Decentralisation in Portugal: Financing, Challenges and Prospects for the New Model

Decentralisation in Portugal, driven by Framework Law No. 50/2018, represents an ambitious step in the transfer of powers from central government to local authorities. Overall, this process can optimise resource allocation and promote more efficient public management. However, the specialist literature emphasises that the success of decentralisation depends on robust financing models and sound governance. In this article, we analyse the evolution of decentralisation in the areas of education, health and social action in Portugal and the financing model, with particular attention to the Decentralisation Financing Fund (DFF). Based on this analysis, we propose a new financing model based on five variables that are crucial to the success of decentralisation. We conclude that, for decentralisation to be efficient and promote greater territorial cohesion, the financing model in Portugal must be based on the distribution of tax revenues at the central government level, complemented by a distribution among municipalities based on municipal tax revenues.