Part of Nick Smith’s problem is that he doesn’t understand how to build public support for change before trying to implement it. Instead, he pulls out some dodgy numbers and tries to trick the public. This backfired in the debacle over ACC levy changes when he provoked one of the first big protests against the National government. Now, it’s happening with local government.
Smith claims that local government rates are rising out of control and that councils are taking on too much debt. He wants to limit rates increases to inflation plus population growth – which would just mean more debt, but he doesn’t say that. He knows that people get antsy about rates rises, so he assumes he is on to a winner. But people also value the independence of their councils and the services they provide. They do not want central government telling them what they can and cannot do.
At the heart of Smith’s argument are three dodgy numbers.
First, that rates are rising at 7% a year. But the councils have pointed out that Smith is using the wrong figures. Actual rate rises have averaged half what he claims and are not hugely out of step with inflation plus population growth. Setting that as a limit for rates increases, however, would just prevent councils from making important investments.
Second, that council employee costs are out of control (funny how the Nats’ solution is always to cut someone else’s pay or job). In fact, the Labour Cost Index shows that local government labour costs have risen by 25.5% since 2003 while central government costs have risen by 28.5% and private sector costs rose 23.8% – all in the same ballpark.
Third, that council debt has quadrupled. In fact, Stats NZ figures show that councils have run a cumulative surplus of $35m since 2002 including a $69m surplus in the last quarter. Between 2007 and 2011, they ran recession-related (and World Cup-related) deficits totaling only a billion. That compares to the $50 billion National has borrowed.
There hasn’t been much focus on Smith’s local government reforms yet but, if he remains minister, they are going to get shot to pieces and with his political capital gone, its hard to see how the reform process will progress.