As many councils around the country implement record rates rises, the Government has rejected helpful recommendations from a report supported by the infrastructure sector, which called for less centralisation and stronger local government
Local Government Minister Simeon Brown has concluded the Future for Local Government Review and confirmed that the Coalition Government will not be responding to the review’s recommendations which were released last year.
He argues that the review’s recommendations are a distraction and the Government is focused on establishing a regional deals framework and unlocking new funding and financing tools to enable central and local government to work together in delivering services and infrastructure.
“We are setting clear expectations that councils focus on the delivery of core services and value for money,” Brown says.
However, Infrastructure New Zealand Chief Executive Nick Leggett was supportive of the review’s recommendations when it was released last year.
He says it is an excellent canvass of the issues and provides a toolbox of solutions for the Government to choose from.
“The gems in this review are too good to be lost.
“If we are seriously going to build infrastructure projects that enhance social and economic opportunities for more New Zealanders, we need local leadership to develop financial partnerships through better shared funding models.
“The review captures the opportunities for community voices to be strengthened through Local Government and for people to improve their local places.
“Infrastructure New Zealand has said that in the past, much of New Zealand’s infrastructure building success was locally, not centrally driven. This included early rail, bridges, roads and even the Auckland harbour bridge.
Sadly, we have lost the nation building spirit, along with the funding mechanisms for local and regional entities to drive and partner with central Government and the private sector on their projects. It’s time to restore that by building strength in regional and local communities.”
Legget says Local Government needs change and renewal, but the answer isn’t more centralisation.
“Local Government has been hampered by narrow revenue streams like rates – and unfunded mandates handed down from Central Government. It’s time to rebalance that and rebuild New Zealand. For instance, having GST on rates refunded to councils and linked to local infrastructure, could be game changing.
“Democracy must be at the heart of change, along with a drive towards localism, especially given New Zealand is the most centralised country in the OECD – bar none.”
Local Government New Zealand (LGNZ) says the report takes a common-sense approach – especially to funding, system sustainability and other challenges facing councils.
“Every recommendation needs thoughtful consideration; we need to focus on what communities need to build a stronger New Zealand,” National Council Member, Mayor Alex Walker says.
LGNZ President at the time, Stuart Crosby, had said local government was united in the need for change.
The review panel spent two years talking to local government and the communities they serve, looking at best practice and considering all the trade-offs, Crosby says.
“They have made it clear, in no uncertain terms, that while there is a real need to transfer resources and level up funding between central and local government, it must come with a commitment to do things differently and change the system to be more responsive to local needs.
“Central government cannot solve the issues communities face on its own. If we look at the big issues such as climate change, dealing with regional inequalities, building social cohesion, and planning for growth, local government is best placed to take a leadership role.
“Local government in other parts of the developed world is responsible for almost half of public spending, but in New Zealand, it’s less than 10 percent.”
Current LGNZ President Sam Broughton has recently pushed again for all GST on rates to be returned to councils.
Based on 2022-2023 rates, the Government collected $1.04 billion in GST on rates.
“Councils’ share of overall tax revenue has remained at 2% of GDP for the last 50 years, despite our ever-increasing responsibilities,” Broughton says.
“It’s no secret that the funding system for local government is broken. Rates account for more than half council funding, and relying so heavily on rates alone is unsustainable.
“We need a range of levers to address the funding and financing challenges in front of us. Alongside returning GST on rates, we’ve also put an accommodation levy, GST sharing on new builds, congestion charging and tourist levies on the table.
“With homeowners facing average rates rises of 15%, it is important that the Government gives councils more levers to sustainably fund our cities and towns. Returning the GST from rates is an excellent place to start.”
