Mayors across Denmark call for reform of outdated subsidy system at Christiansborg

On Friday morning, all politicians at Christiansborg received an email from a group of mayors across Denmark. They expressed concerns that the current system for redistributing funds between municipalities—known as the subsidy and equalization system—needs thorough examination. Half of the country’s mayors argue that the system is outdated and unfairly structured.

The call for reform follows a recent government press conference about a healthcare reform, where the government indicated it would initiate an analysis of the equalization system. This analysis should particularly address the significant disparities in welfare across municipalities, according to several local leaders, including Holger Schou Rasmussen, the Social Democratic mayor of Lolland Municipality.

Rasmussen highlighted that despite having the highest tax rate in Denmark, his municipality struggles to raise funds while others with lower rates maintain high service levels. Hans Stavnsager, mayor of Faaborg-Midtfyn Municipality, echoed these sentiments, describing the system as a “black box” with unclear mechanisms for budget allocation.

The equalization system, modified in 2021, has been criticized as inadequate by finance expert Arne Ullum. He noted that it fails to account for increasing numbers of elderly residents and others on disability pensions. This results in municipalities with higher elderly populations facing significant financial losses, compromising local welfare services.

Ole Vind, the Mayor of Hedensted, pointed out that his municipality has lost 33 million kroner due to this system, affecting funding for nurseries and elder care. He emphasized that it is unjust for his community to support others while becoming increasingly poorer despite growth in population and employment.

The analysis of the equalization system is set to be conducted by the Ministry of the Interior and Health, with results expected by the end of 2027.