Financial Resilience: How Dutch Cities Have Buffered and Adapted to the Financial Crisis

Abstract

Since 2010, Dutch local authorities (LGs) have been coping with fiscal stress and austerity. Restoring fiscal balance is difficult for Dutch LGs as they have very limited abilities to increase the level of local income. Fundamental choices regarding policy priorities and public services are required to reduce fiscal deficits. An in-depth case study of four carefully selected LGs revealed three typical financial shocks in the Netherlands: the reduction of national transfers to LGs, the decentralisation of national tasks to LGs without corresponding budgets and the declined value of municipal assets (construction land). The perceived vulnerability for financial shocks is relatively high in Dutch LGs due to their undiversified and uncertain revenue sources. This chapter illustrates that while the anticipatory capacity initially was low, many efforts have been made since 2010 improving risk management and medium-term financial planning. Dutch LGs have typically deployed short-term and long-term responses to cope with austerity. Regarding the short-term, two types of responses were commonly used to balance the budget: cutting costs and postponing investments. Long-term responses were deployed to realign actual operational outputs with strategically desired outputs. Sticking to strategic plans was not easy as financial shocks evolved quickly. An important long-term response in the Netherlands was the ‘transition of the role of government in society’, moving from a proactive self-organising type of government towards a more passive, coordinating type of government. No evidence was found for radical changes of the financial system