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May 19th, 2012

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Wealthy councils will have to hand over an extra 400 million kroner a year to poorer councils after the passage of the government's reformed redistribution plan (udligningsreform) this week.

The government redistributes tax revenue raised in each of the 98 councils in order to equalise public service levels around the country and prevent poor councils from spiralling into debt.

Known as the ‘Robin Hood’ reform, the changes will see a greater degree of redistribution along with the creation of a 400 million kroner fund that councils can tap into to help them tackle problems such as homelessness and addiction.

Councils that face problems with at-risk children and nomad families will benefit from the redistribution, while councils that operate ferry service connecting island communities with the mainland will receive an extra 15 million kroner a year under the deal.

The government started the negotiations seeking broad consensus for its proposal, but refused to compromise once the opposition parties withdrew from talks.

As a result, passage of the bill hinged on the support of the far-left party Enhedslisten.

The economy minister, Margrethe Vestager, lead the negotiations and was consequently accused by the opposition of breaking a pledge to seek consensus in the reform.

Vestager argued, however, that the reform could not wait until the next election, as the right-wing Dansk Folkeparti had demanded.

“Our ambition is that councils who need more money will be able to get more as of 1 January 2013,” Vestager told the Ritzau news bureau. “What’s important to us is that Enhedlisten is ready to step up and make it happen now.”

Gentofte council was one of the big losers in the reform and its mayor, Hans Toft (Konservative), argued that the extra 70 million kroner residents of wealthy would have to pay was an unreasonable amount.

”We already pay two billion kroner to other councils. That’s half of our income tax. Demanding more money from our residents is crazy,” Toft told Ritzau.

Copenhagen will wind up losing most money in the reform. The amount of money it receives will decrease by 245.2 million kroner a year, though it is allowed to apply to the new 400 millon social fund created to help councils address social problems – especially important given that 30 percent of the country’s homeless live in the city, and that it also suffers from above average poverty levels.

“If we couldn’t access the fund, the city’s most vulnerable – drug addicts and the homeless – would be worst affected,” councillor Ikram Sarwar (Socialdemokraterne) told Politiken newspaper, adding that the reform would affect  the city's ablity to follow through with some of its planned projects.

One of the councils receiving most money was the island of Langeland.

“We are set to receive an extra 21 million in redistribution and that is great, but it doesn’t mean we’re going to have a party, it simply means we can avoid making cuts,” Mayor Bjarke Nielsen (Venstre) told Jyllands-Posten newspaper.