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Palmer's Council Proposal Muddle Headed - Douglas

ACT Party President Sir Roger Douglas today said Geoffrey Palmer's call for Auckland to be run by a single council funded by rates and another form of finance (possibly the right to raise taxes) is yet another example of the muddle headed thinking that has occurred at both Central and Local Government levels over the past 6 years.

"The idea ignores in almost every respect, the key elements of economics: It fails to deal with the perverse incentives that have driven rates up year after year by 3, 4 or 5 times the inflation rate.

"It fails to deal with the issue of monopoly rights which are at the heart of local government inefficiency.

"It fails to deal with the political gains that come from supporting various special interest groups which drives wasteful expenditure.

"It fails to align the interests of Auckland ratepayers, politicians, bureaucrats and interest groups.

"It positively feeds the notion that there is somehow a free lunch out there for local bodies (more taxing powers), thereby enabling the politicians to ignore the trade-offs they should be making e.g. selling airport shares to finance critically needed infrastructure like stormwater.

"It fails to deal with the issue of the high transaction costs of doing business in Auckland like licensing and the RMA.

"It totally ignores the secondary effects which would occur if we gave local government the power to raise more revenue. The cost of these secondary effects would well exceed the benefits that would flow from extra local government expenditure.

"Unrestrained monopoly government activity of the nature promoted by Sir Geoffrey Palmer will inevitably allow special interest groups to use the democratic process to fleece rate payers and consumers.

"Geoffrey Palmer's proposition also ignores the fact that competition is just as important in government as in markets.

"Only when we have competition between government units and between government enterprises and private organisations can we hope to ensure that government is a servant of the people and not the other way around. Competition is a disciplinary force and we ignore it at our peril.

"Having said all this, Sir Geoffrey Palmer is right, Local Government needs to be reformed, not only in Auckland but elsewhere as well.

"Size however, if it is a factor, is but a minor one.

"If government is to be a positive force and not a negative one, we must pay more attention to the rules of the political game. We must ensure we create a framework where the interests of the various groups - voters, politicians, bureaucrats and the self interest elements of our society are in harmony with economic and social progress.

"This will require that the scope of government (including local government) is limited and that government remains neutral among the various groups within society.

"Sound economic organisations are the key to economic prosperity - Geoffrey Palmer's proposal does not fit into this category," said Roger Douglas.


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