Rates caps are the latest in a series of anti-democratic local government policies from a party that once claimed to support localism and devolution, argues Joel MacManus.

On Tuesday, the minister for local government Simon Watts confirmed council rate rises would be capped, requiring increases between 2 and 4% per year. The legislation for this change has not yet been written and Watts says it won’t kick in until 2029, so this should be seen as a National party election policy more than an official government stance, though Act and New Zealand First have expressed support for the idea.

Watts admitted it would save the average ratepayer just $34, though after several years of rates rises driven by higher construction costs many voters will be happy to have some assurance of stability. The downside is that spending restrictions will inevitably put more cost pressure on councils, causing essential infrastructure and maintenance to be delayed, and possibly leading to credit downgrades and higher borrowing costs. 

This policy is a particularly brutal twist of the knife for councils because many of the costs they have faced this term have been foisted upon them by the very government that wants to enforce this spending limit. Former transport minister Simeon Brown’s edict to increase speed limits outside schools forced councils to spend millions on new digital road signs. Compulsory referenda on Māori wards, the rushed proposals for regional amalgamation, and the re-writes and re-re-writes of the planning code all cost councils money and staff time, and they weren’t compensated one cent for it. 

National’s rates caps policy is, literally, an undemocratic position. It limits the ability for local voters to have a say on how much their council charges them. Even if voters indicated that they wanted to spend more on a major project, or spend less and get a rates discount, it wouldn’t be allowed. 

The Taxpayers Union, which pushed hard for the rates cap, put out a press release within minutes celebrating a “campaign win”. An hour later, it put out a statement outlining its next goal: to remove section 12(2) of the Local Government Act, better known as the “power of general competence”. 

That provision states that councils have “full capacity to carry on or undertake any activity or business, do any act, or enter into any transaction”. Removing it would essentially prevent councils from being involved in disaster response, climate change mitigation, urban regeneration, social housing, tourism promotion, stadiums, events, public art, community safety patrols, homelessness programmes, running an investment fund, or making submissions to parliamentary select committees. 

Before the power of general competence was introduced in 2002, councils had to come to parliament cap in hand and ask them to pass a local bill explicitly giving them permission to do almost anything.

Technically, libraries, pools, museums and community halls all currently operate under the power of general competence as there is no specific legislation enabling them. 

Of course, there is a difference between the goals of the Taxpayers’ Union and the policies of the National Party, even if sometimes the distinction is hard to see. The TPU has been an extremely effective lobby group, putting palpable pressure on the government, and this latest proposal would fit the general direction of travel National has pursued in terms of limiting the influence and power of local government. 

It’s difficult to overstate just how much National has betrayed its election promises when it comes to its relationship with councils. As the local government spokesperson when National was in opposition, Christopher Luxon was a full-throated, enthusiastic supporter of localism, calling for a devolution of power away from central government toward local communities. As prime minister, he has led the most profoundly anti-localist government in living memory. It’s one thing for politicians to promise things they don’t deliver. It’s quite another to do the exact opposite of what you say you’ll do.

Luxon has never explained what caused such a complete reversal of his – and National’s – purported ideological support for localism. But some recent comments at a public meeting in Lower Hutt may offer some insight. 

When a conservative voter expressed their concerns about rising rates and other council decisions under Green- and Labour-led councils, Luxon responded: “Rightly or wrongly, I’m going to put this back on you guys because if only 30% of you bother to vote in a local body election, you kinda get what you deserve.”

In reality, Wellington had 50% voter turnout at the 2025 election and Hutt City managed 42%, and he wasn’t going to put it back on them – there was a rates cap in the works. 

If Luxon truly believes councils can’t be trusted to make their own decisions and voters can’t be trusted to pick the right councils, then maybe he should stop beating around the bush and say the quiet part out loud: that the National Party wants to abolish local democracy and replace it with a government-run Department of Parks and Pipes.