entire structure constitutes just the embryo of a ministry to be set up at some future time and destined to perform not a programming and co-ordinating function but one of promoting and testing actual measures.

As far as the regions are concerned, it can be recalled that under Article 117 of the Constitution they are vested with legislative power in this sphere and, under the subsequent implementing legislation (Presidential Decree 616/77, section 11), assigned the following functions:

¾ Helping to define national economic planning goals;

¾ Framing the regional development programmes in keeping with the national economic planning goals, assisted by the local authorities under the arrangements specified in the regional statutes;

¾ Co-ordinating action in their own remit with that of the state authorities and the local authorities in their remit.

The regions have to pursue social welfare policies by co-ordinating a large number of entities, whether in the public sector (provinces, mountain communities, individual municipalities, corporations, public assistance and benevolent agencies - Ipab) or in the private sector (voluntary associations, co-operatives, foundations, etc). They have accordingly taken some restructuring measures as regards both intermunicipal amalgamation and merging of social and medical services.

While the solutions to the institutional problems are not always consistent, the regions have uniformly endeavoured, by using the programming method, to link up the many initiatives by various entities and to apprehend the specificity of their own territory, the needs to be fulfilled, the problems to be solved and the goals to be attained.

This has been achieved predominantly through the regional development plan, approved at the same time as the annual and pluri-annual balance sheets and embodying:

¾ Analysis of the economic and social situation within the region;

¾ Overall strategy (general aims, targeted projects, programmed measures, actions) and content of official policy action within the region to be implemented in a fixed time-span.

The objectives of the regional plan are implemented by sectoral plans and, in the case in point, the plan concerning social assistance.

The Tuscany Region, whose planning experience is quoted as an example here, acting under the terms of law 72/97 on restructuring of integrated social assistance and social medicine services, has identified the bodies institutionally required to set up a social protection network capable of ensuring the organisation and furtherance of social welfare rights (region, province, municipality and mountain community), together with the planning instruments and procedures, and has laid down rules on the spatial organisation of the relevant measures by specifying the service providers.

It rests with the region to approve the Integrated Social Plan, a sectoral programming instrument under which the region, also referring to the priorities set by the regional development plan, frames, co-ordinates and rationalises social assistance policies. The aims set by the region in the Social Plan provide scope for autonomous action by the local authorities, consolidated into “health and welfare zones” determined by the regional authority and also operating under the Social Assistance Plan drawn up and approved by the Conference of Mayors administering these zones.

The regional authority is responsible for allocating the resources of the regional social assistance fund, up to 50% of which are granted for spending on routine management to the municipalities according to primarily demographic criteria, while 10% are set aside for projects of regional importance with a supra-zonal quality. The remainder is allocated to projects devised by the Zones and approved by the Conference of Mayors, as a contribution to the payment of expenses not borne by the bodies responsible for the projects.

The regional authority also co-ordinates and supervises the implementation of the Regional Social Plan, supports, directs and co-ordinates the information system, and carries out the regionally important projects using the earmarked 10% of Regional Social Fund resources.

Leaving the example of Tuscany and turning to the general scheme, it should be borne in mind that the implementation of sectoral plans is assigned to the local authorities. To be exact, the provinces have planning functions in respect of broad-based services, while they merely exercise residual powers as regards care of the blind, the deaf and children not recognised by the father.

The municipality, on the other hand, designated as the prime entity vested with social assistance functions, administers the measures in this area for which it is competent under the terms of section 9 of law 142, according to specified procedures, that is directly, or in conjunction with one or more municipalities lying within the same health and welfare zone, as authorised by and contracted with the area health organisation, or with mountain communities under a programme agreement with the province in respect of specific services.

The municipalities are involved in regional programming through the preparation and approval of welfare programmes incorporating the social assistance measures defined by schemes coming under the general plans of the health and welfare zones, and sustained by regional finance in variable proportions up to the aforementioned percentage of the Regional Social Fund's resources. Such measures are likewise administered by the municipalities.

For the implementation of actions and services, municipalities may contract with private and public bodies (Ipab, social co-operatives, community associations, auxiliary agencies, the voluntary sector, etc).

It rests with the municipalities to promote local pacts bringing together trade unions, co-operatives and community movements in order to establish social solidarity networks.

It should nonetheless be pointed out that in administering welfare provision action the municipalities have to use predominantly indirect finance allocated according to demographic parameters and past expenditure, so that the financial framework strongly affects their independence. As a result, it is difficult to adapt the planning of measures to the needs which must be met from time to time, for instance phenomena of the immigration type, which do not come into the customary field of action because they raise new challenges to be met by innovative planning.

This is at least partly due to the uncompleted federal reform limiting the autonomy of the regions and the leading role of local government bodies, which are guaranteed under a reformed system of fiscal autonomy.

3.2 France

The general principles of administrative organisation in France, as established under the legislation on decentralisation, are as follows:

¾ Responsibilities are distributed between the various tiers of government: central government (which retains the power to legislate and regulate), regions, départements and municipalities, with no supervisory links between them.

¾ However, the fields often overlap and much work is done in partnership between the various institutions.

¾ Central government performs retrospective checks on the lawfulness of the decisions taken by local authorities.

¾ Local government finance is based on direct local taxation and central government grants.

I. Distribution of responsibilities in the social, health, housing, employment and training sectors

Social Sector
Central government

¾ Directly-managed services: Département Directorate of Health and Social Affairs (DDASS); Regional Directorate of Health and Social Affairs (DRASS); legal protection of young people (Ministry of Justice).

¾ Benefits: residual welfare benefits (emergency allowances for homeless people, allowances for refugees, grants to pay for abortions, etc) and non-welfare benefits (minimum income, (RMI) for those not entitled to unemployment benefit, disabled adult allowance, special education allowance, National Solidarity Fund, military allowances, legal aid, etc).

¾ Institutions and individual services: approved schools (Ministry of Justice) and special schools (Ministry of Education); government institutes for people with sensory impairments; vocational rehabilitation, employment and care for disabled adults; residential rehabilitation centres for the maladjusted; training institutes for social workers; holiday centres for families.

Départements

¾ Directly-managed services: welfare, social assistance for children, maternity and child welfare, social services, etc.

¾ Benefits: the départements are responsible for all welfare benefits except the residual benefits for which responsibility is retained by central government, and for optional benefits, with the entire system of benefits being covered by Département welfare regulations.

¾ Institutions and individual services: child welfare establishments (children’s homes, educational assistance in the community, teams responsible for preventive action, adoption agencies); département or private establishments for young disabled people; day and residential centres for disabled adults; services and accommodation for elderly people; home-help/childminding services, etc.

Municipalities

Municipalities contribute to welfare expenditure (municipal share). They may perform département functions under contract to the département authorities. They also process welfare applications.

Regions

The regions have no powers in the social sector.

Health

Central government: hospital sector; planning, grants for school health facilities; mental health; efforts to combat alcoholism, drug addiction and AIDS.

Départements: prevention (in particular of cancer), vaccinations, community health centres, efforts to combat “social” diseases (tuberculosis, STDs).

Municipalities: municipal hygiene and disinfecting services.

Housing

Central government retains overall responsibility for this sector.

The départements each have their own Housing Council, are responsible for housing benefits (the Housing Solidarity Fund is financed jointly by central government and the départements) and issue opinions on the distribution of housing benefits.

Municipalities may have their own local housing programmes and may in some cases take action to help the poorly housed.

The regions establish housing priorities, supplement the central government funding and encourage innovation, quality and energy saving.

Employment and training

Central government: public employment service

Regions: fund and implement apprenticeship and vocational training schemes.

II. Some details concerning the organisation of social services in Loire-Atlantique

The département has opted for direct management of almost all of the services for which it is responsible, in particular as regards maternity and child welfare and social services. It used to award contracts to private bodies for providing these services in certain areas, but this practice has gradually been abandoned. The only remaining contract of this kind is with the Loire-Atlantique Family Allowances Fund (CAF Loire-Atlantique) in respect of some staff in one particular district.

However, the département does have some organisational arrangements with municipalities, which cover its main areas of responsibility and are governed by local agreements. In the case of Nantes and Saint-Nazaire in particular, the public are divided between the municipality and the département for the purposes of minimum income (RMI) applications and social services duty offices (for people requiring social services who do not come under a specific geographical district), with the département dealing mainly with families and the municipalities with single people without children.

The structure of the département’s social services is currently based on 17 social services catchment areas, which are headed by managers with no hierarchical responsibility over the practitioners working in the field: taking account of what the job entails and the services provided, the département has opted for a system of local managers
(e.g. paediatric/nursery nurse managers).

Loire-Atlantique operates a fairly generalist multidisciplinary social services department and has not established many specialist departments (e.g. it has not set up a special social services department for processing minimum income (RMI) applications).

In general, the département seeks the involvement of municipalities in the various areas of social services provision even where such involvement is only optional under the relevant legislation (e.g. housing solidarity fund, assistance fund for young people, etc). This is because it is important for the municipalities to be involved in order to respond effectively to the various needs and pool resources (as social services are already divided among many different schemes, care must be taken not to aggravate the situation with compartmentalisation between different tiers of government).

In substance, Loire-Atlantique has based its social policy on:

¾ prevention: its across-the-board approach enables action to be taken before developments that can be harmful to the individual or the community at large actually occur, in particular as regards the key phases in childhood;
¾ local development as a means of helping to create conditions in which all citizens, including those experiencing difficulties, are able to play a full part in society.

This second strand, i.e. local development, which is a newer element in the département’s social services work, has been reflected in organisational terms in the establishment of a specific sub-directorate (see organisation chart).

The organisational structure is therefore geared to social policy priorities and the form the social services take to the actual work they do.

4. COUNTRIES IN TRANSITION

4.1 Russia

Social situation

Because of the sharp decline in production levels, unemployment is increasing and the level of under-employment is high. Unemployment, which reached 11,3 % in 1997, rose in 1998 to 12,3 %. According to official statistics, underemployment represented, at the end of 1997, 10% of the workers employed at large and medium-sized enterprises.

Wage and pension arrears in the state sector, cleared at the end of 1997, rose again in 1998. The growth per capita personal income is erratic: it increased by 3,5 % in 1997 compared to declines of – 13 % and – 1 % in 1995 and 1996 respectively, and dropped again in 1998 by 18,5 % as against the previous year.

The minimum subsistence level income is estimated by the Russian Government at Rb415 per month in 1997. In 1997, minimum monthly wage of Rb83,5, (to which salaries and benefits are linked) and average monthly pensions of Rb222 represented 20 % and 53 % respectively of the subsistence level. The minimum subsistence level went up in 1998 to Rb493 per month while the minimum monthly wage remained the same. These do not provide a satisfactory level of income and as a result an estimated 20,8 % of the population lived below subsistence level in 1997 and 23,8 % in 1998. Income inequality has increased.

Social financing

No precise records of all social expenditures are kept in Russia. Social spending items are fixed in the federal and regional budgets are far from being the only sources of social funds, the latter also include various non-social programmes, resources allocated to support specific industries (e.g. coal mining or agriculture) northern areas, resources allocated by the Federal Fund for Regional Assistance, etc.

Over the last few years, the difficult social situation prevailing in the Russian Federation has led to an increase in social funding requirements. The capacity of the federal resources to meet these requirements to the full has however been limited as shown in the following table

Share of expenditures on social sphere in the overall federal budget (%)

The following table illustrates social spending as a percentage of GDP between 1993 and 1995.

Expenditures in social sphere (% of GDP)

Local governments’ contribution

The better part of budget expenditures for social sphere is borne by the local governments. Their share in the local budget exceeds 60 per cent.

Local authorities have to cover 100 % of the expenditures for secondary education, 85 % - for health care, 60 % - child day care centres, 80 % - for communal services, 60 % - for house maintenance. At the same time, the level of their own revenue sources is extremely low. It makes up only one fourth of the regional revenues. The existing imbalance of revenues and expenditures between the levels of the budgetary system is characterised by the following figures:

Summary of key social problems

The number of people needing state support has significantly increased. The decline in economic activity has led to the appearance of a class of “new poor” and to an aggravation of the situation of the “very poor”.

The country’s social protection system and its system of social services are hit by significant under-funding of the budget (at all levels) as well as by the general lack of financial capacity of the population.

Local authorities have to bear a major burden of the costs of social services, which accounts for a serious financial crisis Russian municipalities are facing today. Local authorities’ financial constraints were enhanced as a result of municipalisation of huge social assets, i.e. the transfer of social assets, formerly belonging to privatised state enterprises, to municipalities without any budgetary compensation.

The effectiveness of the system of social services and social assistance has decreased significantly: on the one hand, the provision of services and assistance face reduction in levels and in quality, on the other hand, the system is plagued by a high level of wastage. Providing to those in real need has therefore become a key issue.

The legislative framework is not adequate and constrains any effort to reform the system. New laws are not implemented due to lack of resources and/or lack of enforcement mechanisms. Finally, the social legislation does not take into account the need to decentralise social policy making at the lowest levels. There is no clear cut division of rights responsibilities between the levels of state bodies (federal and regional) and that of local authorities.

Policy

Two major concepts influenced the process of shaping of social policy. The first made an emphasis on economic transformations. Its advocates insisted that economic reforms should, in the long run, positively change the social situation in the country and facilitate the efforts to alleviate the plight of the population.

The other concept, on the contrary, stressed the importance of radical and swift improvement of social indicators of development. The economic reforms, argued socially-oriented politicians, should be aimed at meeting the social needs and be always accompanied by improving the living standards of the population.

The initial stage of reform was dominated by the first concept, social problems were relegated to the background. Absolute priority was given to an economic transformation without due account of the possible social losses.

In fact, no coherent programme of actions in the social sphere existed, which would, at least, try to neutralise some negative social consequences of the economic reforms. Some urgent measures were taken which had an emergency character. They reflected a government’s reaction to a number of social problems which have become so acute and called for actions.

The first attempt to formulate the items of social policy was undertaken half a year after the liberalisation of prices has started. By that time the social costs of the economic reform have become so high that they threatened the destiny of economic transformation. As a result the second concept gained the upper hand in the period of 1992-1994.

Policies adopted by the Russian government during the restructuring period have been taken largely to alleviate the negative impact followed by the sharp decline in living standards. Many social benefits, grants subsidies and social payments introduced in an entirely different economic environment are still operating and disbursed to the population. In the present circumstances most of them are not linked to income-testing and assessment of actual individual’s capacities to provide for their living and welfare. It has resulted in difficulties for implementing agencies to provide social assistance to those in greatest need.

Social benefits, allowances and subsidies

In Russia, there are 150 kinds of social benefits, allowances and grants. And they are provided either in cash or in kind (in the form of services) to more than 200 categories of the population (for instance, to such categories as veterans, children, disabled persons, students, unemployed and others). It is estimated that the total value of all types of social payments amounts to Rb350bn (beginning of 1998). On the basis of the current eligibility criteria, the share of the population who is entitled to receive social benefits constitutes about 68 per cent of the population, i.e. about 100 million persons. Social benefits provided at federal level (for instance child benefits, subsidies to War veterans and invalids, etc.) are furthermore complemented by benefits provided by some regions to various categories of the population of this region and cover more than two thirds of the population.

The problems

If the percentage of the population below the poverty line is 24 %, but at the same time social support is given to almost 70 % of the population, it means that a considerable part of social benefits is used to support those groups of the population which have incomes higher than the subsistence level.

The apparent small level of targeting of the system of benefits is due to the fact that benefits are granted to categories of the people and not to individual people based on their actual needs. Only one kind of social benefits, which is provided at federal level (housing allowance), is given after checking is made whether claimants are really in need of such benefits.

Though there is no systematic approach to targeting, attempts are made in regions to introduce checking on whether a family is really in need to be eligible for benefits and to select the most needy families out of those with incomes lower than the level of subsistence level. However these attempts are hindered by the absence of a relevant legislative basis.

The municipal stock of assets expanded enormously but local budget revenues shrank. This is one of the main reasons for local budget deficits and rapidly growing subsidy-dependence of the Subjects of the Federation and local governments. Apart from social assets, local authorities are made to shoulder the burden of funding such expenditures as child allowances, communal subsidies and providing housing to state officials (Procurators, judges and policemen).

Access to social services

The decrease in budget funds earmarked for the financing of subsidised social services and of maintenance of social assets (such as health facilities, education establishments, transportation, sport & recreation facilities) has led to a reportedly marked deterioration of the social assets themselves and a lower level of service quality and availability. Over the past 5 years, the range of subsidised social services have shown signs of degradation (transport sector is a graphic example of it).

In other social sectors, such as for instance health and to an extent education, accessibility to services has been reduced for less affluent individuals due to the increasing practice of requesting informal user charges. Such charges appear not only to guarantee the access to the services but also the quality of the service to be provided.

4.2 Lithuania

Today, in Lithuania, the reform of public health and social activities is under implementation. In 1991, the Seimas of the Republic of Lithuania (the supreme governmental body of the Republic) adopted the National Public Health Concept and recognised that the health of residents is the most important social and economic value and noted that this value comprises both the absence of diseases, physical defects, and spiritual and social well-being of people.

The Concept indicates that a precondition that ensures the optimal state of public health is the overall harmonious development of the system of public health comprising the maintenance and improvement of public health, the prevention of diseases, the detection of diseases in due time, the due treatment of diseases, and the rehabilitation of patients. The maintenance and improvement of public health as well as the priority of prevention of diseases have been specified as the main strategic course of development of the national system of public health.

The efficient functioning of this system must be ensured by the Government by engaging in the implementation of this task all social-economic structures and in this way creating to society and its each member the necessary conditions for healthy life.

The practical work of the system of public health is co-ordinated by the Ministry of Public Health of the Republic of Lithuania, whereas the state and municipal establishments for the supervision of individual and public health are the executive subjects.

The Lithuanian national system of public health has three levels:

¾ Primary public health activities. They comprise municipal territorial administrative entities. These activities are carried out by municipalities through inferior public institutions: primary public health centres, municipal out-patient clinics and hospitals, mental health centres, the offices of general practitioners, the offices of stomatologists, municipal medical posts, municipal urgent medical assistance stations, municipal nursing and maintenance hospitals, and municipal hospitals.

¾ Secondary public health activities. They comprise district administrative entities. These activities are carried out by a district through public health institutions for the supervision of health of individuals: district hospitals, specialised hospitals, and blood-donor institutions.

¾ Tertiary public health activities. They are carried out by the Ministry of Public Health through university and academic clinics as well as through other specialised medical institutions which render assistance to people irrespective of their places of residence.

The main customers of activities of the Lithuanian national public health system and the services thereof is the Government of the Republic of Lithuania, governmental institutions, district administrations, municipalities as well as state and territorial public health (patient) funds.

The public health services rendered to individuals and supported by municipalities (rendered free of charge) include: the compulsory medical assistance attributed to the initial level of public health activities, the nursing of pregnant women, mothers until their children are one year old, disabled members from the families of unemployed persons, children until they are 16 years old, persons whose income is less than the income supported by the Government, orphans until they are 18 years old, the invalids of the first group, and the installation of false teeth for the person of established categories.

Municipalities have the right to extend the range of public health services and nursing rendered to persons supported by municipalities.

Until 1990 the public health system was 100% financed out of the assets of the state budget.

The system of compulsory health insurance came into effect in 1997. The budget of this system is formed out of 3 per cent fee deducted from the salaries of persons who receive salaries for work and at least 30 per cent fee of the sum of the income tax of natural persons who receive income connected with labour relationship.

For the time being compulsory health insurance provides 70-80 per cent of the financing of the public health system, whereas remaining 20-30 per cent are financed out of the state and municipal budgets.

Out of their budget assets, municipalities maintain municipal sports medical centres, and baby homes for babies with developmental defects; finance compulsory municipal public health programs; and allot a portion of assets to municipal public health funds.

To co-ordinate public health activities the municipal public health boards the members of which are medical professionals and politicians are established in municipalities. These boards are independent institutions under municipalities for the co-ordination of public health activities. They are financed out of the assets of municipal budgets and co-ordinate the activities of public health centres, the policy of control of alcohol, tobacco, and narcotics on the territory of a municipality, and approve the programs of development of primary public health activities and services.

In the first part of the “Remarks on the public health program of Lithuania” the European Regional Bureau of the World Health Organisation states: 'Obviously, from 1991, after adopting the national public health concept, the Lithuanian national public health policy is implemented on the basis of long lasting efforts. Such long lasting efforts for the protection and encouragement of public health often require activities that last longer than for the period of work of one government. Exerting every effort to reach social consensus among the most important political parties so that the issues of health of residents would appear amongst the first issues on the political agenda, Lithuania became a country the experience of which should follow other European countries.'

Nevertheless, there is a large number of unresolved problems in the sphere of public health in municipal administrative regions. Because of insufficient municipal budgets municipalities are not able to finance the special expenses of public institutions, municipal public health bureaux that should be established instead of available public health centres or the branches thereof and that should be supported out of assets of the state budget have not yet been established; the problems connected with the installation of artificial teeth and with the treatment in hospitals of not socially protected persons who do not have the policies of compulsory health insurance have not yet been settled.

Other social services to residents are rendered by state, municipal, district and non-governmental (non-governmental organisations, religious communities, natural and legal persons) sectors.

In the sphere of social services, municipalities carry out both their stipulated functions and the functions delegated by the Government. Within the limits of their own competence, municipalities organise the nursing of disabled people, patients, old people, the care and maintenance of people. Within the limits of competence delegated by the Government, municipalities pay out state allowances and different indemnities.

Municipalities are the main organisers and suppliers of independent functions - social services on their territories. Municipalities plan the types and scope of social support and 100 per cent finance social support out of the assets of municipal budgets Municipalities co-operate with non-governmental organisations, religious communities, natural and legal persons, other municipalities that render social services, control and are responsible for the quality of social services rendered,
The costs of functions delegated to municipalities are financed out of the assets of the state budget.

The services rendered by municipalities are general, such as: provision of information, consulting, assistance at home, nursing at home, money for guardianship, etc.

Municipalities also render specialised social services and establish the following institutions:

¾ Stationary guardianship and nursing institutions: general homes for old people, nursing wards, nursing homes, family children guardianship homes.

¾ Temporary refuge institutions: night shelters, temporary children guardianship homes, temporary refuge homes for mothers with children.

¾ Daily guardianship institutions for: disabled adults, the employment of old people, persons with mental diseases, the rehabilitation of alcoholics and drug-addicts, children with psychic and physical defects, and children from asocial families.

Currently 55 per cent of stationary guardianship services are rendered by the public sector and 45 per cent by the non-governmental sector.

On their territories, districts render specialised and expensive services which cannot be afforded by municipalities. The social services rendered by districts are financed out of the state budget.

A large number of problems arise in the course of providing social services.

The number of socially supported residents for different reasons does not decrease in administrative regions, whereas insufficient municipal budgets do not allow to satisfy the social needs of such residents in full. The costs of the functions delegated by the Government are not always indemnified out of the assets of the state budget. The National Social Work Concept has not been prepared, only 5 per cent of social employees are professional social workers, the lack of assets and other different reasons do not allow to support socially deprived people in full.

Social work which is carried out by state, municipal, and non-governmental institutions in order to help people to live under normal social conditions is gradually improving.

5. CONCLUSIONS

To conclude, let us come back to the Finnish welfare debate, which seems to cover the key issues in both the Nordic and other European countries. Characteristics of European corporative and liberal systems are, for example, the discussions on changing the financing of social security, accentuation of family’s responsibility, the demands for extension of the maintenance liability of close relatives, the demands for “averaging out” the care for the elderly, the care for the disabled and children's day care to the European level, reassessment of universal benefits, breaking the monopoly of public services and the purposeful development of alternative production methods.

In the Nordic system the main emphasis is above all on the statutory liability of public authorities to organise social services, on universality as well as on the “supply and demand” basis in services. In other European systems the basis is more a principle of “demand and earnings”.

If the concepts of the rest of Europe gain support in the Nordic countries, both the financing of social security and the possibilities to provide social security for people outside the labour market may be hindered (i.e. the severely disabled, the elderly and the unemployed without a work history). This would mean weaker joint responsibility.

The Nordic model exists, both as an ideal model described by researchers and in practice. It is not unambiguous, but it has its strong features that can be acknowledged by everybody. In the following some of the main strengths of the Nordic model are summarised:

The responsibility of public authorities for the welfare of citizens is comprehensively prescribed in the Constitution. Central characteristics are the liability for the welfare system and the well being of citizens and the key role of the municipality in organising, producing, financing and controlling the services (joint and overall responsibility).

The Nordic welfare society is made by law. In several social and health services citizens have the legal right to claim them from the municipality. Though the constitutional self-government gives municipalities a reasonably extensive independence in their relationship with the state, legislation is an important instrument for the control of the municipalities.

The starting point of the welfare municipality in the Nordic model is to secure welfare services to everyone. The model is reasonably efficient, it strengthens equality and it has the support of citizens (universality, legitimacy).

In order to function well, a social protection system needs the approval of the general public and a broad economic base. Finland's social protection system enjoys widespread public support although differences of opinion are clearly discernible between different population groups and different periods.

The maintenance and improvement of a welfare state require a stable economy, which can provide the framework for funding a social protection system. The services and benefits provided by the welfare state have remained at a satisfactory level, even though due to high unemployment and the recession, it has been necessary to keep taxation and social insurance contributions at a high level in order to safeguard them.

The analysis of the Nordic model also offers the following lessons to other countries:

¾ Employment trends have a key position when it comes to the future of the social protection: more people in work would reduce the need for social security and related costs.
¾ New working time models, better occupational health care and ways of job-sharing should be tested.
¾ The social protection could be restructured so as to further promote people's own activity. Social security should encourage people to work and seek training.
¾ The efficiency of service production and the service structure could be further improved and services could be targeted better. A variety of community-care and intermediate forms of services should be arranged to replace institutional services.

The most important message, however, is that local authorities can play a key role in the provision of social services. The expenditure of local authorities and joint municipal authorities makes up nearly two-thirds of all public expenditure on consumption and investments in Finland. The largest part of their expenditures arises from the provision of basic community services, in particular social services and health care.

Such a strong role of local authorities in the social services field is clearly related to independent taxation rights: Finnish local authorities fund nearly half of their operations out of their own tax revenues. Each local authority decides independently on its income tax rate; no upper limit is set, whilst the real estate tax has an upper and a lower limit prescribed in the law.

The Finnish system is based on historical development, in which the connection to the Nordic model has traditionally been strong. If the basic starting points of the Nordic model – joint responsibility and equality – are maintained, it will probably preserve its basic characteristics despite a controlled introduction of methods applied elsewhere in Europe.