On 28 October 2022 the Future for Local Government Review issued a 261 page draft report, making a number of findings and recommendations, and posing a number of questions.
The review was set up 18 months ago by the Local Government Minister to consider what councils should look like in the wake of the Government’s reforms of three waters and resource management.
The Review has an ‘interesting’ vision for local government, including radical reforms to how councils will be governed, what they will do, how they will be funded.
Most of the attention on the review has been on its ideas to reduce the voting age to 16, change to a four year term, impose the single transferable vote system for local elections, and to impose co-governance on councils with unelected mana whenua appointees on councils and to require councils to embrace te ao Māori values in all they do. It also has a very strong emphasis throughout the report on councils being ‘champions and activators’ of wellbeing.
These would be great ideas if there was evidence they would improve the effectiveness and efficiency of councils and result in better outcomes for their communities and a lower rating burden. However, the draft report seems to believe in hope and faith rather than evidence let alone ‘western concepts’ of public policy and liberal democracy. This should be concerning.
The draft report has a number of findings, recommendations, and questions, in chapters on the following topics.
Revitalising citizen-led democracy (i.e., ways to boost voter turnout)
Tiriti-based partnership between Māori and local government
Allocating roles and functions in a way that enhances wellbeing
Local government as champion and activator of wellbeing
A stronger relationship between central and local government
Replenishing and building on representative democracy (i.e., ways to make council governance more diverse and Tiriti-centric)
Equitable funding and finance
System design (i.e., structure of local government)
System stewardship and support
To take just one example from the draft report, local government funding and finance is an area of particular interest for the Forum.
In its chapter on this topic the Review Panel doesn’t think the funding system will be sufficient for the future considering population and demographic changes; central government imposing responsibilities without funding to cover costs; pressure from tourism; impacts of climate change; lack of incentives for growth and development; volatile investment income; and specific challenges from natural disasters.
The draft report says a successful funding system is one “where community outcomes and priorities are equitably funded by central government, local government, and other parties, reflecting respective national and local outcomes, objectives, and priorities”.
It sees several opportunities for this:
There should be co-investment in public goods, with co-funding by central government and local government in partnership with Iwi, against an agreed set of outcomes and objectives.
The passing of unfunded mandates to local government should end.
New funding mechanisms should be established (e.g., road congestion charges, bed taxes and visitor levies, value capture using targeted rates, revenue bonds, and volumetric charging for water).
Rating should be retained and simplified, including processes for developing, consulting, and auditing long-term plans and annual plans.
Intergenerational fund to tackle climate change – for both adaptation and mitigation.
These options, plus a specific recommendation that central government should pay rates on its land, sound good on the face of it but there is much devil in the detail.
Of concern is the draft report’s scepticism about the benefit principle, with it saying that people and groups have different ideas about public versus private benefit that councils have to measure and identify who benefits over specified time horizons, which can be complicated. It also notes affordability concerns about the beneficiary principle, the implications of which should make farmers’ blood run cold.
Businesses and farmers tend to support the beneficiary principle as it’s a key way to ensure they pay a fairer share. The problem from our perspective is that in many areas the principle hasn’t been applied appropriately and councils haven’t always been transparent on how decisions have been made and what the impacts are. It’s often hard work extricating how much different categories of rateable property pay relative to each other or even showing on rates invoices how much individual ratepayers pay for specific council activities.
The review panel wants ‘a more equitable funding system’ that delivers both vertical equity (right balance between local and national funding) and horizontal equity (where some councils will require more support than others to get a similar outcome). That’s fine between the tiers of government and between councils but it’s also important that there’s equity for those funding councils – i.e., ratepayers should be paying their fair share. That means, in our view, that the beneficiary principle must be maintained and if anything strengthened.
On ending the unfunded mandate, we would agree. However, for this to be successful it would require a significant improvement in central government regulatory impact analysis. Also necessary is a fundamental change in culture from regulators to reduce the regulatory burden generally (including on local government). Both the quantity and quantity of regulation needs to be examined. A Regulatory Standards Bill would assist by requiring regulation to be consistent with principles for good regulation.
On the need for more co-investment, might also find broad agreement. However, if it means discrete time-limited funding pots to be applied for on a case-by care basis it would be little different from the ‘low trust’ status quo which does not provide a lot of incentive to be more friendly to growth and development.
Simplifying rating sounds all very reasonable but the benefit principle relies on having more rather than less granular rating systems with the use of user charges and targeted rates rather than just having a ‘simple’ general rate. ‘Simplicity’ is often used as an excuse for councils to not provide more information on how much different categories of rateable properties pay in rates (e.g., residential vs business vs farming) and itemised rates assessments so individual ratepayers can see what they are paying towards council activities.
Submissions are open on the draft report until 28 February 2023 with the review required to provide its final report to the Minister in June. There is therefore a strong chance that politics, specifically the small matter of a General Election, will mean – like with other previous reviews – nothing comes of this. But at the very least it’s illustrative of a very different vision for local government.