Influence network between ministers and municipalities
Photo by Elijah Macleod on Unsplash
Appointing a minister increases by 45% the investment grants allocated to the municipality in which he or she has held a local mandate. This gift – valued at 30 million euros per year !- illustrates the importance of the relationships ministers build over the course of their political careers. Brice Fabre and Marc Sangnier shed light on the reasons for such generosity.
Following the French law on trust in political authorities, parliamentary reserve disappeared last year in January 2019, allowing senators and parliamentary representatives to award grants to associations and local authorities. In a recent study, Brice Fabre and Marc Sangnier reveal another mechanism by which national politicians manage to allocate financial resources to certain local authorities. The authors concentrate on the subsidies granted by the State to municipalities with more than 3500 inhabitants between 2002 and 2011, seeking to identify possible geographical variations linked to the personal background of ministers.
The authors map the links between ministers and municipalities, distinguishing between the municipality they were born in, the municipality where they studied, and the municipality where they served as mayor or city councillor before being appointed to the government. 155 of the 200 ministers in this period had previously held office as mayors or city councillors. Detailed accounts for the French municipalities, obtained from the Public Finance Office (DGFiP), are used to compare the sizes of grants to municipalities and determine whether these are linked to new ministers1 .
- 1Among the characteristics used to compare municipalities are the number of inhabitants, the age structure of the population, the income level of the inhabitants, the unemployment rate and the rate of local taxes.
Professional links or individual links?
Estimations show that the per capita investment grants received by a municipality increase by approximately 45% once a politician with at least one municipal mandate under his belt joins the government. This showed up so clearly that the authors checked to see whether neighboring municipalities might also receive greater subsidies. However, ministers’ birthplaces and the secondary schools they attended confer no advantage. So while political and professional links influence the allocation of discretionary grants, personal links alone aren’t enough.
What’s behind this link to ministers?
This raises the question of politicians’ motivations. Increased subsidies may represent a deferred payment for political support or preparation for the next election, municipal or legislative. Actually, whether or not the minister is still on the municipal council has no effect on the amount of subsidies. This suggests local support is being sought, regardless of the minister’s municipal authority involvement. Another possible justification for increased subsidies lies in ministers’ better knowledge of their municipalities and capacity to control them. In this case, the ministers’ insight into regional issues mitigates the asymmetric information that the central administration encounters in awarding grants.
Networks of influence
The study shows the central role of networks in the distribution of discretionary subsidies. Regardless of the hierarchical level involved – whether Secretary of State, Associate Minister, Minister or Minister of State – appointment to the government has the same impact on the grants received. Therefore it is not the budget that matters, but a government member’s capacity to mobilize the administration and the networks he or she may have. Such networks are clearly established at a national level, since the subsidies granted by departments or regions don’t vary. The reason may be either that ministers can’t influence these regional administrations or that they don’t try to. The effect identified is not generated by overall policy or by a new municipal request, but rather by national networks initially activated by a new member of the government.
The authors also demonstrate that these networks survive the Minister’s fiscal year-end. Municipalities receive a grant surplus starting from the year of their appointment and then continue to receive more, even five years after that appointment. Several explanations are put forward. Former ministers may maintain their influence after leaving the government. Additionally, the municipalities learn how to talk to the administration and thus keep the links active. By developing the relationship between local government and the central administration, the minister is creating a network that the municipality may continue to use in a sustainable way.
Photo by Freddie Collins on Unsplash
The total amount of grants allocated to municipalities due to their past or present relationship with a member of the government is valued at 30 million euros per year. As the authors point out, this is a low range, particularly since the study covers the period 2002-2011 and does not take into account municipalities’ connections to ministers in previous periods. Still, it represents 8% of the total subsidies granted by the State to municipalities. At a time when the abolition of the housing tax could make local authorities more dependent on resource transfers, this study reveals inefficiencies in these transfers. The ministers’ motivation is obviously not purely selfish: they are directing subsidies towards the municipalities they have more information about. However, this highlights administrations’ lack of information when attempting to allocate their subsidies optimally.