10 November 2004 PR 209/04
Dr Cullen Speaks Sense On Rates

Farmers wholeheartedly agree with Finance Minister Michael Cullen's comments today on the need for a fairer local government rating system, said Charlie Pedersen, Vice President of Federated Farmers of New Zealand (FFNZ).

"Dr Cullen is right on the money when he says that the current system discriminates against rural areas and people on low incomes such as the elderly," Mr Pedersen said.

Dr Cullen made the comments when answering a question from the floor of FFNZ's National Council meeting in Wellington. He stressed that his views were personal rather than government policy.

"We would encourage other ministers to take heed of the Deputy Prime Minister's rightful concerns. The current system unfairly relies heavily on property values, rather than use of council services, as a way of raising revenue," Mr Pedersen said.

Federated Farmers has been calling this year on the government to appoint a Royal Commission of Inquiry into the funding of local government.

"A Royal Commission would allow a proper study, unimpeded by the vested interests of councils and valuers, of possible rating systems and other options for funding local government," Mr Pedersen said.

"Some of the alternatives used overseas include a direct sales tax, a visitor or 'hotel room' tax, and a tax on utilities such as power and gas. Another is rating only a property's curtilage -- a farm house and surrounding section -- rather than an entire farm.

"A 1988 government study floated the idea of a portion of GST funding local government, ensuring that everybody pays, not just property owners.

"These options are all worthy of independent examination if the result is a fairer system which better reflects use of services and ability to pay," Mr Pedersen said.

"The present system based on land values isn't working. It fails farmers and many other ratepayers, including pensioners living in sought-after areas and rate payers on low incomes.

"The land these people own doesn't use council services, people do, and local government should be funded accordingly," Mr Pedersen said. "Some farmers are paying tens of thousands of dollars in rates, a fact highlighted by the many members of the Federation's 10K Rates Club."

FFNZ's National Council is the Federation’s key decision makers and comprises the national board, representatives from eight industry groups, and presidents from 24 provinces throughout New Zealand. It meets twice a year.

ENDS

A transcript of some of Dr Cullen's comments follows:

"The heart of the problem comes back to the base of the funding for local authorities, being rate based…it tends to discriminate both against rural areas and tends to discriminate against low income but perhaps reasonably high asset people. Particularly in urban areas, particularly the elderly, are often sitting on expensive properties but perhaps low incomes. They can't sell a quarter of the section each year to pay the rates.
"I do think that at some point we are going to have to have an intelligent debate around intelligent means of funding for local authorities which is more fairly spread.
"Look at where the government gets its money from…there is still no doubt in my mind that the total shape of government revenue is fairer than the shape of local government revenue, because you get so many inconsistencies in local government funding.
Sooner or later if Federated Farmers wants to launch that debate I would be delighted because it's more than time that we did that.
"A property in an urban area with one income earner in it pays the same amount in rates as the house next door with five income earners in it. I think that is absurd," Dr Cullen said.

Ends

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