TERRITORIAL IMPACT OF COVID-19:

MANAGING THE CRISIS ACROSS LEVELS OF

GOVERNMENT

Maria-Varinia Michalun, Senior Project Manager and Policy Analyst

Section on Economic Analysis and Multi-level Governance,

CFE/OECD

Local Government Association (UK) Webinar

17 June 2020

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• 3 dimensions of territorial impact

• 9 categories policy responses

• 10 early insights and looking ahead

2

Presentation outline

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• Exposure to global value chains

• Sector specialisation(e.g. tourism)

Economic

• Increased expenditures

• Reduced revenuesFiscal

• More vulnerable regions (e.g. deprived urban areas)

• Certain vulnerable populationsHealth/Social

3

Territorial impact in three dimensions

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Impact: Economic dimension

Source: OECD, 2020, From pandemic to recovery: Local employment and economic development) https://read.oecd-ilibrary.org/view/?ref=130_130810-m60ml0s4wf&title=From-pandemic-to-

recovery-Local-employment-and-economic-development

Share of jobs potentially at risk

from COVID-19 containment

measures

© OECD | 5Territorial impact of COVID-19: Managing the Crisis Across Levels of Government

Impact: Fiscal dimension

76%

64%59%

48%

34%

25% 24%21%

14%

1%0%

10%

20%

30%

40%

50%

60%

70%

80%

The share of subnational government in public expenditure

by functional area (2017)

Note: The OECD average (unweighted) is calculated for 33 countries (no data for Canada, Chile, and Mexico). The

functional areas correspond the Classification of the Functions of Government (COFOG), which distinguishes 10

areas. The total of general government spending is non-consolidated.

Source: OECD (2020), Subnational governments in the OECD: key data (brochure and database).

Revenue drop

Expenditure rise

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Impact: Health/social dimension

Territorial impact of COVID-19: Managing the Crisis Across Levels of Government

Inequalities are

exacerbated

• Population density

• Poverty

• Housing conditions

• Health system capacity

• Pre-existing conditions

• Income

• Education

Territorial & social

inequalities are linked: placed-based policies are

needed

Source: OECD (2020), The Territorial Impact of COVID-19: Managing the Crisis across Levels of Government

EnglandMetropolitana (Santiago)

DaeguQuebec

HovedstadenCanterbury

FlandersNew South Wales

LombardyStockholm

Île-de-FranceTokyo

Community of MadridPrague

BavariaNew York

ViennaNoord-BrabantSão PauloBogota D.C.Mazowieckie

Ciudad de MexicoTicino

United KingdomChile

KoreaCanada

DenmarkNew Zealand

BelgiumAustralia

ItalySwedenFranceJapanSpain

Czech RepublicGermany

United StatesAustria

NetherlandsBrazil

ColombiaPolandMexico

Switzerland

0% 20% 40% 60% 80% 100%

national COVID-19 fatalities

country mean highest

The UK and London Within-country differences

in COVID-19 fatalities

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Regional disparities in access to health servicesNumber of hospital beds per 1 000 inhabitants, large regions, 2018 (or latest year available)

Source: OECD regional database

Factors Supporting Crisis Management: Access to health services

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Factors Supporting Crisis Management: Teleworking

VanWestern Slovakia

VestIslas Baleares

Kozep-DunantulNorthwest

MississippiBasilicata

Jadranska Hrvatska

Alentejo

BurgenlandChemnitz

Sterea ElladaNorthern and Western

Lietuvos regionasWest-Vlaanderen

Hedmark og OpplandPohjois-Suomi

Basse-NormandieNordjy lland

OstschweizNorra Mellansverige

North East

IstanbulBratislava

Bucuresti-IlfovComunidad de Madrid

BudapestPrague

District of ColumbiaLazio

Kontinentalna Hrvatska

Lisboa

WienHamburg

AtticaEastern and Midland

Sostines regionasBrabant WallonOslo og Akershus

Helsinki-UusimaaIle de France

Hovedstaden

ZurichStockholm

London

10% 20% 30% 40% 50% 60% 70%

TURSVKROUESPHUNCZEUSAITA

HRVOECD25

PRTLVAAUTDEUGRC

IRLESTLTUBEL

NORFIN

FRADNK

ISLNLDCHESWEGBRLUX

Minimum National Average Maximum

The possibility to work remotely differs between and within countriesShare of jobs that can potentially be performed remotely (%), 2018, NUTS-1 or NUTS-2 (TL2) regions

Source: OECD, 2020,

https://read.oecd-ilibrary.org/view/?ref=134_134296-u9iq2m67ag&title=Capacity-for-remote-working-can-affect-lockdown-costs-differently-across-places

Policy Responses

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Categories of policy measures

Territorial impact of COVID-19: Managing the Crisis Across Levels of Government

Reinforcing vertical coordination and supporting cross-jurisdiction cooperation

Managing exit strategies from containment: testing and social distancing

Strengthening data collection and digital governance regionally and locally

Managing the impact on local finance

Supporting vulnerable populations by all levels of government

Supporting SMEs and the self-employed

Promoting public investment as part of crisis exit and recovery

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Vertical coordination mechanismsActivate multi-level coordinating bodies

Clarify roles and responsibilities

Establish coherent guidelines

Work with national associations of regions

and/or municipalities

11

A coordinated response by all levels of government can minimise crisis-management

failures.

• Activating existing or setting new coordination mechanisms

• Making the most of cooperation across jurisdictions (countries, regions, local authorities)

It is not the degree of centralisation or decentralisation that matters for successful

response measures.

• Coordination more essential than ever to manage exit strategies from containment

• Meet asymmetry with asymmetry: focus on places most strongly hit

Cross-jurisdiction coordination In procurement and protective

equipment purchases

In containment measures and exit

strategies

In medical care/hospital transfer

Territorial impact of COVID-19: Managing the Crisis Across Levels of Government

Coordinated action among levels of government and across regions

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o 60% of OECD countries have measures to support subnational finance

o Limit the risks of a “scissor effect”

o Limit the risk of pro-cyclical policies

Vertical coordination

mechanismsExamples of actions

Territorial impact of COVID-19: Managing the Crisis Across Levels of Government

Supporting local finance

• Australia: Cost sharing agreement between Government, States and Territories • Belgium: regional governments are supporting local finance (e.g. grants, relaxed deficit rules)• Denmark: Temporary easing of fiscal rules for municipalities • The Netherlands: an emergency envelope of more than half a billion euros to be allocated to

municipalities. • Norway: Government compensation to municipalities for spending impact of COVID-19

4 Categories of fiscal instruments

1. Revenue side measures2. Expenditure side measures 3. Fiscal rules and debt 4. Financial management

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Vertical coordination

mechanisms

Some recommendations

Territorial impact of COVID-19: Managing the Crisis Across Levels of Government

Supporting vulnerable populations

• Provide additional grants to subnational governments to finance expenses corresponding to

increased social service needs and supporting vulnerable populations in the crisis (e.g. Iceland)

• Establish temporary formula-based grants to compensate subnational government support to

vulnerable groups during the pandemic

• Clearly and regularly communicate the support available to vulnerable population and how to access

it, and simplify its allocation (e.g. the Netherlands, Portugal)

• Facilitate horizontal cooperation among municipalities to address the increases and shifting profiles

among vulnerable populations (e.g. Barcelona)

10 early takeaways

and insights for the

future

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10 early takeaways1. Use multi-level coordination bodies to minimise the risk of a fragmented crisis response

2. Support cooperation across municipalities and regions to minimise disjointed responses and

competition for resources

3. Consider a “place-based” or territorially sensitive approach to exit strategy implementation and

recovery policies

4. Take the opportunities offered by digitalisation to support crisis management and be aware of its

limitations

5. Foster continuous national/subnational dialogue regarding COVID-19’s fiscal impact on subnational

budgets

6. Improve subnational finance management with temporary or permanent fiscal tools and measures as

well as modern and innovative financial management tools

7. Strengthen national and subnational-level support to vulnerable groups

8. Ease administrative burden on regional and local services and those that help SMEs, the self-employed

and vulnerable populations

9. Ensure similar SMEs are treated in the same way.

10. Use public investment to support COVID-19 recovery over time

15Presentation Title

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• The most effective responses

are coming from systems

that are flexible, where there

is room to act “on the ground”

and where there is effective

national-level leadership.

• Use territorially adapted

responses to manage a

territorially differentiated

problem/crisis

Territorial impact of COVID-19: Managing the Crisis Across Levels of Government

Looking ahead: Some insights for the future

The importance of effective governance arrangements at and among all levels

• Strike a balance between

centralised and decentralised

approaches

• Use coordination

mechanisms to avoid crisis-

management failures

• Build effective crisis-

management partnerships -

no level of government can

meet the demands alone

• Mobilise public, private and

third sector actors for a

more effective response

• Don’t forget clear,

transparent, rapid, and

accurate communication,

regularly

• Consider investment as a

crisis management tool

• Use this opportunity to build

resilience and integrate other

large-scale objectives (e.g.

climate) in recovery plans

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• How to deal with the aftermath of this crisis? How to turn challenges into

opportunities? (digitalization, inequalities, urban-rural balance, climate)

Question to consider:

Territorial impact of COVID-19: Managing the Crisis Across Levels of Government

Thank youFor more information

www.oecd.org/coronavirus

mariavarinia.michalun@oecd.org

Link to the paper: oe.cd/il/2X6