Reining in local government

Last updated 08:23 21/03/2012

In 2002 local councils were given the power of general competence. It meant they could do anything at all, so long as a majority of councillors voted for it. Any amount of spending could be justified so long as it contributed to the social, economic, cultural and environmental wellbeing of their communities.

For the life of me, I can't think of anything that wouldn't be justified under those criteria. A local council could probably build its own air force and claim it was essential to their social wellbeing.

Since 2002 the rates homeowners and businesses pay have increased by 7 per cent on average, almost double the average rise in the previous decade. This is well beyond wage growth, which means a higher proportion of what we earn has to be spent on rates or rent. Local authority debt has also quadrupled from $2 billion to $8 billion.

A lot of spending goes on council staff salaries. In the past eight years these have gone up a total 86 per cent, compared to 9 per cent in the previous eight years.

The Government announced this week a package of reform measures for local government. The two most likely to have an impact on rates are the proposed new focus, and the proposed fiscal cap.

The proposed new focus is "providing good quality local infrastructure, public services and regulatory functions at the least possible cost to households and business". The inclusion of public service still leaves lots of room for councils to have flexibility, but hopefully will see most of them focus on doing a few things well, rather than trying to do everything.

The fiscal cap is based on the central government one of expenditure rising no faster than inflation, on a per capita basis. It will be a soft cap, so councils will be able to spend more if necessary, but doing so could trigger monitoring or intervention.

Some have argued that these proposed reforms are undemocratic. They say that a local council should be able to spend ratepayers' money on anything they want, and it is up to the local voters to keep them or sack them. They say the Government should leave it to local voters.

The problem I have with this argument is that many large items of expenditure that councils approve are not known before elections, and councils proceed regardless. Some of them turn into disasters such as the Hamilton V8s. Yes, you can sack the councillors responsible at the next election, but that doesn't stop you being left with the bill regardless.

So I think the reforms are a much-needed step forward. I don't think they will magically stop rates increasing every year, but I think they will make a difference.

Do you think the reforms are needed? If so, do they go far enough?

David Farrar is a centre-right blogger affiliated to the National Party. His disclosure statement is here.

58 comments
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Chrissy   #1   08:33 am Mar 21 2012

doop pe doop pe doo....

Don't mind me, I'm just going to write blogs about party lists, local government and other boring stuff while my party sells off your country and some of its members continue to conduct themselves unethically.

Hopefully you won't notice.

Crimson Avenger   #2   08:37 am Mar 21 2012

David Farrar - Tackling the real issues since.... um... well...... sorry forget that.

He just seems to write fluff while rome burns these days.

JJ Bowen   #3   08:57 am Mar 21 2012

Let's put some perspective on this and check out the finances of Councils in 1992 compared to 2012 David. Listen to Mora's afternoon show yesterday and learn before spouting on. Let's just look at more pressing issues like what the Govt. of Mr. Key is up to rather than be distracted by this clever ploy of moving our attention from central to local Govt.

Paul   #4   09:13 am Mar 21 2012

While I do think that rates reforms are needed I think that your commentary is lop sided in that a lot of the cost of rates increases has come from Central Govt itself. Think about how many services that were provided by Central Govt which was pushed out to Local Govt. No consultation, just "hey boy, this your responsibilty now."

I believe that ratepayers should have an absolute right to force a referendum for a new election if they are really dissatisfied with the current regime.

Here in Kapiti people are p*ssed off with council over their decision that we will have water meters one way or another, despite over 80% of people expressing a NO to the proposition. People here are very unhappy that successive councils pussyfooted on the Western Link Road, which would have taken between 40% and 60% of traffic off SH 1, but now because of their inaction that evil politician Stephen Joyce has hijacked it to have an Expressway (fancy name for a Motorway) right through about 12 kilometres of residential property.

Lets not get started with the CEO's massive salary increase. Market Rates? Yeah right! I believe the market rate was he applied for the job, was happy to accept the going rate and suddenly it's not good enough any more? To that I have just two words. The second is off, I'll leave you to figure out the first word. Roll on Reforms.

David Smith   #5   09:18 am Mar 21 2012

A couple of things David. First, John Key appears to be watering it all down in a big way and contradicting Nick Smith. This being the case I think maybe we are commenting about something that is already being put to one side. Second, I agree nonetheless with everything you say. I answer "yes" to the needed or not question and possibly "no" to the 'do they go far enough?' question. Councils should keep all of their district's infrastructure up to date and maintain all the public services that are unique to the place and fall outside central government's responsibilities. But that's it. The billions wasted by councils throughout New Zealand appalls me. And it will still be democratic as long as councils are elected. Their having a narrower brief wouldn't change that. Good article David (and I hope this blog and any comments on it don't end up being just academic).

Oh Please   #6   09:39 am Mar 21 2012

I know,lets amalgamate all local councils and have a National Party member representing each, that way we can spend it,drill it, sell it and make everything user pays to appease the neo-liberal gods.

Sean   #7   09:43 am Mar 21 2012

I wonder if the 3 commenters above know each other?

mark s   #8   09:43 am Mar 21 2012

Mr Farrar - on the radio the prime minister has ruled a lot of it out now so it's passe. Re. council spending I can only speak to Christchurch and even before any quakes councils have been grossly irresponsible costing taxpayers millions and millions on social housing, countless trips for council staff and related. Any bill going to Parliament aimed at fixing this would be welcomed here by many if the prime minister starts saying again what he said on Monday. My rates have almost doubled in the ten years from 2001 - 2011 (+97%).

Kurt   #9   09:44 am Mar 21 2012

Council business is core infrastructure maintenance and improvement, thats water,sewerage, power,rubbish collection, roading and parks maintenance. Pretty much everything else is irrelevant to council business and should be minimised or left to others to arrange.

Personally I dont care for local artworks, festivals and the likes being sponsered. Nor do I consider heritage buildings part of council expenditure, or swanky office buildings or deals with developers.

It seems simple to me, do what you are there to do and forget everything else. If, after looking after core services, putting aside funds for upgrade work and maintaining existing infrastructure, the council has money left over, then they can look at what they can spend it on. That doesnt mean borrowing either, it means what can they buy with what they have.

I have seen my rates increase by close to 80% of the past decade and in that time the city maintenance has gone backwards as money is wasted on all forms of fairy tales items, special interest groups wants and over budgeted buildings that could have been built for a third of the cost.

Its getting bad when the government and the councils steal from you as well as thiefs and burglars to fund their lifestyle choices.

David S (ChCh)   #10   10:03 am Mar 21 2012

Kurt #9 is right. People who want those things should fund those things, and the same with professional sports teams who are subsidised by rate payers who can't afford it, eg in Dunedin / Christchurch. The local government reforms are needed and don't go far enough.

#5, #8 Hopefully Mr Key will change his mind (again).

All things the main government in Wellington looks after should not be duplicated at city council level, ie environment / social spending. I hope that makes the Act if it goes through. Local government should be about the local, not the national and the global as well.


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