Editorial: Cap on rates would do no favours

Opinion

Rodney Hide, Minister of Local Government, is reported to be working on a regime for capping council rates as part of a review of local body law. He should think again. A rate cap is one of those superficial responses that politicians in Opposition make to occasional eruptions of public annoyance. Act's leader proposed just such a bill three years ago. Now that he is the responsible minister, and the annual rating ritual is under way, he needs to do better than pose as the ratepayers' hero.

Nobody enjoys paying rates, any more than they do taxes, and the rates bills come to households in visible instalments. If local bodies were allowed to raise their revenue insidiously, as the state does through employers and GST returns, rates would hardly be noticed. They amount to just 4 per cent of the average household income, against 40 per cent that goes to the Government in various taxes.

The visibility of rates is a thoroughly good thing. It makes councils agonise over their annual demand and any increase above the inflation rate is bound to bring an outcry. When it happens too often the ratepayers wreak their revenge at the triennial elections. Mayors and councils often lose office on resentment of rises and gain it on promises to better control spending.

The promises are easier to make than to keep, of course. A number of influences conspire to drive local body spending higher than is good for the economy. One of them is the burden the Government has placed on them to constantly draw up long-term plans and carry out expensive consultation exercises of little use to anybody. Mr Hide's review of their governing legislation should start there.

The lengthy procedures of the Resource Management Act are a source of expense ripe for savings. Legislators should also look at the costs that arise because councils bear potential liability for almost anything that goes wrong with public or private works on their patch.

The council will probably be blamed, either for cutting corners on its own projects or failing in its inspections of private property to find hazards that always seem glaring in hindsight. Hence they spare no expense on health and safety precautions.

Mr Hide should ask why everything a local body does seems to cost so much more than the same operation in the private sector. It may be that consultants and contractors load their bills when dealing with public bodies, conscious that the client is spending money extracted from captive property owners rather than voluntary customers. If a rates cap was an antidote to that behaviour, it would be a good idea. But it probably would do nothing to help.

It would merely reduce the work that councils would do. Every amenity that could not be built, or maintained properly, would be attributed to the rates cap. A device intended for the benefit of ratepayers would reduce their council's accountability to them.

The Local Government Minister would do better to assist accountability by removing the needless costs that Parliament has lately put on the sector and, at the same time, providing ratepayers with a more aggressive watchdog on the costs of council projects.

New Zealand has an unusually centralised system of government. Parliament largely defines what local bodies can do, how they raise their revenue, how much debt they can carry and the reasonable demands they can make on property owners. Within these constraints councils should be allowed to conduct their own discussions with ratepayers about what the locality needs, desires and is willing to finance.

Far from helping aspirant communities, Mr Hide's cap could hurt them.