Local Government New Zealand calls for greater devolution during joint symposium with the New Zealand Initiative

Local Government New Zealand calls for greater devolution during joint symposium with the New Zealand Initiative

Local Government New Zealand and the New Zealand Initiative have joined forces in calling for central government to devolve more of its powers to the country’s local authorities.

But while it might sound like a great idea to some, Local Government Minister Nanaia Mahuta is urging caution.

The New Zealand Initiative, a libertarian public policy think tank which is based in Wellington was formed in 2012 after a merger between the New Zealand Business Roundtable and the New Zealand Institute.

The joint LGNZ/New Zealand Initiative report states:

“Our support for localism is designed to not only create a more responsive, agile, and accountable system of local government but also improve the performance of central government by shifting its focus away from the operational to the strategic.

“This change is necessary because our highly centralised institutional settings are not working and are acting as a drag on efficient and effective functioning of our society and economy. The effects of this have become acute in recent years, most notably in areas experiencing significant growth and housing shortages but also in other areas of New Zealand where our governance system has found to be unresponsive and ultimately stymied the interests of individuals, communities and business.

“In short, the argument that decentralisation won’t work in New Zealand has run its course and we are now overdue for change. This is now particularly pressing given the dynamic, and fast paced nature of the global economy - our institutional settings need the flexibility to keep pace."

It says too much power is concentrated in the hands of central government which accounts for 88 cents of every dollar of public spending.

“This is at odds with the growing awareness in many developed and developing countries of the benefits offered by adopting a subsidiarity model, whereby decision making is devolved to the lowest appropriate level.”

It says central government has for far too long been getting a free ride and this is particularly evident when it comes to looking at who pays for what.

"Central government has a long history of passing duties and responsibilities onto local authorities, a role that many people expect central government to perform. A problem arises when these responsibilities come with little or no central government funding to enable the new responsibilities to be performed, leaving local authorities to meet the costs from local tax revenues. This would not be such a significant issue if the process was transparent and central government disclosed these costs to the public, but this is seldom if ever the case.”

The report refers to the 2012 amendments to the Sale and Supply of Alcohol Act which were designed to give communities the right to adopt local alcohol policies in order to control harm from the sale and consumption of liquor. It says years later many councils are still trying to adapt their policies, despite spending significant amounts of money defending themselves against legal challenges.

“The example highlights a common situation where central government gives councils a duty but fails to provide them with the powers or resources to carry the duty out in a way that will meet the expectations of their communities or the intent of the legislation. 

"What makes these hidden costs more galling for many in local government is that central government is quick to criticise local authorities for the rate at which local property taxes are increasing, ignoring their own role as a major cost driver.”

It says this creates a moral hazard because central government decision-makers aren’t compelled to fully consider the burdens they place on local communities. The report claims that between 1900 and 2017 local government taxes as a share of GDP increased from 1.8% to 2.1%, whereas over the same period central government taxes as a share of GDP rose from 8.9% to 31.1%.

Local Government Minister Nanaia Mahuta says while she welcomes the debate it’s important that we don’t leap to solutions based solely on international comparisons.

“Localism can mean different things to different people. We need to learn from overseas examples but it is critical that we measure these against our own particular circumstances. This would include, for example, consideration of our demographics, economy, culture and constitutional arrangements,” Mahuta says. “We need to be cautious about embracing silver bullet solutions – including further devolution – without first ensuring local governance systems are delivering existing functions in a way that maximises wellbeing. 

“I will be exploring these important questions with the sector this year alongside a number of other related critical issues, including local government funding and financing and the regulation and provision of three waters services.” 

But Mahuta’s not willing to say whether she supports or opposes recent calls from Auckland Mayor Phil Goff for the government to return the GST Aucklanders pay on their rates to the council in a bid to support the city’s growing infrastructure costs. He says it would increase the Super City’s revenue by $270 million a year.

“We are keenly aware of the local government financing issues, including the extent to which high-growth councils are pushing up against their debt levels,” Mahuta says. 

“This is why we asked the Productivity Commission to hold an inquiry into local government funding and financing. Alongside this we have officials doing detailed independent work to enable the Government to respond constructively to the Commission’s recommendations. Its draft report is due in June this year with a final report to Government in November.”

We welcome your help to improve our coverage of this issue. Any examples or experiences to relate? Any links to other news, data or research to shed more light on this? Any insight or views on what might happen next or what should happen next? Any errors to correct?

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Neither the Initiative, nor LG nor the Commission, are starting from the correct base-line.

All have an increasing colletion of aging stuff, and a dwindling time ahead with access to the means to maintain.

Yes, we will end up going local - but most of the current crop of LG, both elected and official, have no idea where it really goes. i put a comprehensive resume in (to Cull's outfit, as it happens, their 2015 LTP) of the stuff I put up hereabuts, and they thanked me for my submission on their pool. No idea.

13
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Oh hell no. Local govt has been nothing but an abysmal failure in NZ over the last 10 years. Out of control spending, failure to maintain core assets infrastructure and services, massive waste on hobby-horses of special interest pressure groups and mayoral egos, ever widening regulatory burden placed upon long suffering rate payers. It has to stop.
Councils should forthwith not be allowed to borrow money. Pay as you go and answer to the voters for what you spend. Also all council debt to be paid off over next 15-20 years. Also must be a well maintained public costed plan for infrastructure maintenance, replacement and necessary growth.

"Between 1900 and 2017 local government taxes as a share of GDP increased from 1.8% to 2.1%, whereas over the same period central government taxes as a share of GDP rose from 8.9% to 31.1%."

Not sure what they've been smoking but they clearly have not had any contact with local government ever. Describing local government as agile and accountable organisations is highly unusual as they are not anywhere close to that. I don't think they could cope with an agile approach being applied, let alone the cover ups that would be exposed if they were actually accountable.

We need localism badly, but we need localism to be of higher quality than its current incarnation. This is tricky. Both central & local govts are failing the people. Both are over staffed & over funded & both are under delivering. The reason is that the quality of the people that are part of these institutions are mediocre at best. Anyone with any initiative is delivering profits for businesses, whilst the people in state administration are - under-motivated, shall we say. This will only change when people with good business skills (generally) take over. And only then we will start to see productivity lift substantially. Another contributing factor is the low standard of lawmaking over the past 30 years or more, which coincides, funnily enough, with the lowering of our educational standards over a similar time frame. To add to that our culture is weary, our birth rates are abysmal & the standard & management of our relationships is at a 100 year low point. Other than that, everything is fine.

Local Govt need more power so that they can have behind the door meetings and commit more money to worthless projects,oh sorry delete that please they do that already.

Local govt is even more inefficient than central govt. For example councils screw up a lot more road projects compared to NZTA. If councils are going to take on more responsibility they need more accountability and a cap on debt (including all those rug companies they keep sweeping it under). Debt is their current get out of jail card. Kick the can down the road so the rate payers won't notice the true costs until they're no longer the same rate payers.

The Swiss have made it work but they have direct democracy and probably have strict expectations of their local politicians.

I have a T-shirt, printed with a picture of large saltwater croc, jaws open, and the caption 'Trust Me'.

Perhaps we need to send a few of these to the LG types......

Sounds like a great idea, rates will have to go up, but that is also a good thing as only evil landlords pay rates and they are like a cash cow to be milked.

Terrible idea.

Local government, particularly in the regions, is pretty much dominated by reactionary country bumpkins.

Just take a look at Tauranga - they've naively borrowed Auckland's car centric sprawl mentality from the 1950s, duplicating their mistakes which have taken a generation to fix. The city is now a nightmare of traffic and bad urban design.

Another high profile failure is the Mangawhai water treatment project.

Central government has its issues, but local government is far worse. There simply isn't the talent pool outside the main centers to support good governance.

Hmm how to test that comment. Talent pool only in big centres you say. Let me check. Auckland = big centre = talent pool. Auckland still has sewage going into stormwater pipes going into swimming beaches. Shall we go on? Transport? Waste and recycling? What else shall we use as tests of that argument?

Brutus. Not just a case of limited talent pool and reactionary bumpkinism - local body decision making is also largely dominated by left wing ideology that has an innate caution about, if not aversion to, proactively supporting the development of businesses. Christchurch is an example just now - with the CBD rebuild finally delivering some great facilities that should be helping to deliver a significant inflection point in the city's economic growth curve, a tired lefty council offers little by way of inspiration to business.

Why should any government - local or central - need to provide inspiration to business? I'd have thought just providing adequate infrastructure (i.e., reticulated services, good public transport and a good urban plan that provides certainty to business development) would be ideal. Governments are not entreprenurial and to my mind, nor should we expect them to be. For example, I can see no reason why rate/taxpayer dollars should be used to fund convention centres. That they are is one reason why the business cases are flawed and the revenue expectations so often fall short.

On a per capita basis Auckland Super City is less representative and more centralised than central government.

Why do businesses want this? To allow them to play off regions against each other if offering the biggest tax breaks, or "joint investment opportunities" to keep a business in their region.

Terrible idea.

'a significant inflection point in the city's economic growth curve',

Gotta be the quote of the day.

I have a tendency to verbose pomposity

No way.

We need centralise further, not localise.

1) Combine local and regional government into unitary authorities
2) Require them via legislation into business case and regulatory impact assessment processes for all their spending.
3) Standardise the planning and infrastructure via national standards.
4) Require them to fund essentials (waste, water, roads) before vanity projects.

We dont have the population or enough people with the skills to support additional localism.

The localism desire is probably driven by two components:
1) democratic representation
2) desire for more money to spend – the productivity commission is looking into this. My personal preference is to allow local government to rate central government land to remove the distortion and potentially provide additional revenue. (although I think this is explicitly excluded from the productivity commissions scope)

K-O more money to spend?

Ever asked yourself what underwrites money?

K-O more money to spend?

Ever asked yourself what underwrites money?

Who or what finances the council debt? is bond issuance from the central bank like the governments debt? That would be a fundamental difference to consider shifting debt from government to councils.

More money for the cardigan wearers. No freakin way.

LGNZ just an apology group for councils.

Article this evening about the Maori guy (who last year defaced a British statue in Hamilton) but granted a meeting with Hamilton Council "Closed to the Public" to discuss removing all the British of any associated with killing Maori. How did he deserve a meeting, given his past behaviour ( more online) and how and why did he get a "behind closed doors" meeting to talk about this? Could I generational non - Maori get one to ask that all street names be returned to English? The world has gone mad as far as Local Government is concerned. Vote wisely in October people.