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Local Government Borrowing Bill

Local Government Borrowing Bill

Rahui Katene, MP for Te Tai Tonga
Tuesday 6 September 2011, 4pm

Mr Speaker, the circumstances around irresponsible borrowing and lending has been at the heart of the financial crisis of the past three years.

In many respects, therefore, we could look at this bill as an extension of the ‘borrow, borrow, borrow’ mentality that has had disastrous consequences at central and local government, at community and at family level.

But we cannot ignore the very serious debt issues facing our local government, which this bill attempts to address.

I am really pleased to be able to speak to this bill being a member of the Local Government and Environment committee.

As Maori Party member on that committee I am really keen to ensure that I can do what I can, to assist the committee to tackle an extremely significant issue for local government, and that is to dramatically improve representative democracy as provided for in the provisions of the Local Government Act 2002; and in particular around Maori representation.

The provisions are really specific in terms of providing opportunities for Maori to contribute to and participate in local authority decision making process.

There is opportunity for fostering the development for Maori capacity, and the requirement to provide relevant information to Maori in order to best uphold the commitment to democratic representation.

And yet at the very best representation of Maori elected on to Councils is at best between five to seven percent; despite Maori being 17 percent of the population. And of course as we all know the Maori population is increasing and at a faster rate than the European population.

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So there is no question – we have a long way to go in improving the effectiveness of local government for Maori.

We must pull out all the stops to enhance Maori participation in local government; to implement and monitor accountability mechanisms to ensure effective Maori participation and of course to be engaged in the true realisation of power-sharing envisaged by Te Tiriti o Waitangi.

In order to meet these needs we accept that local councils need to allocate priority to Maori representation.

And yet as we already know local authorities are already facing many competing priorities – a situation which this bill attempts to address.

The forecast borrowing needs of local authorities are large – total borrowings could reach $10 billion within five years from a current level of around $6 billion.

The purpose of the bill, then as others have said before me is common sense – it is very simply to make borrowing cheaper for local councils.

This simple aim would be achieved by establishing the New Zealand Local Government Funding Agency Limited to act as a type of ‘umbrella organisation’ for the purposes of borrowing money for local councils.

The theory is that multiple councils issuing their debt collectively will lower the cost of borrowing.

Economies of scale will mean that the agency is more credit-worthy than individual councils and will therefore borrow money at a lower interest rate.

We would hope, therefore, that the benefits of this approach will be realised by all – and more to the point, will enable a more comprehensive and enduring attempt to create representative democracy.

The Maori Party places huge priority on listening to the people.

And so we were particularly interested in the submission from the Society of Local Government Managers.

This society represents approximately 570 local government managers (including the Chief Executives of 76 of the 78 local authorities, and other managers with significant management, policy or strategic development responsibilities).

The Society was happy to go on record that it supports the establishment of the Local Government Funding Agency and in fact encourages the Select Committee and Parliament to enact this Bill as quickly as possible.

In their view they believe that the proposal does not just benefit the local government sector and the rate-paying public – the economy as whole could benefit. They thought that the Local Government Funding Agency is likely to make greater use of the ability to issue bonds to the general public.

We were also interested in the views of the Federation of Maori Authorities FoMA responded to this bill by stating that they saw the implementation of a Local Government Borrowing Authority as a positive move. Their submission confirmed the view that the formation of a local government borrowing authority will reduce overall costs to councils, as they no longer have to individually source funds, but instead can go collectively through the new borrowing authority.

We concur with many of the submitters therefore that the Bill will deliver a lower borrowing cost and reduce risk associated with borrowing for both local Councils and the wider Local Government sector.

Our worst fear would be that this Bill will not result in better services, and that instead it will end up in more local government spending and debt.

Analysis provided to the select committee suggested that savings across the entire local government sector would be approximately $25 million per annum.

We would hope therefore, that this will enable local authorities to do what we would suggest is the honourable course of action – and that is to use this new borrowing to give serious consideration to representative democracy. That can only benefit local authority; it can only benefit taxpayers; it can only benefit ratepayers as a whole.

ENDS

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