The government's plans to reform local councils will be discussed in Cabinet today, as it looks for ways to try and keep rates rises down, and force councils to better control their debt levels, Prime Minister John Key says.
Speaking on TVOne's Breakfast programme this morning, Key said outcomes being considered were less likely to involve caps on rates increases, but would focus on ways to encourage councils to keep rates hikes and debt down.
Rates across the country had on average risen about 7% every year since 2003, Key said. While there were some good reasons for why rates had been raised that much, "every year, 7% on average seems like an awful lot."
Changes being considered would also make it easier for councils to amalgamate, although the government would not be forcing more amalgamations like it did with the Auckland Super City, Key said.
At the moment it was very difficult for councils to amalgamate.
“In New Zealand there have been very few [council] amalgamations. There’s been eight attempts by communities, only one of those has succeeded, and ironically only when Banks Peninsula made themselves defunct," Key said.
“We’re not going to force amalgamations as we did in the case of Auckland, but we are going to make it possible, and arguably easier, for councils to amalgamate,” he said.
The government would also likely express a view on what councils’ core responsibilities were, but only within broad parameters.
“The reason we would care about the role of councils, is we would care about their rate increases, or their debt levels. Debt has quadrupled in the last six years,” Key said.
“What we’d say is, if a council starts wandering off into activities which arguably aren’t necessarily their domain, and which cost money, then they’ve got to pay for that in two ways: Either rate increases, or borrowing. And the problem with borrowing is, yes, it’s good to spread [costs] – there’s an argument about inter-generational dependency there – but you can only pay for...debt through rates increases, outside of selling any assets [councils] might own," he said.
Asked what place central government had telling local government what to do, when councils would be held to account by ratepayers, Key replied:
“Because councils can’t go bankrupt. If you go back to the leaky homes argument, one of the reasons we wandered in with a bailout package was (a) because we thought that was the right thing to do – try to help those homeowners – but secondly, without it, there would have been massive compound rate increases every year for about four big councils across New Zealand.”
“They can’t go bankrupt, so in the end what would happen is, they legally have to meet their debts," Key said.
Unlike a business, which could file for bankruptcy, councils cannot go broke, he said.
"So the government is passionately interested in the activities of councils, what’s driving their rates, how much debt they have on board. Obviously within that, they have broad flexibility, and there will continue to be broad flexibility. But there has to be some constraint on exactly where the demarcation line is," Key said.