The moral justification and practice of intergovernmental equalisation grants to local government – A subsidiarity perspective

In: Australian journal of public administration, Volume 81, Issue 1, p. 3-17

Abstract

AbstractDecentralised government – such as local government – allows for better tailoring of goods and services and hence higher levels of economic welfare. However, inequities in wealth can mean that some local governments experience difficulty trying to provide for the needs of their citizens. To try to mitigate these disparities, most systems of local government feature a program of untied equalisation grant transfers. However, proponents of equalisation grants schemes have struggled to provide a convincing moral justification for the practice: often scholars resort to rather unconvincing appeals to Pigou's famous normative dictum that equals should be treated equally. We propose that the natural law Principle of Subsidiarity is a more appropriate and robust moral justification for equalisation grant transfers. Moreover, we show how adoption of a subsidiarity justification would lead to improved grants practice that could be expected to avoid some of the serious problems that plague existing equalisation grant schemes.