Andrew Braggins: Power to the people may backfire

Rodney Hide is interested in the use of polls and referenda to increase voter control. Photo / Richard Robinson

The content of Local Government Minister Rodney Hide's proposal to review the Local Government Act (Cabinet Paper EGI (09) 44) will come as no surprise to students of the Act Party's local government policy.

Some of its objectives call for positive change that is unlikely to meet much resistance.

For example, the call to improve council planning documents making them more easily understood and enabling better comparisons between local authorities is timely. It is also an aspect which the Auditor and Controller General has previously highlighted as an area for improvement.

However, some of the other initiatives signalled, while undoubtedly well-intentioned, may have a counter-productive effect.

The review proposes that:

- Ratepayers and citizens have better tools for controlling council costs, rates, and activities.

- Local government should operate within a defined fiscal envelope.

- And councils should focus on core activities.

The paper says elsewhere that "there has been widespread concern at the recent growth in local authority rates and the choices some councils have made in funding decisions". The implication is that local authority participation in non-core services is a cause of significant rates rises.

However, looking back at local authority spending trends from 10 years ago, it is not clear that 'non-core' spending has been the major cause of rates rises.

Consider North Shore City Council for example. In the 10 years to its last annual report (2007/2008) the council's capital spending has increased from $30 million to $188 million.

This increase was more than 3.5 times faster than the increase in operational spending, albeit from a lower starting point. Importantly, almost all of this capital expenditure falls completely within what would be generally agreed to be core services, as opposed to operational costs.

Interestingly, the 2007 Local Government Rates Inquiry found that the broad empowerment (also known as the power of general competence) provided by the Local Government Act 2002 had not been a significant driver of expenditure increases. While noting a need for local government to improve its planning function, its report cited expenditure on infrastructure renewal, expansion, and upgrading as the driver for increased local body spending.

A focus on better mechanisms to fund and deliver capital works - or even some work to implement the recommendations of the Rates Inquiry - might well do more to reduce rates than a debate about what constitutes a core service.

While the paper acknowledges no formal definition of core services exists, it "expect[s] there to be general acceptance that it includes transport services (roading, footpaths, and public transport); water services (water supply, sewage treatment, stormwater, and flood protection); and public health and safety services (refuse collection and regulation of nuisances)."

This approach would seem to leave cemeteries, leisure services, community services and economic initiatives as liable to be categorised as non-core services. All of which (excepting the latter) are matters which councils have been involved in for many years and were specifically empowered to undertake in the predecessor to the Local Government Act 2002.

The report acknowledges that prohibiting councils from participating in certain services would not be the best approach. Rather, it anticipates that voter control over council spending will drive councils to reassess whether they participate in these activities and/or the extent to which they are fully user-funded.

The preferred method for increasing voter control appears to be the use of polls and referenda, which are compared to the "retrospective accountability processes" of complaining to the Ombudsman or voting in the local body elections.

However, since businesses can't vote, they are at risk of being disenfranchised by this new approach. Consequently, we might see a paring back of business-friendly policies (e.g. economic development initiatives), or an increase to business rating differentials. This raises equity issues similar to those noted elsewhere in the paper, where it says that "councils can be pressured to expand their services by providing services that benefit a limited number of people, but for which the whole community is required to pay".

The enthusiasm for direct democracy does not extend to the contents of the paper itself: "no public discussion document is proposed ... as public views are well known, but targeted consultation will be undertaken".

The paper proposes that the minister report back to the economic growth and infrastructure committee with specific proposals by August 31, 2009. Consultation will be undertaken through the select committee process with a view to having the necessary legislation enacted in time for the 2010 local authority elections.

* Andrew Braggins, senior associate of law firm Buddle Findlay's environmental and resource management team specialises in issues associated with local authorities and infrastructure.