This Briefing Paper was written by Bohdan Bernatskyi and Oleksiy Kovalenko.
Decentralisation of power takes place in two directions: vertical – when some powers of a central government are delegated to local authorities; and horizontal – when citizens themselves take part in local decision-making. This model well illustrates the process of decentralisation in Ukraine, which has been implemented since 2015-16. The autonomy of communities and cities at the vertical level stands for the right of local authorities to decide by themselves how to allocate budget funds. Before the Law ‘On Voluntary Amalgamation of Local Communities’ was adopted in 2015, budgetary and financial capacities of communities were extremely low. For example, before the adoption of a law in 2014 (on Amendments to the Budget Code of Ukraine concerning the Reform of Intergovernmental Fiscal Relations), which came into force in January 2017, personal income tax, which now ranks first in replenishing local budgets, used to be transferred not to the local budget but the national one.
Horizontal decentralisation is quite new for Ukraine. August 2015 can be considered as its starting point when working groups were established in Chernihiv, Cherkasy and Poltava city councils to develop regulations on city participatory budgets. In practice, vertical decentralisation is measured not only by powers but also by the capacity of local authorities to transparently manage budget funds and effectively use this resource for their community development. With the development of a decentralisation policy in Ukraine, it became possible for communities to obtain such financial capacity. At the same time, horizontal decentralisation is a more multifaceted and autonomous phenomenon, which demonstrates the capacity of each member of the community to directly participate in working out and making decisions, which influence the harmonious development of a village or city in question.
To understand the depth of horizontal decentralisation and to determine whether it is real, it is necessary to pay attention to such parameters as:
- availability of efficient and binding participatory tools (local initiative, participatory budget);
- possibility for residents to manage financial resources;
- possibility for residents to freely discuss and share thoughts and views.
Given the fact that the institution of local referenda, which was to become the basis for emerging horizontal decentralisation, is still not on the agenda, public budgeting can become one way for each member of the local community to directly participate in local affairs
This paper analyses whether the participatory budget tool has created preconditions necessary for the development of horizontal decentralisation in Ukraine. Based on the results of this study, the authors of the paper conclude that public budgeting (PB) tools have significantly contributed to the development of horizontal decentralisation in Ukraine. This conclusion rests on the following: (1) for the first time since 2015-16, local communities have begun to implement participatory budget programmes, allowing inhabitants, based on voting results, to identify and propose projects to authorities that will be implemented from the local budget.; (2) in 2019, residents in a number of communities could participate in the decision on how to spend a total of about UAH 590 million of local budget funds. This amount is only 0.1% of all local budgets, but it is a start (the resource of all local budgets and subventions is UAH 573.1 billion). In addition, the amount allocated from local budgets for participatory budgeting is 0.4-0.5% of local budgets of those villages, towns and cities where the participatory budget was put in place in 2019. This percentage of allocated funds for participatory budgeting is in line with international standards and the best European practices.
 Decentralisation of Public Authority: Experience of European Countries and Prospects of Ukraine / [O.M. Boryslavska, I.B. Zaverukha, A.M. Shkolyk and others]; Centre for Political and Legal Reforms. – K., O.M. Moskalenko, 2012 – 212 pages, https://niss.gov.ua/sites/default/files/2019-05/2019.pdf
Decentralisation of Power: Agenda for the Medium Term. Analytical report. Authors: Y. A. Zhalilo, O.V. Shevchenko, V.V. Romanova, etc. National Institute for Strategic Studies. – K: 2019. – 115 pages.
 ‘Traditionally, the largest share in the revenues of local budgets is the income from collecting personal income tax – UAH 35.9 billion, or 59.3% of the total income of the general fund of local budgets’. Read more at: https://decentralisation.gov.ua/news/11013.