{"id":4031,"date":"2024-09-02T11:42:39","date_gmt":"2024-09-02T09:42:39","guid":{"rendered":"https:\/\/www.rivistaeco.com\/?p=4031"},"modified":"2024-09-02T11:42:39","modified_gmt":"2024-09-02T09:42:39","slug":"why-differentiated-autonomy-is-such-a-controversial-law","status":"publish","type":"post","link":"https:\/\/www.rivistaeco.com\/en\/2024\/09\/02\/why-differentiated-autonomy-is-such-a-controversial-law\/","title":{"rendered":"Why differentiated autonomy is such a controversial law"},"content":{"rendered":"

What is the purpose of a law on differentiated autonomy?<\/span><\/i> Why are the Basic Levels of Service (Italian acronym: LEPs) so important?<\/span><\/i> Will we have twenty small autonomous states?<\/span><\/i> Will the South be left to fend for itself?<\/span><\/i> These are some of the many questions surrounding the law proposed by Minister Calderoli.<\/span><\/i> The answers aim to clarify the crucial points that raise the greatest concern.<\/span><\/i><\/p>\n

The purpose of the law presented by Minister Roberto Calderoli (published in the Official Gazette as Law No. 86 of 26\/6\/2024) is to provide a unified framework for the implementation of Article 116 of the Constitution, as reformed by the Amato government in 2001. This article provides for the transfer of functions and related resources to the ordinary statute regions that request it. Therefore, it is a matter of principles rather than facts. Moreover, Article 116 of the Constitution itself provides that the assignment of specific functions to the regions must be approved by the Parliament \u201cby an absolute majority of its members\u201d, which is a somewhat more demanding procedure than the one usually adopted – \u201csimple majority of those present\u201d – for ordinary laws.<\/span><\/p>\n

Which subject matters can be transferred to the regions?<\/b><\/h3>\n

The regions can be assigned all the areas that are provided for in Article 116 of the Constitution, which includes all twenty policy areas that are currently defined as \u201cconcurrent\u201d, i.e. on which there is a shared competence between the state and the regions, plus three areas (justice of the peace, general rules on education, environment and cultural heritage) that are currently under the exclusive competence of the state. The initial request from the Veneto region in 2017, later significantly scaled down in the 2018 agreement with the government, was for the allocation of all twenty-three transferable policy areas. Among the most important and controversial are international relations and relations with the European Union, foreign trade, education, scientific and technological research, and support for innovation in productive sectors, food, civil protection, ports and civil airports, major transport and navigation networks, communication regulation, and energy.<\/span><\/p>\n

These are important matters (think of education), over which the regions would have legislative power. It is hard not to see the risk of increasing regulatory complexity and confusion, with additional bureaucratic burdens for citizens and businesses.<\/span><\/p>\n

What are the LEPs?<\/b><\/h3>\n

The LEPs are the essential levels of service, and under the Constitution (Article 117) they are set by the state for all \u201ccivil and social rights that must be guaranteed throughout the national territory\u201d. However, the law extrapolates a broad LEPs subset and delegates the government to define them within 24 months. This means that nothing should happen for this subset of subject matters for at least two years, even though a considerable amount of work (on no less than 257 LEPs) has already been done by a technical commission chaired by Sabino Cassese. The time needed will probably be even longer because it is expected that the decrees defining the LEPs will be adopted \u201conly after or concurrently with the entry into force of the legislative measures allocating the necessary financial resources\u201d (Article 3, paragraph 7). Therefore, if there is no money, the LEP\u2019s decrees cannot be issued, and functions and resources cannot be transferred. For this reason, initial statements from representatives of northern regions have indicated their intention to immediately request the allocation of policy areas whose devolution is not contingent on the definition of the LEPs. These include international relations and relations with the European Union, foreign trade, professions, civil protection, complementary and supplementary pensions, coordination of public finance and the tax system, savings banks, rural banks, regional credit institutions, regional mortgage and agricultural credit institutions. Again, these are not insignificant matters, over which the regions would have legislative powers.<\/span><\/p>\n

Why are the LEPs so important?<\/b><\/h3>\n

The LEPs are crucial to ensure equal treatment of all regions. Article 4, paragraph 1 is the key in clarifying their role: it states that if the determination of the LEPs results in additional costs for public finance, the transfer of functions to the regions that have requested them can be made \u201conly after the entry into force of the legislative measures allocating the financial resources to ensure the same essential levels of services throughout the national territory, including the regions that have not signed the agreements\u201d. The expression is not very clear (perhaps it will be interpreted as historical expenditure), but the purpose is clear: \u201cto avoid disparities in treatment between regions\u201d. Therefore, for the subject matters requiring LEPs (the majority), the transfer of functions is subject to very stringent conditions.<\/span><\/p>\n

A North-South dispute over resources?<\/b><\/h3>\n

In the narrative of the party that until a few years ago was called \u201cLega Nord\u201d, the LEPs were seen as the building block to which standard costs and thus state transfers could be attached to put an end to the waste of resources that was believed to be taking place in Southern Italy. According to the latest available data processed by the Bank of Italy, in the <\/span>Mezzogiorno<\/span><\/i> overspending compared to the territory\u2019s revenue of the is EUR 3,178 per capita, or almost EUR 70 billion per year coming from the other regions, which additionally make a positive contribution to the nation\u2019s budget balance (see table). The experience with the LEAs (Essential Levels of Assistance) in healthcare, established in 2001, has shown how difficult this equation is, because it is hard to establish LEAs and even harder to set a unit price for each possible purchase. And it is evident to all that disparities in service levels have not been reduced at all. The law itself explicitly acknowledges that the LEPs are not sufficient to overcome territorial inequalities, requiring the state in Article 10 to allocate additional resources in order to \u201censure national unity as well as promote economic development, cohesion of social solidarity, insularity, and the removal of economic and social imbalances (…)\u201d.<\/span><\/p>\n

How would the transfer of functions take place?<\/b><\/h3>\n

The procedure leading to the approval of the transfer of functions is the heart of the measure and is covered by several articles (Article 2 et seq.).<\/span><\/p>\n

To summarise, almost the entire procedure involves negotiations within a joint commission between the state and each individual region concerned, leading to a preliminary agreement. The State-Regions Conference and the Parliament are informed and can express opinions, which are, however, not binding. Only at the end of the negotiation process is the draft agreement submitted to the Council of Ministers for approval, which then forwards it to the Parliament, which decides by an absolute majority of its members. In all likelihood, Parliament can only approve or reject, but not amend, the agreement unless the bilateral negotiation process is set in motion again.<\/span><\/p>\n

Can the state limit the scope of the subject matters under discussion?<\/b><\/h3>\n

At the beginning of the negotiation between the state and the region, the President of the Council of Ministers can intervene to limit the negotiation\u2019s scope to certain subject matters, \u201cin order to safeguard legal or economic unity, as well as to provide common guidance on priority public policies\u201d (Article 2, paragraph 2).<\/span><\/p>\n

How are resources allocated to the regions?<\/b><\/h3>\n

The agreement also includes the allocation to the region of the financial, material, and human resources necessary to perform the transferred functions (Article 5). With regard to financial resources \u201cparticipation in the revenue of one or more state taxes accrued on its territory\u201d are provided. Thus, there are no own resources that regions can manage as they see fit, which does not constitute what is usually defined as \u201cresponsible federalism\u201d. Furthermore, every year the participation rates are changed by the Minister of Economy upon the proposal of the state-region joint commission in order to \u201crealign\u201d the resources with the needs required to meet the LEPs (Article 8, paragraph 2). In practice, the regions have no financial autonomy: the keys to the safe are in the hands of the central state, which should use them for equalisation purposes. The only doubt concerns the fact that the proposal must come from a joint commission, in which the region concerned is unlikely to agree to give up the \u201cexcess resources\u201d that may have formed on its territory. Perhaps this is the only window left that could allow the regions that grow the most or make the most judicious use of resources to retain them on their territory.<\/span><\/p>\n

How much does it cost?<\/b><\/h3>\n

According to Article 9 of the law, the cost should be zero. However, some additional costs are almost certain. The main ones depend on the regulatory confusion that can arise in a situation where regions have different competences on significant matters. There is also the risk of duplication of costs between the central state and the regions, if only some request the allocation of a certain subject matter, and the loss of economies of scale and scope. Finally, there is the risk of additional costs related to the state\u2019s obligation to provide regions with the resources they need to finance the LEPs.<\/span><\/p>\n

Why is the law so controversial?<\/b><\/h3>\n

Those who defend the law emphasise that it is good for decisions to be taken by those closest to voters; that the law does not take anything away from the southern regions but holds their officials accountable; that the status quo has not reduced the gap in terms of income and services between different areas of the country.<\/span><\/p>\n

Critics point to the risk that less favoured regions will be disadvantaged. This could happen if richer regions manage to accumulate resources in excess of what is needed to finance the LEPs (for example, because they use resources more wisely), as well as to retain resources on their territory.<\/span><\/p>\n

This is a critical issue that the law leaves unresolved, as it refers to the operational rules of the state-region joint commissions, the definition of which is entrusted to individual agreements. Should the regions with excess resources manage to retain them, this would result in funds being diverted to the detriment of either the state budget or the other regions.<\/span><\/p>\n

A diametrically opposed criticism points out that the law does not change the status quo of a decentralisation without accountability, because the regions have the privilege of spending, and the state has the burden of taxing. The criticism is valid if, in the bilateral commissions, the state succeeds in redistributing the regions\u2019 excess resources. A third criticism argues that autonomy should be symmetrical and not differentiated; there is a risk of a Republic in Harlequin\u2019s clothing, in which it becomes extremely difficult for the state, citizens and businesses to navigate through so many different competences in different regions. Moreover, it is likely that the request for greater autonomy will come from many regions across the country; each of these requests will correspond to a different bilateral state-region commission, with an evident risk of creating significant administrative chaos. Furthermore, many believe that functions such as energy, transport, education, telecommunications, environment, and foreign trade should not be decentralised.<\/span><\/p>\n

Finally, there is the risk that the state will be deprived of the financial resources necessary to perform an essential task such as cyclical stabilisation in the face of fluctuating economic activity.<\/span><\/p>\n

Fiscal balances net of interest expenditure (values per capita)<\/b><\/h3>\n
\"\"
Note: Fiscal balance = expenditure – revenue. If the fiscal balance is positive, the region spends more than the revenues generated in its territory; it therefore receives transfers from the rest of the country through the state. If the balance is negative, the region spends less than the revenues generated in its territory; it thus contributes positively to the public budget balance and\/or transfers to other regions. Source: Bank of Italy, \u201cThe Economy of the Italian Regions\u201d, No. 22, November 2020. The data refer to 2019 and are the latest available\u00a0<\/figcaption><\/figure>\n

 <\/p>\n

Bio<\/strong><\/em><\/p>\n

Rossana Arcano is junior economist at the Observatory on Italian Public Accounts of Universit\u00e0 Cattolica. She graduated with honours with a Master\u2019s degree in Banking and Finance from Universit\u00e0 Cattolica. She is pursuing a second-level Master\u2019s Degree in Analysis, Prevention and Fight against Organised Crime and Corruption (Anti-Mafia and Anti-Corruption).<\/span><\/em><\/p>\n

Alessio Capacci is junior economist at the Observatory on Italian Public Accounts of Universit\u00e0 Cattolica. After a three-year degree in Economics and Commerce, he obtained a Master of Science in Economics and Development with 110 cum laude at the University of Florence.<\/span><\/em><\/p>\n

Giampaolo Galli is director of the Observatory on Public Accounts of Universit\u00e0 Cattolica and professor in economic policy at Universit\u00e0 Cattolica. He is also a senior fellow at the Luiss Institute for European Analysis and Policy, a member of the scientific committee of the Centro Einaudi and of the advisory board<\/span> of Rivista di Politica Economica.<\/span><\/em><\/p>\n","protected":false},"excerpt":{"rendered":"

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