Local government finance in Ireland: The four pillars of fiscal decentralisation

This article outlines Ireland’s system of local government finance using a conceptual framework drawn from the fiscal federalism and municipal finance literature. Commonly referred to as the four pillars of intergovernmental fiscal relations, the four pillars are expenditure assignment, revenue assignment, intergovernmental transfers and local borrowing. After presenting the economic case for local government based on the decentralisation of the allocative function of the public sector, the theory underlying each of the four building blocks is outlined and applied to local public finance in Ireland. Differences between theory and practice are evident, as are differences with practices in other countries, confirming the no-onesize-fits-all approach to intergovernmental finance and fiscal decentralisation. Future reforms in the area of local government finance in Ireland should be cognisant of this framework and the good principles of public finance that follow, in addition to the historical, institutional, and political factors that also determine practices and outcomes.