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The Next Phase Of Local Government Reforms

The Next Phase Of Local Government Reforms

Minister of Local Government Rodney Hide

Speech To Federated Farmers National Council Meeting 2010; Westpac Stadium, Wellington; Thursday, November 18 2010
Federated Farmers President Don Nicholson, Vice-President Donald Aubrey, CEO Conor English, National Council Members, Provincial Presidents, Ladies and Gentlemen. Good morning and thank you for inviting me to join you here today.

Too often, the cost of inefficient processes and unnecessary spending is passed onto the ratepayer through increased rates.

It is clear from the correspondence I have received and the meetings I have attended that many farmers are unhappy with the amount of rates they are paying.

Since becoming Minister of Local Government, I have come to understand that the legislative framework for local government is unwieldy in places, imposing unnecessary bureaucracy and regulatory burden on councils and ratepayers.

With these concerns in mind, a more efficient and effective local government has been my vision since becoming Minister.
To achieve this vision, I’ve identified some goals for local government.

These are:

• to improve local government accountability and transparency – allowing ratepayers to be more informed and therefore able to exert greater influence on council decision-making;

• to streamline the legislative framework within which councils work – by removing unnecessary process and red tape; and

• to have a local government system that is more fit for purpose, and that will allow local government to work better with central government.
These goals are why the review of the Local Government Act 2002, and in particular, the planning, decision-making and accountability aspects are such a priority for me.

The Local Government Act 2002 Amendment Bill is now before the Committee of the Whole House, and I’d like to give you a brief update on it.

The Bill’s main aims are to improve financial management, transparency and accountability in local government, and to encourage local authorities to focus on core services.

The proposed amendments will enhance ratepayers' and residents' ability to participate in local government decision-making processes. It makes it possible for ratepayers to learn more about the work of their councils, and provide informed feedback in a timely manner.

The Act currently requires consultation in a number of different circumstances, but consultation is meaningless if people do not understand what they are being consulted about and the impact proposals will have on rates, debt, and service levels.

The Bill requires that councils produce plain English financial reporting, so that ratepayers can understand what they are paying for, and how they are paying for it.

The amendments propose that council reporting is made consistent so that ratepayers will be able to make comparisons between different councils. This would include, for example, a consistent approach to the disclosure of rates income.

From 2013, every council will produce a pre-election financial report to enable voters to make a more informed choice about candidates and which projects they are likely to support and spend ratepayer money on.

As a part of the pre-election financial reporting, a financial strategy will be introduced with limits on rates and debt, and targets for returns on council investments.

A financial strategy will help councils and ratepayers to prioritise existing and proposed expenditure, by making clear the effect of proposals on services, rates, debt and investments.

The Bill will encourage councils to focus on core services, requiring each council to have particular regard to the contribution the services make to its communities. Services such as infrastructure, public transport, rubbish collection and recreational facilities.

It is important to note that councils must have “particular regard” to the contribution those services make to their communities; it does not say councils have to provide them, or provide only these services.

Decisions about councils’ activities and expenditure will continue to be made locally, rather than by central government.

The aim is to ensure that councils undertake these core activities, before seeking a mandate for spending outside of these areas.

The Bill will encourage councils to concentrate spending on core services that should benefit farmers and the rural community such as basic infrastructure needs.

The Bill proposes that councils must disclose information about network infrastructure services separately in their long-term plans, annual plans and annual reports. This would allow the public to more easily identify information about the services that make up a substantial part of council budgets, and, compare this information with other councils.

Standardised disclosure about infrastructure services would allow people to identify and ask questions about how much is being spent on particular services and how much it would cost to meet additional demand for the service, improve the level of service provided and replace existing assets.

I would like to thank Federated Farmers for making a submission on this Bill. Your suggestion about tables of benchmark properties was included in the Bill that was reported back by the Select Committee.

This means that councils’ long-term and annual plans will have to include examples of the impact of rating proposals on the rates of different types and values of property across the district. This information will be particularly helpful where councils make extensive use of targeted rates.

Your submission also recommended requirements for itemised rates assessments. However, this could not be considered as it would have required changes to the Local Government Rating Act, which was outside the scope of the Bill.

These changes are meaningful to the day-to-day operations of councils. But we cannot stop there. I believe both local and central government can do much better.

Looking to the future, I am planning to review New Zealand’s system of local government.

As part of this review, I want us to ask and answer some fundamental questions:

• What is local government?
• Why do we have it?
• What does it do?
• What do we want it to do?
• What does local government need to do its work efficiently and effectively?
• How is that work funded?

Since becoming Minister, I’ve noticed first-hand that the nature of the relationship between the two tiers of government, and how their relative responsibilities, powers and status is not clearly defined.
There is a tension between local government’s role of serving communities, and the statutory requirements that central government imposes on local authorities.

Some people consider that central government sometimes treats local government as a service delivery arm of central government. This situation limits the scope in which councils can act for the benefit of ratepayers.

There are also issues and tensions in the local government system, and external challenges that may be problematic in the long-term. This includes local government’s capacity to deal with large, complex, multifaceted and interlinked economic, demographic, environmental and social problems.

New Zealand’s local government system is rooted in governance arrangements established during the colonial period of the mid to late 19th century.

Over the last two decades there have been several reforms of local government, including the recent Auckland reforms, which sought to modernise aspects of the local government system, but did not consider it in full.

As New Zealand continues to undergo change, and the local government sector grapples with challenges arising from that change, I want to see if the local government system is ‘fit for purpose’ for the next 50 years.

Central government has a strategic economic policy agenda of significantly lifting growth and living standards, improving efficiency throughout the economy, and reducing the income gap with Australia and other comparable economies.

Related policy agendas, such as regulatory reform, are a crucial part of the broad policy goal of lifting our economic performance.

It is imperative to consider where local government, and the regulatory regime for the sector, fits with these national policy approaches, and how it could better contribute to enhancing prosperity for all New Zealanders.

Internationally, there are new and different ideas and ways of thinking about local and community governance, and the relationship between local and central government. It would be useful to consider whether these ideas are relevant to New Zealand’s circumstances, now and in the future.

Although the Auckland governance reforms were the Government’s specific response to a unique set of circumstances, aspects of the reforms will have implications for local government and central government in New Zealand.

We need to think through what those implications are likely to be, and what aspects of the Auckland reforms could be useful for local government elsewhere in New Zealand.

We also need to consider how we can more clearly define the relationship between central and local government, including allocation of functions and costs, and how we can improve the ways in which central and local government work.

I will be releasing a discussion document in mid 2011 which will set out the strategic issues facing local government in New Zealand. It will put forward questions to spark a debate among all New Zealanders about “where to” for local government.

The discussion document, and the responses that we get from New Zealanders, will provide the Government with a basis for further work after the 2011 general election.

This is a big project, in a sector that plays a vital role in New Zealand society and economy. I expect that the project will run over several years, possibly out to 2014. We’re not going to rush it.

I have no preconceptions about the outcomes of the project. We may conclude that no changes are needed. We may find that the system could be improved through minor adjustments. Or we may determine that significant reform is needed.

The Government will not make any decisions without the contribution of the local government sector and other stakeholders.

I note that Federated Farmers is advocating for reforms of local government funding, such as moving away from property-based rates to a greater focus on matching costs to benefits. You have also expressed concerns about development and financial contributions. This review provides an opportunity for you to raise these concerns and I look forward to hearing your ideas.

I trust that the work I’ve discussed has given you an overview of what has already been achieved in the local government portfolio in the past year or so, and where I hope to go in the future.

Thank you for listening to me. I’m looking forward to your questions and comments.

ENDS

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