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The real Nick Smith scandal

Written By: - Date published: 3:00 pm, March 21st, 2012 - 15 comments
Categories: local government - Tags:

It’s a shame Nick Smith is all over the political news at the moment for his ACC botch up because he should really be all over the news for his Better Local Government proposals.

That is not to say his apparent breach of cabinet guidelines vis-a-vis his letter to ACC to help friend Bronwyn Pullar with her ACC claim while the minister of ACC is not important. But in the greater scheme of things I’d rather we had a public debate about what we actually want from our local councils.

So far all I have heard is “rates are too high. They keep rising. It’s outrageous.” And thus Dr Smith’s proposal which seems ready to kneecap local governments’ autonomy, and slowly bleed them of the ability to invest money in anything but the most basic provisions, seems likely to pass quickly through the court of public opinion unchallenged.

I’ve got three concerns that I’d like to see addressed before that happens though.

First, rates are, in my opinion, a ridiculous tax. Obviously people object when we receive a bill out of the blue every few months for hundreds, or even thousands of dollars. The sudden arrival of a bill for large sums of money make rates much harder to stomach, for most people, than PAYE. Rates also intrinsically feel less fair than PAYE (or even GST, for all its flaws). But just because people hate rates does not mean that rates are necessarily a bad thing. Just as everyone hates tax, but we all recognise the need for taxes to build the community we want, the same applies to rates.

Second, we need to have a more detailed discussion about what is the role of local government, and what is the role of central government, where the two intersect. Personally I think central government’s sphere should be much greater and local government’s role could be reduced. But the more important point is that we cannot reduce local government’s role without expanding central government’s role to fill the void.

The reason local government has expanded into new areas such as housing, economic development and welfare is that the people electing local governments have, since the 1980s, seen central governments abandoning these spheres. The 2002 Local Government Act simply enabled local governments to do do the jobs central government was not willing to do itself. If central government abandons its monopoly on these areas it can hardly complain when smaller democratic bodies step into do the job instead.

And, in relation to my first point, if we constantly push down central governments tax revenue with ongoing tax cuts, is it any wonder that the organisations that are then stepping in to cover the cracks need to raise their revenue by increasing rates?

Third, councils, even those sticking purely to what Dr Smith could describe as their core functions, are currently funding some of the most expensive infrastructure in the country. Transport, waste, and water quality are probably three of the most infrastructure-intense areas of government investment in New Zealand. Good councils are facing up to environmental challenges that central governments have been too timid to meet. We need to get those investments right and we need to get them right quickly.

Capping local government spending at ‘CPI plus population growth’ risks inhibiting councils from making the right long-term investments in easily accessible public transport, healthy waste management, and clean sensible water use. It would simply be short-sighted. Next year’s new councils not only need to be nimble on their feet to face these challenges, they also need to be able to make bold and large investments.

There is something inherently anti-democratic and paternalistic about Dr Smith telling yet-to-be-elected democratic councils what they can spend their money on and how much money they may spend. Local government are very accountable – accountable in a way that businesses are not. Just ask John Banks and Kerry Prendergast.

Stephen Day

The images are from Flickr. Thanks to Broken Piggy Bank and Hickey/Scott for the images


15 comments on “The real Nick Smith scandal”

  1. Draco T Bastard 1

    but we all recognise the need for taxes to build the community we want,

    As part of their denial of reality that’s one truth that the RWNJs don’t recognise.

  2. Herodotus 2

    Where do councils receive their income from to cover day to day operations? Rates and dividends from CCO’s from the likes of Watercare, Ak Airport, POA (Which is why IMO they was this need to increase the dividends and th ecurrent pay and working conditions issue). If there is strain placed on home owners (which is starting to happen with increased interest rates SWAP’s ) in the form of mortgages, cost of living and the at best maintaining household incomes. How then can households continue to pay more for rates without having to make sacrifices elsewhere? And in Aks case projected to be 4.9% p.a. for 10 years, with debt rising massively as well !!! (with the likelihood of dimished services like having to prebuy rubbish bags as is the case in what was Rodney DC), killing household by 1000 cuts !!!!
    Dr Smith is concerned local government debt has burgeoned from $1.5 billion to well over $8b in the past decade – And this debt excludes CCO’s
    It follows high-profile, big-ticket failures such as David Beckham’s 2009 football game which lost the Auckland Regional Council $1.79 million and the saga of the V8 Supercar races which cost Hamilton ratepayers about $40m- Sure you may think that councils are accountable- Not much good in kicking out a council/Mayor yet still be saddled with paying for their mistakes.

  3. Blighty 3

    I’m not sure why you’re against rates. Taxing wealth rather than income is more progressive.

    • Herodotus 3.1

      Perhpas if the cost of a home was more realistic then I could agree – Yet when the avg house in Ak is over $535k. Do something about the extreme cost of property- reduce this then mortagges will be less in both value and servcicing allowing for greater disposable incomes that then can be used to pay higher rates if need be. All this goes back to both cenrtal and local govts for causing the primary issue.
      Yet the value of a house does not necessary equate to wealth – There is the amount of debt on the property not to be forgotten about.

    • Stephen Day 3.2

      Hi Blighty, I perhaps should have been clearer – I’m not necessarily against taxing property. Rather I think posting large taxes to people once every three months rather than smaller amounts directly from their pay once a fortnight is always likely to create resentment. I don’t need to budget for PAYE because it is gone before I can spend it. I do need to budget for rates and therefore emotionally I hate paying them even though intellectually I think they are worthwhile. On the issue of taxing property I agree that there should be some tax on assets – especially land assets – and I agree with you that the focus should be on creating a progressive tax system, both for assets and income.

  4. I agree with your comments Stephen.  I thought the release of this policy on Monday was half baked and premature.  It seems to me that the Government wanted to drop something to draw attenation away from something else, such as a sex and ministerial abuse scandal which did subsequently occur.
    Now this particular policy looks dead in the water.  There has already been a leak out of Cabinet that makes the proposed changes look more and more doubtful.

    • Herodotus 4.1

      Nice to see poor policy dying a quick death – Pity so much poor policy sees the light of day. Where is all the conceptual and critical thinking regard to policy gone or does it not happen ?

    • Stephen Day 4.2

      Thanks Mickey. Yes, my post has been somewhat superseded by events this afternoon.

  5. The Gormless Fool formerly known as Oleolebiscuitbarrell 5

    I think that rates are too high. They keep rising. It’s outrageous.

    • Stephen Day 5.1

      Yes, it’s because all local body politicians hate dogs and spend all their time and our money hunting and persecuting dog-owners. Why not form a ginger-group called something like ‘Dog Owners Rates Revolt’?

  6. prism 6

    It worries me that central govt are trying to limit local govt so apparently drastically. I have noticed a big flaw in the supposed reasoning – it’s how hard it is for ratepayers to control their councils. Well they are a lot more responsive than central govt. And it’s through local govt that the life surrounding us is lived while central govt is worrying about how to divide up the pie while it’s still warm so that all the vultures at the feast get the biggest proportion.

    In Nelson, Nick Smith’s bailiwick, there is a constant whine like a buzzsaw about rising rates and how the citizens group don’t like it and don’t want us to have a performance and conference venue because they don’t want it and don’t take any interest in the arts and haven’t much business sense to see how it provides employment and helps tourism, no it’s just the self-indulgent wanting others to pay for their pleasures etc etc On top of that there is an amalgamation row with the Tasman area, mostly farming, and the Nelson area, mostly city and suburbs , joining together and saving big, or so we are sold.

    What the old and retired want is the council to look after the drains and services only. They have everything they want except youth who they don’t want to care about, little inter-generational generosity to be heard. They have money to spend on travel in New Zealand or visiting family in Australia but they don’t want to invest in their local area providing amenities for the younger generation. And I know it’s hard managing on the old age pension for some including me but I do get some help – a $500 rebate on about $1800 rates, now to be utilised to pay for the insulation package I’ve been given. The wealthy who have discretionary money perhaps should have a reduced cash payment, but keeping the promise of equal treatment in medical help for their ailments of age etc.

  7. Reagan Cline 7

    It makes sense to call an isolated group of islands by a single name “New Zealand”, but why should it follow that there is an exactly corresponding political entity ?
    The advantages of increasing the autonomy of local government are fostering democratic decision making, political decisions that meet local needs, fostering of skills and training among local people and reducing large scale conflict because it is harder to get a group of autonomous political units to agree to common action than a federation. So smaller autonomous groups of people decide on policies and actions and interact ethically and legally with other groups.

    • Bunji 7.1

      Indeed, our government is among the (if not the) most centralised in the OECD – we could do with more decentralisation. Barring local government from meeting local desires seems anti-democratic to me too. (But then, this govt’s not been big on democracy, see ECAN, SuperCity etc etc…)

    • prism 7.2

      @Reagan Cline
      Sounds good in theory, a balance is needed between inward-looking local powers that is likely to lead individuals setting up fiefdoms and central government that can take an overview and be objective.

  8. IcI 8

    Reading just the first sentence & I have to think:

    !!! Diversionary tactics !!!

    Why are we being made to focus on this by the media? What else is going on in the background that is being pushed through without our attention?

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