SMELLIE SNIFFS THE BREEZE – Rodney Rampant

SMELLIE SNIFFS THE BREEZE – Rodney Rampant

By Pattrick Smellie

12 June - I once did a bit of work for a city council. They were scrambling to work out just what to put in their Long Term Community Council Plan (LTCCP) and for some reason it made sense to bring in a consultant, who knew nothing about the organisation, to help.

What quickly became clear was that the statutory requirement to redo the LTCCP, a 10-year strategic plan which must be updated every three years, was a bureaucratic nightmare rather than the clarifying strategic exercise envisaged in the Local Government Act.

Prior to that, I had considerable experience with two district councils over resource consent renewals for major electricity assets. In the case of the Taupo District Council, I watched aghast while the TDC went on a bizarre political adventure, spending around $6 million of ratepayer funds trying to blacken a major corporate in the hope that this would produce a deep-pocketed response. It didn't work, but to this day hardly any Taupo ratepayer is aware of the full scale of their Council's incompetence.

Further south, the Otago District Council seemed equally hell-bent on imposing costs and delays which could have been avoided if it had chosen a shared rather than confrontational approach with one of its largest local stakeholders.

An unrepresentative sample perhaps, but these experiences appear pretty similar to the tidal wave of anecdotes about local government incompetence which have fed into the far-reaching proposals for local body reform released this week by Local Government Minister Rodney Hide.

On top of the Auckland supercity proposals, it's hard not to wonder whether the effervescent and oddly-sculpted Act Party leader isn't in danger of biting off more than he can chew.

What is clear, however, is that Hide is at the centre of some of the biggest policy action occurring in this government.

He's not alone. The review of water management announced this week by Environment Minister Nick Smith has enormous implications for electricity generators, farm irrigation schemes, industrial water use and municipal water supplies.

Put this together with Smith's stewardship of big changes to the Resource Management Act and his oversight of the new Emissions Trading Scheme, and he also looks like one of the most reformist ministers in Cabinet.

Both are in the vanguard of potentially unpopular but arguably vital changes to New Zealand's regulatory framework to try and lift national productivity rates.

Sorry to bang on about it but no matter where the political finger may be pointing at any one time - this week it was semi-futile jaw-boning about bank lending rates - it's in regulatory reform that this government appears willing to take a few risks.

For example, who has their eye on the activity of Hide's Regulatory Taskforce? Created on April 1, the seven-strong group is charged with providing expert advice on the Regulatory Responsibility Bill considered by the Commerce Select Committee last year.

Led by former Treasury Secretary Graham Scott, a former Act candidate as well as a sought-after international consultant on public sector reform, the group is due to report by September and has potentially a very wide brief to slice through any clogged regulatory arteries that it comes across.

The presence of Capital Economics director Bryce Wilkinson, identified like Scott as a long-time crusader for "finishing the job" started by Roger Douglas in the 1980's, indicates a willingness to consider bold ideas. The rest of the group represents a solid who's who of the legal and corporate sectors, including investment community heavyweights Paul Baines and Don Turkington, and the noted legal commentator, now chairman of Chapman Tripp, Jack Hodder.

The inclusion of David Caygill, once a regulatory reformist in the Lange-Douglas government 20 years ago and now the chair of the Electricity Commission, suggests that the taskforce will have the capacity to knit its proposals together with whatever happens once the wholesale electricity market review is completed.

Here, too, are the seeds of some radical action. Energy Minister Gerry Brownlee has all but committed the government to "something big" to prove it's taken action on the alleged $4.3 billion "overcharging" by power companies during dry winters.

The word from deep within the process is that a market-based approach will survive, but that a reshuffle of the electricity SOEs' generation assets is looking attractively big bang-ish. For example, all renewables Meridian Energy could find itself lumped with a gas-fired power station and a gigantic headache working out how that fits with its clean, green branding.

Brownlee's appetite for radical action is fed by popular disgust with power companies, and to some extent Hide's reform instincts play to a public weary with rates rises and dubious entrepreneurial projects funded by ratepayers' money.

However, Hide's Act pedigree and support for the supercity mean critics automatically characterise his proposals as anti-democratic, notwithstanding his support for referenda as a way to curb local authorities from moving into new, unexpected and sometimes commercially risky activities.

Most of the attention this week was on the referendum proposals. Equally important, however, is the detail in Hide's Cabinet paper which suggests local government should be subject to similar rules as central government is under the Public Finance Act.

The most significant impact of this change would be to require local bodies not only to produce statements of their fiscal strategy and financial position which could be compared with others, but also to publish a pre-election fiscal update. Hide is in a hurry and wants this in place before next year's local body elections.

On the face of it, this looks a timely intervention. Across the country, local government spending is forecast to grow by 37% and income by 48% in the next 10 years, with no let-up from rate rises which are forecast to increase by an average of 6% a year, according to a Department of Internal Affairs report released this week. If that wasn't enough of a warning bell, councils are also planning to fund part of that spending increase by a whopping 101% increase in council debt, says the report, which is based on analysis of the latest round of councils' LTCCPs.

Hide's proposals are intended to bring focus to all that new spending and debt, and largely to dismantle the cumbersome LTCCP process.

Councils all over the country will probably welcome being freed from what has become a hugely expensive exercise in legal compliance in which the potential for strategic planning has been all but lost in too many cases.

Whether they will welcome the fiscal scrutiny with quite such open arms is another matter. Yet arguably, the only reason for regarding such reforms as even remotely radical is that Rodney Hide is behind them. The disciplines of the Public Finance Act have been fundamental to improving the transparency and accountability of central government spending and revenue-raising.

It's high time that local governments were in the same boat.

(BusinessWire)

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