Institutional Design and Central—Local Strategies: Introducing the New Block Grants System in Norway

Abstract

When special grants are replaced by block grants in a central–local financing system, central government steering of the communalized welfare sectors can no longer be based on economic incentives. In this paper the potential for central government control over welfare policies under block-grants conditions is discussed, with particular reference to the change in the Norwegian transfers system. It is argued that, given high ambitions for the welfare state at the central level, a central government may find legislation to be an insufficient means of control, and it may be more likely to search for new types of economic incentives to make the communes perform according to the priorities of the national welfare state. In doing so, however, the central government must find methods of legitimizing a partial return to old practices that do not contradict the principle of block grants.