Decentralised power in the school system can provide good conditions for efficiency and high performance (Barankay and Lockwood, 2007; Clark, 2009; Falch and Fischer, 2012; Hanushek et al., The Danish system is highly decentralised in the sense that the central government does not interfere in specific municipalities and schools, but governs the system mainly through general guidelines agreed in national negotiations. Central funding is related to national goals and targets as negotiated in the annual agreements between the central government and LGDK. A key central initiative to reduce spending following the financial crisis was the introduction of multi-annual expenditure ceilings for the central government, municipalities and regions by the Danish parliament.