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Local government in NZ is broken and dying – and hardly anyone gives a toss

If we want councils to be open, accountable and democratic, we have to overhaul the laws the govern the sector, writes Jason Krupp.

Local government in Zealand is broken and dying, only it is dying so slowly that you’d hardly notice it unless you are looking, and it is a problem.

That most of you probably read this without batting an eye is testament to just how broken the sector is. And the odds are good that you were among the three in five people who couldn’t be bothered to read a pamphlet, tick a few boxes, and mail in a form in the recent local body elections.

Not that I’m saying you’re a bad person for being uninterested. Only that your response is entirely rational within a system that does everything to resist democratic expressions of local choice.

Town Hall, Auckland

Town Hall, Auckland

This statement might seem like a slap to the sector, and the people who care deeply about their communities, especially those who made the effort to vote. But it happens to be true for two important reasons.

The first is that the system has been designed to blunt the power of the local ballot box. Unlike national elections, where election promises translate into political mandates, at the local level they carry much less weight. That’s because under the Local Government Act, a mayor’s powers are largely limited to leading the long-term and annual planning process. Very often newly elected mayors and councillors have to live with the existing plan until the next planning review cycle, which in some cases can take up to 18 months.

“Fine,” some of you might say, “the ballot box is broken, but local government runs on a participatory basis. Surely the consultative requirements in the planning process mean people still get a say in the running of their communities?”

Technically this would be correct. The emphasis is on technically. As anyone who has worked on the long-term plans will tell you, the process is so complicated, technical and long that it effectively locks out anyone who doesn’t do this for a fulltime job. The Auckland Unitary Plan is some 7,000 pages long, and by some estimates would take 55 days to read cover-to-cover. Even Wellington’s significantly more modest 325-page annual plan is an impenetrable tome for everyday people, many of whom have better things to do with their time than wade through bureaucrat-ese.

It also creates the potential for well-resourced advocacy groups, or even chief executives of councils, to capture elected members at the expense of the community.

In 2012 central government set about fixing this by requiring councils to produce “consultative documents” instead of the traditional draft long-term plan. These were in effect plain language versions of the plan, aimed at starting a strategic discussion between local authorities and communities in a transparent fashion.

In theory this is a step in the right direction, but it didn’t get off to a particularly good start.

The Auditor General’s review of the 2015 consultation documents found many councils did not meet the expected standard. Many documents were poorly written and failed to explain the significant issues facing a community. Even where the issues were explained, many documents did not spell out different options, the implications and consequences.

As a result of these opaque long-term planning arrangements all kinds of questionable spending decisions get made, and the ratepayers are none the wiser until it hits the press or the rates bill.

The second factor that dilutes local democratic choice is the work load central government places on local government. This is something not many people are aware of.

As creatures of statute, councils are entirely answerable to central government. With the stroke of a pen, parliament can hand tasks to local government, set service standards, and dictate local operations. Councils are obliged to accept these responsibilities, or be replaced by statutory managers. And central government does kind of task shifting all the time. At last count there are more than 30 pieces of legislation that conferred responsibility to local government – and that excludes the Local Government Act.

But while central government is happy to pass on tasks, it is much less forthcoming with funding. For example, when policymakers introduced drinking water standards in the mid-2000s, it was estimated the cost of this were somewhere between $309 million and $527 million. Yet central government set aside only $150 million for this activity. It effectively amounts to a regulatory free lunch for policymakers in the Beehive, or a discounted one at least. It reaped the benefit of lower health costs, and got local communities to carry the lion’s share of the regulatory costs.

These factors conspire to create not just a democratic gap but an accountability gap too. Ratepayers and residents are effectively locked out of the running of their community, and they are unable to tell which tier of government is responsible for which service. All they do know is the one way direction of their rates bills: upward.

The effect is to make ratepayers and residents increasingly resistant to any form of local council investment, even where there are clear long-term benefits from doing so. Auckland City Council constantly bemoans its debt limits, yet moves to sell some of the city council’s substantial investment holding (which are five times bigger than its asset base) are a political nightmare.

If this were a restaurant the customer, would have to order through a committee of waiters in hexadecimal, the chef would cook what they think will the customer wants, and the restaurant owner would keep adding side plates based on what he things is good for the customer.

It is hardly surprising that when the customer gets her food, it looks nothing like what she wanted.

When she complains, the chef, waiters and restaurant owner start fighting over who placed the wrong order, who boiled the vegetarian’s steak, and who ordered every side dish in the place. Not only does the customer have to foot the bill for all this, but she can’t choose another restaurant because they are all run the same way.

In short, it is a mess.

Central government (who is the restaurant owner in the above metaphor) is clearly unhappy with this arrangement.

Its answer has been to pursue a strategy of amalgamation, merging councils into bigger units in the pursuit of economies of scale. The problem with this approach is that it is highly questionable. The vast bulk of local government mergers have failed to produce the cost and decision-making efficiencies they promised, and it is baffling to see New Zealand running with this ball when the international evidence is so clear.

One-size-fits-all thinking also eliminates a major advantage of local government. Councils are the closest tier of government to the people, and in many parts of the developed world they play a vital role in creating bespoke policy solutions to local needs.

It is no surprise that amalgamations are so deeply unpopular among communities and academics alike.

At the NZ Initiative we have proposed a different solution in the report The Local Manifesto: Restoring Local Government Accountability.

We want to make councils ultimately responsible for all local matters by amending the Local Government Act in a way that strictly sets out which tasks and services local government is solely responsible for. That way when rates shoot up, ratepayers know who ask tough question of. You can’t pass the buck when there is no one to pass it to.

The flip side of this is that it frees central government to focus on national level matters. As it stands, no matter is too small or local that central government won’t get involved. Take the review of dog control rules currently being conducted by Associate Local Government Minister Louise Upston. Or Local Government Minister Sam Lotu-Iiga’s review of campervan bylaws.

These are both classic examples of one-size-fits-all thinking. It ignores local differences and allows councils to shift the blame for their poor performance onto central government. If central government wants to encourage local responsibility, it needs to stop behaving like an overbearing helicopter parent.

There is of course a case to be made that there may be some instances where it is advantageous for central government setting policy at a local level. But if it does so, it must bear the costs of this intervention, or give communities the opportunity to opt out. Central government’s regulatory free lunch, where it gets to pass policy free of charge, has to end.

A key feature of successful local government structures overseas is financial incentives. We need to introduce these in New Zealand. If central government wants to encourage councils to do the right thing, such as pursue faster economic growth or free land for housing, it needs to introduce financial rewards for doing so. It cannot hog all the benefits and pass on all the costs.

Imagine how local government and the public’s attitude to releasing land for housing would change if the government paid councils a grant for every new house built within a limited timeframe. Or to what degree local red tape would be slashed if councils got a slice of the goods and services tax on any additional economic growth they helped encourage?

There is a caveat though. If this weighty responsibility is to be handed to local government, councils need to prove they can handle it. They need to demonstrate that they can be trusted as wise spenders of public money. Right now the cost benefit analysis on long-term plans amounts to little more than a list of pros and cons. Councillors wishing decisions to fall one way or the other just need to make sure the respective pro/con column is longer. This is the kind of thinking that results in Blenheim’s white elephant theatre.

Councils also need to show that their actions are steered by the will of the community.

Mechanisms like non-binding local referenda and community juries can be an effective means of securing buy-in on long-term plans. Another upside from this is that it confronts communities with the costs of their decisions. Yes, you can have gold plated sewer pipes, but you have to pay for it.

If this sounds like an odd set up, it is probably worth noting local government in New Zealand is really the oddity. Most Western countries have devolved decision-making down to the local level to a far greater degree than New Zealand. Even in highly centralised countries like the United Kingdom, powers that were once vested in Whitehall are being handed back to local authorities as part of the city deal process.

Ultimately, if we want local government to be open, accountable and democratic – something not found in the current system – then we need to reform the laws that govern the sector. It is almost a no-brainer. We trust voters to make wise decisions at the ballot box, why not entrust them to run their own communities?

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