Sunday19th July 2009: Q+A’s Paul Holmes interviews Local Govt. Minister, Rodney Hide.

Points of interest:
- Hide: Government asking councils to do too much, wants law changes to limit council services
- Local Govt. Minister wants to set “fiscal envelope” for councils
- Council spending “unsustainable”
- Need to control rates increases is “urgent”
- Leaky Buildings: Hide looking to have developers and builders provide a home warranty

The interview has been transcribed below. The full length video interviews and panel discussions from this morning’s Q+A can be seen on tvnz.co.nz at,
http://tvnz.co.nz/q-and-a-news

RODNEY HIDE interviewed by PAUL HOLMES

PAUL Local government has long been a bug bear of ACT Leader, Rodney Hide, who grabbed the local government portfolio when the Cabinet jobs were handed round last year. Mr Hide wasted no time before announcing the establishment of a Super City in Auckland, but his reform plans extend a lot further than the City of Sails. Rodney Hide wants an end to big rate rises which really are bothering us all, so he's planning a new law that would see the Beehive cap council spending. He wants a new appraisal of what exactly core council services should be. Councils of course see Mr Hide as a one man cartload of very tricky monkeys. Well Rodney Hide is with us live. What do you actually want to achieve with the rates?

RODNEY HIDE – Minister of Local Government
I want to get them under control, in the last few years we've seen them go up twice the rate of inflation. The forecast is for them to go up at a similar rate, I think that’s unsustainable.

PAUL Come on to these numbers shortly, but do you actually want to cut rates, do you want to limit rates, or do you want to cap them?

RODNEY I want to get council spending under control, number one. Ultimately it's up to the councils but quite frankly right now the track they're on is unsustainable.

PAUL And what was that track last year, average rate rise last year 8%?

RODNEY Yeah.

PAUL In fact I think Internal Affairs themselves have said that rates are set to rise 60% in the next ten years, and a 2006 Local Government – an independent local government rates inquiry said the existing rating system will be unsustainable in ten years.

RODNEY Correct.

PAUL So how urgent do you see the need to act?

RODNEY Oh it's very urgent, because here we are in tough times and it's tough obviously for people on fixed incomes like pensioners, but it's also tough for business, particularly farmers, who carry a disproportionate burden of the rates.

PAUL See what are people telling you about rates?

RODNEY Well there's two things right, and this is the tricky thing for local councils, on the one hand you know we all want good services from local government.

PAUL And the money's gotta come from somewhere.

RODNEY And on the second hand we don’t want our rates to go up, and that’s the tough thing that councils are trying to provide for. My goal is to get the rates under control and my goal is to focus local government on what's important and the core services.

PAUL Yes but Minister the money for the good services and renewed services has gotta come from somewhere.

RODNEY Sure, but there's a lot of things that councils do, and they certainly complain to me that they shouldn’t be doing and don’t have to do, a lot of burdens that have been put on them by central government that have seen their costs sky rocket. In fact Tim Shadbolt wrote to me and said that if they hadn’t have had the previous government for the nine years he could have had rates under control at the rate of inflation, but the extra burden that politicians had put on them they’ve seen the rates go up.

PAUL Just quite quickly, might there be some rate reductions from what you're proposing?

RODNEY I'd love it, I mean ultimately central government doesn’t set the rates, it's up to the councils, but certainly I believe that if we can ...

PAUL Are rate reductions possible?

RODNEY Of course they're possible, it's a political decision.

PAUL And just to clear to this up, are the days of councils blithely increasing rates over?

RODNEY I hope so.

PAUL And where are you at with the planning for this legislation?

RODNEY Here's what I've got, I've got a paper out that’s being discussed with Local Government New Zealand, my whole goal in this is to get transparency and accountability, to put ratepayers in the box seat, to actually have councils set a fiscal strategy and actually work within it and actually to have them focus on their core services, rather than if you like monuments.

PAUL Let me talk about core services shortly. First of all another aspect of councils, which there is a perception in many places around the country perhaps particularly when it regards you know that councils are Hitlers, that there's far too much red tape, that we have to get permission for too much, we almost have to ring the council to get a bloke round before we can mow the lawn. Do you think there is too much red tape, would you like to see that reduced?

RODNEY Of course and I'm quite lucky because I'm also Minister of Regulatory Reform which is the minister to get rid of red tape. There are two problems, one problem is central government has put a lot of heavy legislation on, second of all though councils have naturally become very risk averse, because if you find yourself with a leaky building, who's ultimately responsible, well it's the poor council, and so they're having to be tough to protect the ratepayers, so we're looking to put that responsibility back on to the developers, back on to the builders through a proper warranty system, so it's not falling back on to the councils. If we're gonna have a system where councils are gonna have to cover the costs of any cock up, then councils are gonna make it tough to build a building.

PAUL So might you change some laws.

RODNEY We're gonna change lots of laws if I have my way.

PAUL In order to make it easier for councils. Are councils simply trying to do too much. I mean is there an element of empire building in councils?

RODNEY Well I think it's natural that politicians you know like to build empires, civil servants like to build empires, and that’s why we need to make sure that taxpayers and ratepayers ultimately have a say, and that we link back you know with the services to the actual cost it's going to be, and that’s what I'm trying to drive towards so that people make a decision about well how much are you prepared to have your rates go up, and then force the councils to live within that budget.

PAUL Yes but what renews the services, what renews the infrastructure, where in the end do the millions and millions and millions of dollars come from.

RODNEY Well ultimately it's from ratepayers and taxpayers of course, cos politicians don’t have their own money, they take it off you and I and the people that are watching this show, but what I'd like to do in local government is this, and this is my agenda. It's clear that councils, the few that actually set a good fiscal strategy and say here's our budget and then work towards it can actually hold a good budget.

PAUL Do any of them?

RODNEY Yes

PAUL Name them.

RODNEY Oh go into the Hutt and the Hutt Council's done a great job of doing that, I went into Rotorua they’ve done a good job, but often other councils when I go to see them they say oh we've got a problem with affordability. What they’ve done Paul is come along work out all the good projects and say oh how are we going to pay for this, so what I want to see first of all is ratepayers ideally able to when they have their three yearly ballot tick a box and say we'd like the council expenses held to the rate of inflation say, and then I'd like to see the councils within that cap or fiscal envelope, I'd like to see those councils focus on the core services and not rush off and build the monuments.

PAUL Right let's talk about these core services, so you're not saying we're not gonna cap absolutely, that the people will have a say in the rate rise, is that what you mean?

RODNEY What I'd like to do is have ratepayers and voters have a say about whether they think core expenditure of local government should be rising say above the rate of inflation.

PAUL Core services, what are they?

RODNEY Well we don’t know, because no one's actually even looked at this, but I certainly know what they're not, and I've had councils that are investing in hotels, cooking schools, banks, you name it, Lotto shops, they clearly aren’t core services, and what I'm concerned about is if we're gonna set a fiscal envelope for councils to work in, that the first priority should be what we think of is this proper job of local government.

PAUL So that is drains, that is cleaning...

RODNEY Absolutely, the basic infrastructure, my concern is if we actually set a fixed budget that the infrastructure could crumble and we actually have the politicians off you know building things that they like to cut the ribbon for, rather than the core services that we all need.

PAUL But to maintain the core services perhaps and to renew and maintain core infrastructure, councils are inevitably aren’t they going to have to raise more than the rate of inflation?

RODNEY Yes, and they’ll have to put that case though ultimately to the ratepayers.

PAUL You want more use of referenda don’t you?

RODNEY No I want the ratepayers to be able to have a say, and I think that when you ask yourself this, yes it's a good idea to have governments operating to a budget, who are the best people to be setting what they think that budget is appropriate. Well I think it's actually the people who are going to pay for that. Funnily enough when you do that quite often people say actually we don’t mind the rates going up faster than the rate of inflation because we do need some basic services, and then you go within that and you say okay the need is to focus on the core services and if you're going to do something grandiose actually go back to the people that are gonna pay for it.

PAUL And ask them can we afford it, and are you prepared to pay?

RODNEY Yeah.

PAUL We phoned around a few mayors as a matter of fact for their reaction to the kind of stuff that you're planning, and most of them said to us look we could have the core services done by Monday afternoon, it's the rest that takes us the rest of the week. Tim Shadbolt said to us what's the point of gleaming drains and beautiful white line painted roads if there's no cultural and sporting life in a city, which councils have to promote.

RODNEY Of course and I agree with that, I think cultural and sporting life is important, and I've got no objections to councils actually getting involved in that, what I want to say though is that sometimes they get carried away, sometimes they commit tens of millions of dollars and they don’t take the ratepayers with them. I'm not about telling them they can't do this, they can't do that, they can't do this, but what I am saying is if you're gonna commit tens of millions of dollars don’t just do it without taking the ratepayers with you, because we've seen so many poorly executed projects, particularly in local government, that have ended up becoming white elephants.

PAUL Example.

RODNEY Oh I don’t want to go through particular councils right now because I go round and meet them, but I think people at home know plenty of examples.

PAUL Bob Harvey in Waitakere City said look there's always the unexpected millions that you need, he talked about heavy rains that wiped out the road to Piha, five million dollars to repair.

RODNEY Oh and 35 million dollars for their council offices, six hundred million dollars worth of debt that the ratepayers of the future are gonna have to carry, that wasn’t unexpected, that was actually planned for by Waitakere City Council.

PAUL Yeah but this is unexpected expenditure, unexpected of God stuff.

RODNEY Well look of course there are acts of God stuff Paul, but when you look at the rate rises, when you look at the sort of expenditure the councils have engaged in, that is not unexpected, they have planned for it. Waitakere City Council it's not unexpected expenditure that saw 35 million dollars on their flash offices, it's not unexpected expenditure that saw them accumulate six hundred million dollars worth of debt.

PAUL I'm sure many people are very sympathetic to you wanting to keep the rates down, certainly there's much grumbling and much concern about the rates, but if you really legislate, if you really force the councils to keep those rates increases well down, in the end aren’t kids gonna have to pay to go to the swimming pools, aren’t people gonna have to pay to use the libraries, aren’t people gonna have to pay to go to the art galleries?

RODNEY And that’s why I want to make this clear distinction, it's not about me forcing the rates down, what is it about me is getting the costs under control for local councils, a lot of the costs come from central government, and I'm working to lower those costs, and I have to say the mayors are loving that part of my work, but the second thing is to allow ratepayers in the community to have a say about what they're prepared to pay for.

PAUL I understand this but the inability surely – the inability they won't be able to afford both the infrastructure and the cultural and sporting services.

RODNEY No no, not true, I have New Plymouth City Council come to see me, they actually put out a document to their community and said we could go on the low rate track, we could go on the medium rate track of increases, or the high rate track increases, do you know the community quite rightly in that case, they decided to go on the medium rate increases because they wanted the services, but what that did was actually set the fiscal strategy for that council and they took the community with them. I'm quite happy for rates to increase if the community want that and want the services. What I'm unhappy about is it doesn’t matter who you elect that the poor old pensioner gets socked with a 10-12% rate increase and actually lose their house. I don’t like farmers actually struggling in their business because they're paying inordinate amounts of rates with no say, and businesses are particularly being hit with discriminatory rates, where they disproportionately pay for services that they don’t use.

PAUL Or is this part of the ACT agenda?

RODNEY Of course it's part of the ACT agenda, I'd like to go a lot further as part of the ACT agenda.

PAUL Actually, and if you force council to keep the rates down is it possible it might have to begin to sell assets, or partially sell assets?

RODNEY Of course I'm in favour of privatisation, I don’t see why we should have government trying to run a business, businesses run businesses and they do a far better job at managing capital and customers and all those things, you have competition and choice, of course I favour privatisation, unfortunately the ACT Party only got sufficient votes to have five MPs and the Prime Minister said it's off the agenda, but you know I love privatisation because I think government should concentrate on being government, as soon as it starts to try and run a business it's a disaster.

PAUL ACT Leader Rodney Hide, and Local Government Minister Rodney Hide, thank you very much for your time.

RODNEY Thank you for having me.

ENDS

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