Linking Public Finance to Local Government Finance: Some Critical Revelations

Abstract

This article focuses on public finance and particularly its relationship to local government finance. A desk review was conducted to collect most of the information that was used. It was concluded that local governments are part of central government. They are creatures created by decentralization either through devolution, deconcentration, delegation or a combination of the mentioned types of decentralization. Thus they are organs of state power. Local governments are supposed to support national governments in implementing their policies, plans and programmes or projects. Both central and local governments derive most of their revenues from taxes and fees. These are public funds that are paid by the citizens to enable governments and their sub-national structures to provide them with needed goods and services. The focus of governments is not to profiteer from supplied services but they need to recover money invested in the manufacturing or in the processing of the goods and services delivered to the public. Thus recovery of marginal costs is important because there is no provision of any goods or services that should be free today. The recovered money is supposed to enable governments and their sub-national structures to be able to supply the same service(s) or better quality or quantity to the public in future. The local government are the best institutions to provide public services at local levels because they have the correct information about the interests of the communities. They provide platforms for debating local issues. Thus they are like small parliaments at local level. Representative democracy if not adequate could be combined with deliberative democracy to allow equality of persons during debates and negotiations of communities’ problems.

Keywords: local government, central government, urban council, rural -district council, local government finance, public finance