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Parliament approves Local Government Act

Parliament approved late Monday the new Act on Local Government, which broadly rearranges the responsibilities and powers of authorities of the central government and local governments.

The law was passed in a roll-call vote late on Monday. The paragraphs requiring a two-thirds majority were approved with a vote of 259 ayes and 97 nays. The vote on the rest of the legislation was 257 ayes and 89 nays.

The new act transfers the operation of schools, hospitals and institutions of social welfare from local governments to the central government in an effort to boost cost-efficiency, while establishing a task-oriented system and placing stricter limits on local council autonomy.

The act puts public security, water supply and waste management, district heating and care for the homeless among the tasks of local councils. It also gives local councils the right to levy local taxes.

The act establishes rules for borrowing by local councils with the aim of preventing excessive indebtedness, requiring permission from the central government to run up debt and sets the annual limit for debt taken on to half of local council revenue. Loans used to pre-finance European Union funding, loans guaranteed by the government, operating loans for less than one year and restructuring loans taken out under bankruptcy protection agreements are exempt from the rules. The rules will be spelled out in greater detail in the Act on Financial Stability.

The act prohibits MPs from holding the office of mayor after the next general election in 2014.