Regional and local governments frequently face restrictions in raising resources to finance present or potential spending. Central authorities often regulate the few local sources of revenue by controlling tax rates, prohibiting increases in user service charges, and limiting the means for revenue collection and enforcement.
Excessive centralization creates difficulties for goods and services that are regional or local, rather than national, in character, such as water supply and sanitation, and even some health and education services. Centralization tends to reduce public accountability and responsiveness to local preferences. The scope for decentralization is greatest in urban areas, but broadening the involvement of rural communities in water supply, irrigation and rural roads can also improve the quality of public services.