Rates need to reflect local communities’ priorities, not ideological central government limits

22 August 2006

Rates are a matter to be agreed between communities and their councils, not central government bureaucrats, despite what is being proposed by ACT with its rate-capping bill, says Basil Morrison, President, Local Government New Zealand.

“Local democracy will only work if citizens can make real choices about the nature and level of services that they want to see in their cities, towns and districts. International practice shows that where such choices are limited, for example, by rate-capping regimes which transfer decision making power to central government officials, voter turn-out declines and infrastructure investment falls behind.

“This proposed bill is in conflict with the new Local Government Act which requires councils to engage with their communities to identify priorities and ways of meeting them. New Zealand councils are world leaders in the level of consultation they are required to undertake and participation by submitters and others is normally extensive. This year, for example, the Far North District received over 1700 submissions on their Long term Council Community Plan.”

“This process would not work with a central government-imposed limit on rates as councils would be unable to respond to community needs without the permission of someone in central government. For example, due to an adverse weather event councils may need to invest in new infrastructure, increasing costs for the council above the capped rate. Under this scenario, these funding decisions may be made by Wellington bureaucrats rather than by local communities,” said Mr Morrison.

“A nationally-imposed rates cap would only restrict the services that a council could provide, and in fact, put more pressure on central government to pay for services that communities want,” said Mr Morrison.

“The irrelevance of the rate of consumer inflation as a benchmark for rates rises has yet to be grasped by special-interest groups and individuals with a limited appreciation of local government and the complexity of balancing and resourcing the range of community interests.

For instance, rates fund both operating and capital expenditure, most of the drivers increasing rates, such as construction cost increases, are moving way ahead of consumer inflation. Finally, the range of costs transferred from Government shows no sign of abating.”

The Rate-Capping Bill, due to be debated in Parliament, would limit increases in rates to inflation plus 2% in any year, or inflation plus 4% over any three years.
Local Government New Zealand states that the level of rates in New Zealand is a fair price for the wide range of services a ratepayer receives.

“Councils provide a huge range of services to communities, affecting every person in one way or another. However, the government has recognised that it has a role to play in assisting those on lower incomes through the rates rebate scheme. We would suggest anyone else on a limited income contacts their local council to see if they are eligible for a rebate on their rates bill,” said Mr Morrison.

ENDS

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