When the evidence of failure overwhelms us, by instinct, we elect a new government and believe again in the village.
Local heroes, local development, and local saviours enter the rhetoric of our leaders. Let’s not worry about the loss of capital from our country, the gutted education service, and the imminent collapse of public services because we are broke.
When there are no tangible assets left, politicians talk about their belief in people, knowledge, and the success of a few small enterprises. This is the point we have reached in our country’s history.
Community life is shattered in New Zealand. The middle-class lost their income, spare-time, and motivation. Today they do not support schools, clubs, pubs, churches, or causes. Worse, they do not trust government, and the constant barrage of right-wing rhetoric makes people retreat.
The Clark government’s challenge now is to make it happen in the provinces. They must revitalise each region if their strategy for business, employment, and growth is to be a success.
As a part of this strategy, Sandra Lee will rewrite the legislation that governs regional, city and district councils with the intention of making those organisations more responsive to their communities and more useful.
Sandra Lee’s reforms may break a 158-year tradition.
What should we expect from the reforms that the government says it will
complete next year? She will achieve little unless she gives autonomy to the
elected councils and reduces their reliance on property tax.
“The central question is not whether the Local Government
Act should be reformed but the nature of the powers that should replace it”. –
Hon. Sandra Lee, Minister for Local Government, July 2000.
These two statements may herald a dramatic change in the balance of power between central and local government.
Legislators have prescribed local government’s tasks, funding mechanisms, and election procedures since 1842 when they established the Municipal Corporations Ordinance, the founding document of local government in New Zealand.
That Act began two great New Zealand traditions - excessively lengthy and prescriptive local government legislation, and the close direction of local government by the dominant political party in Parliament. The two traditions are obviously related.
Perhaps we should not blame those involved in establishing local government in New Zealand. Our colonial history and demography gave us one of the most centralised systems of government in the Western World – local government in New Zealand has a narrow role, compared with many OECD countries. We have a unicameral Parliament and no federal system. Power is firmly in the hands of the few.
The few have assigned few functions to local government. The overseas counterparts of local councils in New Zealand typically have many more functions.
Responsibility for infrastructure like water reticulation, waste water disposal and roads is common in most OECD countries, but local authorities overseas also tend to have primary responsibility for the delivery of social services such as health and education, as well as for recreation, leisure and cultural facilities.
Social services in New Zealand are the prime responsibility of central government and consequently government agencies labour to involve the locals or secure “buy-in” to their programmes.
“Involvement”, “partnership” and “cooperation” have been the key ideas - not the transference of funds and authority. School boards, hospital/health boards, the Hillary Commission’s local committees, grant committees for the arts, road controlling authorities – everywhere you look a committee is exhausting itself trying to cooperate with bureaucratic central government rules.
There is a myth that the narrow set of functions assigned locally is because we have a small population base. The fact is, New Zealand local authorities have relatively large populations by international standards. New Zealand has 74 territorial authorities (with populations ranging from 4,000 to 354,000) and 12 regional councils. Australia has 770 councils (with populations ranging from around 200 to 78,000).
Another outcome of the excessive power of central government is that special interest groups have been able to secure advantages for themselves.
If you want to advance your interest group, you must approach Members of Parliament. Our statute books support every stake that ever became organised. The astronomers, farmers, accountants, lawyers, doctors, scientists, telecommunications companies, energy companies, unions, real estate agents and transport companies – they all lobby government and have won legislation that supports their cause.
The effect is that many successful New Zealanders enjoy a close relationship to central government. Local government does not have the ability to grant favours and in its regulatory role is an inconvenience to businesses. There is little incentive for the movers and the shakers to be concerned about local government. Only land developers and property agents snuggle up to local government.
What are the forces for change? They must be considerable for the government even to contemplate the liberation of local government.
The traditional love-hate relationship between local and central government is easy to understand. Central governments believe two contradictory things – we should make local decisions locally, and the locals cannot be trusted.
Three pressures are upon the present government, working to have them abandon the traditional mistrust of local government.
First, government’s prescription for economic development depends on community participation. Second, members of the present Cabinet have strong grass-roots experience in local government and a strong belief in the worth of local government. Third, the Green Party has brought localism and protectionism onto the agenda.
In addition, two factors, one positive, and one negative, are influencing public opinion and setting the climate for reform.
The positive factor is the success of the last National government when - against howls of protest - Warren Cooper tightened, and made more transparent, local government’s financial decision-making. National built upon Labour’s successful local government reforms of the 1980s, which brought business planning and modern management techniques into local government.
The negative factor is the public’s growing yearning for community advocates. Central government reforms through the 1990s reduced the ability of ordinary New Zealanders to participate in decision-making that had a big impact on their lives. Today, no one speaks for the little people and there is a growing sense of alienation from the bases of power.
So, we could enter a new era - one that sees local government on the road to becoming as an equal player with central government.
Why have local government
Roger Kerr and his Business Round Table advocate small government. They urge councils to privatise assets and reduce income. Kerr’s irrational tedium upset Helen Clark and it also upsets councillors. This year, at the Wellington Regional Council the inability of Mr Kerr to take account of facts and lines of argument frustrated everyone.
Yet, it is a fair question to ask why should we have local government at all. There are four main reasons why we have this form of administration.
New Zealand needs strong individuals, strong families, strong communities, and strong central government. No child can prosper without an adequate family nor can a family prosper without an adequate community.
Local government builds the community sector that is vital for our wellbeing and prosperity. Other community sector entities, each with their part to play, are companies listed on the NZSE, clubs, gangs, businesses, and sports teams. Collective action generates richness, wealth, opportunities, and well-being.
New Zealand must draw into the community sector as many individuals as possible and allow them to participate and profit from their interaction with others. Entrepreneurship through the community sector is what will address the needs of individuals.
“Community well-being” is the key concept in Tony Blair’s United Kingdom Local Government Act. They gave councils new powers to promote the economic, social, and environmental well-being and to respond to the needs of local communities. He did this at a time when their financial management was much weaker than that in the New Zealand sector.
As the British Labour Party’s Manifesto said, “Local Government should be less constrained by central government, and also more accountable to local people. We will increase accountability and encourage democratic innovations in local government”.
Publicly owned assets are icons. People gain their identity by relating themselves to community facilities and structures. People also feel better paying their bills to companies in which they have an ownership stake. Elected units of local government are able to exercise genuine public ownership. Public ownership through share-holding ministers is too remote.
Research denies the myth that public ownership entails inefficiency and waste. It is no harder to establish efficient structures or management systems in the public or private sector.
Councillors and Members of Parliament are the only people who can claim the authority that comes from election. They acquire a responsibility to speak out. This legitimacy is under-used in a society with our traditions, diversity, and sophistication.
Why did New Zealand suffer the misconceived reforms of the 1990s? The reason is that power was concentrated in the hands of a few and they were able to proceed without having their ideas tested in robust public debate or challenged by others who could speak for the community.
Hospitals, power boards, and councils lost elected people.
Government systematically reduced the number of elected positions and thus minimised the ability of others to develop ideas.
The diffusion of power is vital for New Zealand to function properly. It is not that our population is so big – but we need more decision-makers because of diversity within the country, the complexities of today’s world and the sophisticated requirements of our people. One of those sophisticated requirements is the opportunity to be involved in democratic processes that support communities.
The fourth reason for having local government is the provision of services that private enterprise can never adequately provide. Thus, communities subsidise trains, provide parks for recreation, and ensure the security of water supplies.
Lee’s legislative reform will be a total sham unless it includes rates reform. Property taxes have their place, but local governments’ reliance on rates is no longer credible.
New Zealand ratepayers are the hardest hit group of all OECD countries – they provide 56% of local government funding. Australian property owners are the next in line. Australian ratepayers pay for 47% of their councils’ activities. Typically, property taxes in the OECD countries fund a much lower proportion of councils’ activities.
Our unjust system of raising money for local projects has assisted central government to keep the lid on local government. Less than 12% of total government expenditure in New Zealand is decided at the local level. Compare this with Denmark 52%, Finland 29%, and Sweden 35%. (Comparisons with Australia are not helpful here because they have state governments).
Looked at the other way, less than 1% of local governments’ money (excluding that for roads) comes from central government. Compare this to the UK councils, where over 70% of their income comes from central government, essentially from income tax.
No tax delivers justice to all, but the injustices are minimised when several sources of funding are tapped. We must diversify the revenue streams for local government.
A useful model of funding is one that New Zealand uses to fund recreation, sport and the arts. Central government directs money acquired from income tax to councils based on their population. This effective mechanism allows central government to have some say over how the money spent. Population based funding proved difficult in the health sector because it entailed the reallocation of money that is spent in entrenched historical patterns. But, this has not been the experience with local government.
Cabinet will one day have to decide to allocate a proportion of income tax to local government. It is difficult to see the present lot having the gumption to do this at the perceived expense of their own mana.
Virtually no work has been done on rates reform as I have described it. The current long overdue overhaul of the Rating Powers Act that Government is working on with the Local Government Association, will help councils to rate utilities that make use of public land, and to better target ratepayers who benefit from specific services or developments.
Do you worry that your council will squander your money?
I worried about this too, until they had imposed on them onerous principles of financial management that require discipline and transparency.
By law, councils must prepare long-term and annual budgets, assess alternative funding mechanisms for activities, attempt to make the users pay, and account for every cent spent. The reforms that began in 1989 have provided structures for governance, management, and financial control.
The 1996 amendment to the Local Government Act, imposed against howls of protest, requires that local authorities must:
· Identify and specify principles of financial management
· Identify the beneficiaries of expenditure, both who they are and when they benefit
· Assess funding options to ensure they line up with the beneficiaries identified, unless there are sound reasons for departing from the user-pays principle
· Recover costs from those who benefit.
The system works well. Ten councils tried it out in the first year. I was elected to two of those councils (Porirua City and Wellington Regional councils) and have been able to compare their performance. They differed quite a lot in their methods used to develop their policy, but in both cases, the decision-making was rigorous.
The main problem with the decision-making structure is that it is not simple to explain. Ratepayers have a right to understand how decisions are made, and to have confidence in the system. As it is, it takes ordinary people several hours to grasp what is going on and to work their way through any example. Most people do not bother to do this.
By example, Clark must restore our faith in politicians. Sane reliable leaders will appear in Cabinet before anyone starts to trust local councillors.
Sandra Lee must make elected councillors responsible for the social, economic, and environmental advance of their communities. She must identify functions that can be moved from central management and assign them (funded) to local government. She must curb increases in property tax and provide councils with a general-purpose grant from income tax, distributed on the base on population.
The village will again serve us well. Today’s analysts call it the empowered community, and stress its ability to generate wealth. But, we all know it requires leadership on the ground and money in the bank before anything worthwhile can occur.
Robert Shaw is a senior lecturer in business management at the Open Polytechnic of New Zealand and an elected member of the Wellington Regional Council.
Wednesday, 22 November 2000