Parliament has responded to local body rate rises in the most sensible way it could, setting up an inquiry into the financing of local government. The catalyst for the inquiry was a bill put forward by the Act leader Rodney Hide which would have restricted rate increases to inflation plus 2 per cent. That would have been the least sensible solution.
No matter what view is taken of councils' spending habits, there will be times and projects that call for a greater revenue boost than usual. If the community is fully behind the project and happy to provide the extra finance, it would be senseless to have the council constrained by a rating cap. Conversely, the cap would remove any pressure on councils to try to hold their rates. The permitted increase would become the norm. That is one of the perverse effects of regulation, as the Act Party is usually the first to point out.
The solution to hefty rate rises, such as those many places are facing this year, is not to relieve councils of responsibility, which a rating cap would do, but the opposite. Councils must be made more accountable to their voters for their ability to control their budgets and to justify every additional expense they make.
That should be the guiding principle in the inquiry Parliament is about to conduct. The principle must not be the one immediately proposed by Auckland's Mayor, Dick Hubbard. The main issue, as Mr Hubbard saw it, was to find a source of guaranteed money from the Government that would relieve councils of the need to go cap in hand to Wellington and compete with other councils for project finance.
How often have we heard this "cap in hand" lament from council leaders, and how foolishly we listen to it. The day local government is given a blank cheque drawn on national taxpayers will be the day councils' accountability goes out the window.
It would be a dream for the likes of Mr Hubbard, if he could present projects to his voters with no invoice for them attached. It might sound pleasant to his city voters too, if national taxpayers were to foot the bill. But a moment's thought would remind his voters that they are national taxpayers as well, and that they are inviting big costs upon themselves if a local body financing system that lets councils pass most of their costs to the nation is adopted.
Property rates may not be a perfect source of local body finance, and Parliament's select committee inquiry is a good opportunity to consider all alternatives. If it does nothing more than permit councils to carry more debt, and thus spread infrastructure costs more evenly across generations, it could do some good. But let no local politicians imagine they might be awarded a "softer" source of revenue that need not worry them at their next election. On the contrary, their more dubious major purchases could be made to require a specific vote. Whatever happened to the "loan polls" that used to be common?
Federated Farmers, which has been pressing strongly for a review of local government finance, is calling for a system that, among other things, makes councils more answerable to those who must pay their bills. That element must not be forgotten when Parliament produces its inquiry's terms of reference in the next day or so. Any financing method that might cushion councils from electoral retribution should be ruled out now.
<i>Editorial:</i> Keep the councils answerable
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