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Smith makes a mess of local government reforms

Written By: - Date published: 12:07 pm, March 21st, 2012 - 18 comments
Categories: local government - Tags: ,

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.

18 comments on “Smith makes a mess of local government reforms ”

  1. Red Rosa 1

    Well said.

    Interesting to note that The People’s Republic of Christchurch was one of the least indebted councils, per head, while some smaller rural North Island councils were the most in hock.

    Must be the influence of Federated Farmers….;)

    • ghostwhowalksnz 1.1

      Kaipara District includes some coastal growth areas.
      Mangawhai Heads has just had an expensive new sewerage scheme. Other places have to have upgraded water supply .

    • I agree, especially in the post earthquake situation that Christchurch finds itself with huge infrastructure repairs likely to last years. With damaged roads, sewerage, water and power lines – there are days when I thank God that Orion who manage the power lines are owned by the City – it will be some time, and not a small number of dollars later that all this gets repaired.

  2. tc 2

    ‘Instead, he pulls out some dodgy numbers and tries to trick the public. ‘

    That’s the MO of the NACT gov’t….supershity, asset sales, education reform, extra doctors and nurses, fiscally neutral tax cuts etc the list is very long.

  3. Lanthanide 3

    If central government is really terribly concerned about rates rises, the easiest thing they can do is stop charging GST on them.

    At the moment if the council wants to raise $1 to pay someone’s salary, they have to get $1.15 from the public.

  4. Draco T Bastard 4

    Well, technically, he hasn’t made a mess of them yet but he will as soon as he gets a chance to implement them.

  5. ianmac 5

    He has resigned all his porfolios.

    • ianmac 5.1

      Feel a bit sad for him now. Probably he’s very sincere about his role in Parliament.
      But the cut-throat nature of various attacks by Nats and Acts, on for example Winston 3 years ago, hardens the view that those who live by the sword………

  6. Red Rosa 6

    Although it has always been political dynamite, there is a compelling case for drastic overhaul of local government in NZ. Even after the reforms of the 1980s, there are still 70+ territorial local authorities (TLA’s) for 4m people. And one (the Auckland SuperCity) now has about 1m by itself.

    This will cause a huge power shift within NZ governance. When Akld City fully gears up, it will totally dominate NZ local government without even trying.

    It is not difficult to draw up a map with ten or a dozen TLA’s to cover the whole country as unitary authorities, merging roughly along current regional council boundaries.

    Or even fewer, for instance 9 – North Island 5. Northland, Auckland City, Waikato/BOP, Taranaki/Whanganui/Manawatu/East Coast and Wellington.
    South Island 4. – Tasman/Marlborough, Canterbury, Otago/Southland, and West Coast.

    Currently the SI West Coast has 4 TLA’s – 3 district and one regional council – for about 40k people, and the merged entity would still be small.

    The staff overheads for the tiny councils are crippling. Some are less than 10k people, yet need senior staff at salaries not much less than their city counterparts with 10* the population.

    Certainly needs a closer look. But Nick Smith hardly the man to do it!

    • ghostwhowalksnz 6.1

      There would be vitually no savings from the mergers you suggest. Regional and district councils do different things. The same people would be required and even more managers for a merged situation. Its local government for a reason.

      Auckland Council would have a call centre with 200 staff, Buller would only need 5 . Its purely a numbers game. More roads , more people more staff.
      As for senior people , the salarys are certainly much much less

      Earning nearly $280,000 here, he will take a pay cut of between $80,000 and $100,000 to work in Buller, downsizing again from the $50,000 cut he took when he arrived in Tasman in 2007.
      Auckland Council CEO gets in the region of $675,000.
      Hardly similar !

    • James N 6.2

      Sounds like a return to provincial government…

    • RedLogix 6.3

      A Unitary Authority is not the only option.

      Take a look at the links on this page here:


      Essentially the preferred option in this region is a two-tier model, retaining the best features of local small-scale democracy, while achieving efficiencies from those functions like water, public transport and so on that do scale well.

  7. Herodotus 7

    “Actual rate rises have averaged half what he claims and are not hugely out of step with inflation plus population growth”- problem here is that with greenfield developments council receive an enlarged rating base, yet there is brand spanking new infrastructure – new roads, new wastewater systems, new water pipes (New customers for the CCO’s) So no additional costs just enlarged rate base. And development contributrions to pay for existing infrasture that requires upgrading due to the increases growth. So should not where dramatic growth has taken place e.g. Manukau. then the rate increases should be below the average. So that arguement does not hold.

  8. ad 8

    It’s time to focus on a new Minister, and put the previous one behind us.

    With Brownlee taking on both Transport and Local Government – which are together directly well over 5% of GDP – there is much that this government could now do that it could not.

    To start with Brownlee could stop the proposed Local Government reform process completely. This will avoid the momentum of Auckland and Christchurch being killed dead.

    Stopping the reforms that were announced on Monday would enable Auckland’s brand new Auckland Plan to generate the kind of policy coherence across all government Departments that it was required by legislation to achieve.

    It could also enable Brownlee to take an even more comprehensive approach to the rebuild of Christchurch, focussing on rebuild and reconstruction efforts rather than messing in the governance of Christchurch City.

    That would be if this National government was of a mind to focus on rebuilding rather than restructuring for the sake of it.

    It ought to also signal a shift from a Minister filled with rage and bile to one who focuses first and foremost on achieving real delivery of programmes that make a difference to actual people.

    Central Government, in seeking to again reform local government, has finally picked on a part of the public sector with its own politicians, and hence its own capacity to fight back in the media.

    Far better to turn them into partners who can help turn around a struggling economy.

    For example in the Regional Land Transport Programme now out for public consultation and worth billions of dollars over the next three years, central government could evaluate it not only through the National Land Transport Fund, but also through a plan to get good development going throughout New Zealand’s communities.

    While the logic of amalgamation will always push upwards in local government, it’s also there with nation-states the size of New Zealand as well.

    Local government mergers are as false a dynamic as corporate mergers or government department mergers – the benefits usually evaporate no matter what the forecasts were.

    In very different ways, Christchurch and Auckland have the massive potential to really show what civic coherence could really deliver.

    Between them they are 40% of New Zealand’s population and 40% of its economy. They are levers waiting to be operated properly for all of us.

    New Zealand is still in a long slow recession, with an economy shrunk back to where it was in 2007.

    It’s time central government stopped its meddling in the sector, and got a Minister who is prepared to work in partnership to deliver actual results that build this economy up.

    That means, Minister Brownlee, in the remainder of this term we want to see action collectively in Christchurch, Auckland and in transport, not more words.

    • Tc 8.1

      Tui moment……brownlee will be continuing on with the script smith was following, all written up by business round table. Dream on if you think there will be any significant change…..that requires thought.

      These ministers follow orders that’s why such vacuous and vicious sorts like wilkinson, ayatolley, Bennett, Collins, brownlee etc get the jobs., and if they don’t do what they’re told they get shunted aside like wilko and ayatolley have been.

  9. haden nuff 9

    having been a rate payer for many years, i only want water, sewrage and rubbish collection. thats all i want to pay for. all other services could be privately or volunteer run, this would bring back some accountability for failures, eg leaky homes. i do not want them to to pretend they have any buisness acumen and i dont want to be stuck with the bill for their failures at playing buisness people. they are servants not masters. they should be abolished all together and the local mp could oversee a local office that manages these services and pays the contractors that actually do the work. again accountability. any assets they hold should be leased out to private buisness, the leases paying for the debts. i am sick of giving them more and more money so they can invest in ways to take more and more money from me. they are the epitimy of mismanagement, either incompetent, corrupt or both

    • RedLogix 9.1

      So you don’t want the flood protection scheme? OK… we’ll leave a gap in it outside your place.

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