Topic: "Ends and tools: local services between direct provision, public utilities and the market”

Institutions, governance and provision

Historically, the local provision of so-calledlocalpublicservices(water, waste, energy, transport, sports facilities and welfare, to name the most important) has been carried out with different institutional frameworks at different latitudes.

A separate analysis of institutions, governance andprovision could be a fruitful way to approach the issue:

·"Institutions” here are defined as being in the sense of a combination of formal rules and informal constraints which structure political, economic and social interactions (North, 1991 and Williamson, 1998). In this regard, the institutional framework deals with formal and informal rules and strategic policy goals;

·Governance deals with asset ownership, assignment procedures, rights and the command control chain. Briefly, given the institutions, governance refers to how the system is organised;

·The provision of the service strictly refers to the industrial aspect.

Consequently, when designing local service provision and regulation, animportant issue to consider is the nature of the actors involved (e.g. franchisers, local government, bureaucrats, administrative magistrates,banks and other financial actors, insurers and reinsurance companies,consumers, and environmental lobbies), their information endowment and exchange,the incentives that drive their choices, and the types of relationships established. These are all features thatinfluence the outcome of policies and projects, their success or failure, notwithstanding the institutional and regulatory framework officially established. To this aim, the Turin School of Local Regulation has developed a tool called FIELD – Framework of Incentives to Empower Local Decision-Makers, which can be chosen by paper authors to structure their analysis or to derive useful hints (www.turinschool.eu/FIELD).

Municipalities and regulation

Historically, the growing medium of regulation seems to have been in the municipalities. Concessions, franchising, licences and authorisations issued at the local level have always been accompanied by mandatory provisions and rules on price, quantity, quality, accessibility, safety and so on. The regulatory takeover by central governments, especially in energy networks, railways, postal services, telecommunications and other giant network monopolies has generally been based on one (or a combination of) the following requirements:

-neighbourhood externalities

-spill-over effects

-strategic territorial planning

-homogeneity of prices and tariffs, overcoming excessive disparities amongst territories (fairness principle)

-especially in developing countries, the need to separate regulation from strong local political control and excessive osmosis between political actors – industry – regulatory functions.

The question of scale economies, which explains the need for operating a large network of services at central level, and which has also pushed the centralisation of regulatory functions, remains open. Otherwise, municipalities have generally retained a regulatory role, which is played out in ways whichtend to vary with institutional frameworks, the level of development and cultural features of local populations.

Communities, trust and local services

Especially in countries where institutions are weak, social and community trust tends to replace institutions, often reaching the relevant results in terms of efficiency in the provision of local services. Also, in energy provision, there are interesting experiences of community energy production (Wirth, 2014). The analysis of how communities and trust in post-communist societies play a role in the governance and provision of local public services seems particularly promising, considering that literature has provided different interpretations regarding the nature of trust in post-communist societies: on the one side some scholars demonstrated that the totalitarian and rent-seeking centrally-planned nature of communism had unique, negative and lasting effects on trust (Traps, 2009 and Pehlivanova, 2009), whilst others tend to mitigate these aspects, asserting that trust in central and eastern European countries is not as feeble as is commonly assumed (Ekiert & Foa, 2012).

The heritage of the soviet experience

In CEE countries,the process of privatisation of large public assets seems to have mainly endowed the political/military elite. One research question asked is to what extent such phenomenon has also involved local public assets such as water and waste utilities, and local public transport companies, etc.

Generally speaking, atthe local level, public authorities retain a massive role in the governance and provision of services, as also demonstrated by the LORENET research on the regulatory framework of six local public services (Becchis & Vanin, 2012).

Taking the water and sanitation sector as an example, the end of the Soviet era led to substantial transfers of responsibilities to local governments in most countries where administrative decentralisation resulted in the transfer of responsibility for the provision of public services to local governments (OECD, 2011).

Different regulatory agendas

Different institutional and governance frameworks embed, or call for, different regulatory approaches.

The bureaucracy theory seems to be a good instrument to understand complete in-house provision, according to the budget-maximising model (Niskanen, 1994). On the other side, regulation, the political cycle and "revolving doors" give hints in order to understand the mixed framework (public ownership of assets and strategies alongside external assignment of provision). When,on the contrary, "franchise/privatise all" is the prevailing mantra, pure third-party regulation comes into play, with a mixture of well-known instruments (price-cap, IRR etc). In transition economies, this latter trend is often the result of pressure by international financial institutions and development banks.

Local regulation peculiarities and weaknesses

Regulating and managing infrastructures and public services at the local level is subject to specific andadditional challenges, comparedto the regulation of large network services implemented at the centrallevel: locally, relations are so intertwined that it becomes difficult to enforce the most difficult part ofregulation (franchising, investments, tariffs and prices, rent control, punishment, and incumbent removal). The local scenario is full of "improper costs” for the regulatory activity, meaning theseimproper costs are able to distort the well-knownmodel of a regulator maximising social welfare/benefits.

Considering these background elements, the Working Group on Local Public Policies is soliciting paper proposals for the 23rd NISPAcee Annual Conference on the topic of Local Public Services Governance and Provision. In particular, papers tackling the following research topics are particularly welcome:

1)Asset ownership and service delivery in local public services. Templates developed by the Turin School of Local Regulation are available at http://www.turinschool.eu/lorenet/table/templates for those who wish to use this instrument as a starting point for the analysis;

2)Regulatory framework of local public services (again, templates at http://www.turinschool.eu/lorenet/table can be used as an instrument);

3)Relationship between local and central regulation;

4)Trust, uses, culture, ethnical aspects and local services;

5)Privatisation, political/military elites, and local assets after 1990;

6)Distributional aspects, tariffs, equity, phenomena of arrears in utility bills, subsidisation.

Papers can present specific case studies from the NISPAcee region or provide a comparative analysis within different NISPAcee countries or between NISPAcee countries and other geographical areas.