Iceland’s municipalities slashed in half in 25 years

The merging of municipalities has been a hot political potato for more than 30 years. In 1993 the government decided to hold a national referendum on the matter.

If all of the mergers had been approved, the number of municipalities would have fallen from 196 to 43. This failed big time, as all the mergers except one were declined. In a few cases, however, they would be the beginning of a different type of merger a few years later.

The primary driver of this change was the transfer of primary schools from state to municipal control in 1996, along with the belief that larger municipalities would be better equipped to manage them. 

Since then, most mergers have been initiated by the municipalities themselves. At the turn of the century, Iceland had 124 municipalities; today, that number has been halved to 62. 

A desire to create incentives to merge 

Arnar Þór Sævarsson, CEO of the Icelandic Association of Local Authorities, says the number of municipalities is clearly falling.

“There has been a lot of discussion among local authorities about how best to go about the mergers. There are two kinds of views – that the state should introduce a legal minimum population size for municipalities or it should incentivise merging, for example by offering certain benefits.”

Sævarsson says the Association is more keen on the second option.

“There have been mixed opinions on the best ways to do this. But forced mergers go a bit against the right of municipalities to control their own matters.”

When asked what incentives should be offered, Sævarsson names special local transportation projects or direct financial incentives.

He says simplified administration is one of the main benefits of the mergers.

“When administration units decide to merge, it often happens in a large area with a small population. When the unit is small it can be challenging to find the human resources needed to work in the administrations or the local councils.

“So when they merge, the service layer becomes thicker and you save money on fewer mayors and councils. These mergers also lead to fewer schools, since every municipality used to have a school.

"And that also means larger classes, which is more beneficial. Larger municipalities also have a louder voice when fighting for their interests, for instance, local road construction projects.”

However, the mergers still have their critics, according to Helga María Pálsdóttir, the Association’s head of administration. 

“One criticism is that parts of the population become further removed from those who make decisions, especially when smaller villages merge with larger towns. Some mergers from 20 to 30 years ago are still criticised on these grounds.”

Government wanted minimum population requirement

In 2019, a parliamentary resolution set a minimum population requirement for municipalities: 250 residents in the 2022 elections and 1,000 in 2026.

“The purpose of re-legislating provisions on minimum population sizes is to strengthen local government, enhance the sustainability of municipalities and ensure their ability to fulfil statutory responsibilities. 

“It is generally believed that larger municipalities are better equipped to manage their tasks. By reinforcing local government, the goal is for municipalities to become more sustainable administrative units, capable of providing the best possible services to residents and serving as active forums for democratic engagement,” said Sigurður Ingi Jóhannsson, then Minister of Municipal Affairs, in a written statement to parliament.

However, legislation setting the minimum population at 1,000 was voted down in parliament.

The suggested 250 population limit sparked quite a controversy. One of the smallest municipalities, Tjörneshreppur, even ended its membership in the Icelandic Association of Local Authorities. 

They pointed out that they had always stayed in profit and cooperated well with a large municipality next to them, Norðurþing, on issues that were too big for them to handle on their own. 

Two children in primary school

At the time, in 2019, 55 people lived there and only two children attended the primary school. However, Katý Bjarnadóttir, the vice chair of the Tjörneshreppur council, said in an interview with RUV that they would eventually merge. 

“We have no choice. As things stand today, we have to merge, whether we are part of the association or not. We therefore see no reason to be members while they don’t want us to exist,“ she said at the time. 

There can be many reasons why small municipalities are reluctant to merge – historical, emotional and financial. In some cases, the smaller municipality gains nothing economically from merging, and there are examples of the smaller unit contributing proportionally more to the merger than the larger one. 

The way municipalities serve their citizens has changed a lot in the last few years.

“Today's demands are in many cases totally different, like privacy, equal salary certification, education and so on. It is harder for smaller municipalities to fulfil these demands. But the important thing is that they have to make their own decisions on what steps to take,” Pálsdóttir says.

Sævarsson believes that the number of municipalities will continue to fall, although he does not want to guess at a particular number. He points out that no merger has so far been rolled back. 

“The only question is how fast the merging will happen. The public has increasingly high expectations for municipal services – whether in education, social services, waste management or other areas. 

“And this matters a lot when people decide where to live, or if they want to stay in a certain area. The municipality has to be able to provide them with the services they need, for example young families.

“I don’t think we will reach that goal without more municipalities merging. But this has to happen on their terms and they have to find out what’s best for them."