13 June 2016

New agreement on municipalities' economy in 2017 

The day after the Government and the Danish Regions presented an agreement on the regions' economy in 2017, it was published that the Government had also concluded an agreement with KL on the municipalities' economy in 2017. A number of the measures require the adoption of the Danish Parliament. To the extent that the agreement requires adoption of new legislation, the final content is therefore still unknown.

The agreement is comprehensive and contains several interesting elements. We have emphasised some of the new elements below.

1. MODERNISATION AND EFFICIENCY PROGRAMME

A key element in the agreement is that DKK 2.2 billion of the municipal reprioritization contribution, which amounts to DKK 2.4 billion in 2017, will be returned to the municipalities in 2017. This is for instance due to the unpredictable refugee stream, which has challenged the municipalities' economy and is based on the condition that the repaid funds are earmarked for prioritized efforts in relation to  services close to citizens.
In continuation of the above, a long-term modernization and efficiency programme will be established from 2018 with an objective of DKK 1 billion each year.
The modernization and efficiency programme will include the following elements, of which the more detailed content will be agreed between the parties at the end of 2016:

  • Effective purchase and competition
  • Effective operation, new organisational and cooperation forms
  • Digitalisation and welfare technology
  • Simplification of rules and debureaucratization
  • Better use of resources and control

    In addition to this programme, a number of other measures will also be implemented for the purpose of promoting efficiency. For instance, a loan pool of DKK 650 million will be established for investments with an efficiency potential within the public sector.

    2. SIMPLIFICATION OF THE RULES WITHIN SPECIFIC AREAS

    In connection with the employment reform in 2014, an external analysis was made resulting in 12 specific recommendations to re-write and simplify the Act on active employment initiative. For more information on the analysis here. As part of the agreement, a bill will be introduced in the parliamentary year 2017-18 to make a thorough simplification of the act. The purpose is to make the act more simple for the municipalities to administer and more easy for the citizens to understand.
    It appears from the agreement between the government and KL that the possibilities of simplifying the rules concerning the state's operating refunds and digitalisation must be investigated.

    3. FINDING SOCIAL HOUSING

    In continuation of the agreement concerning the municipalities' economy in 2016, the parties agreed to continue the analyses implemented in connection with the finding of cheap social housing.
    This must be seen in connection with the settlement concerning the  Planning Act which was made the day before the economy agreement. The settlement suggests that the municipalities keep the right to demand that up to 25% of all housing in a local area must be social housing. For more information on the settlement here.
    Further, specific rules must be simplified, for example by simplifying the procurement rules and the procedure, which are considered complicated.

    4. COOPERATION CONCERNING PURCHASING STRATEGIES

    As a consequence of last year's agreement concerning the economy, surveys showed that there may be gains by using common public solutions within a number of purchasing categories.
    Based on the above, the parties to the agreement reached an agreement with the Danish Regions to establish a cooperation concerning purchasing strategies with focus on specific purchasing categories. The purpose is to establish common public solutions and create a uniform and better common knowledge base.

    5. EFFECTIVE AND COHERENT PROMOTION OF TRADE AND INDUSTRY

    Finally, it is emphasised that the parties to the agreement together with the Danish Regions agree to ensure more simple and focused efforts for Danish companies as part of supporting an effective and coherent promotion of trade and industry. The agreement emphasises that this is to be done by reducing the overlap between the various players. However, in the second half of 2016, the Government will take the initiative to further discuss how to ensure efforts that will benefit Danish companies. 

    The agreement on the economy provides new frameworks, and Horten would like to assist the municipalities with reaping these advantages. Please contact us if you need further information.

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