Friday, March 2, 2012

Owen McShane: Why so much Dissent?

There is a wave of dissent spreading throughout the Western World in response to the failed experiment in central planning at the local and regional level of Government. For some reason we have suffered decades of top-down local planning in spite of the total failure of central planning in economies as diverse as the Soviet Empire, Maoist China, and North Korea.

This wave has now become a flood and is attracting attention in all quarters. During the property boom, triggered by the planners’ excessive regulation of land markets, and powered by the speculative bubble and lending, the rapid inflation in land prices allowed the planners to fund their excessive interventions and compliance costs, and of course their own salaries and fees, because the “speculators” and developers could absorb the costs.
But now the bubble has burst the real costs are being revealed. Worse, the drop in revenues means that Council budgets are now hopelessly out of kilter and the anticipated development contributions (fines) do not even fund the interest on the borrowings.

Remarkably, the typical response of Council administrators and their consultants has been too increase fees and charges to try and maintain the lifestyle to which they have become adjusted. 

Of course, it doesn’t work any more than a retail store can increase revenues by increasing its prices. So the obvious solution was to raise the rates.

Suddenly, the ratepayers began to ask the hard questions and demanded to know why they should be expected to pay for other people’s profligacy.

A good question, and a hard one to answer. Especially when asked by all those pensioners on fixed incomes.


The current crisis in Local Government has two basic causes.

The first is the belief that bigger is always best. Whenever some local government creates a mess the immediate response is to propose amalgamation. But the end result is no more than a local authority considerably larger than the one whose problems have just proved too big for councils to deal with.

Dr Smith, the Minister for Local Government and the Environment, has recognized that Local Government is dysfunctional, drawing attention to the escalating rates and debt levels that are causing waves of discontent all around the country. These symptoms of widespread failure of are largely the result of the last round of amalgamations in 1989.

Councillors suddenly found themselves in charge of multi-million dollar organizations that demanded skills and experience well beyond their levels of competence. Since then, the Chief Executives (previously known as Town Clerks) have been able to exercise largely unbridled power.

Those problems were then compounded by the 2002 amendments to the Local Government Act that gave Councils the power of general competence. This expansion of powers enabled already over-extended authorities to expand into new policies and activities totally outside their competence. Their general incompetence has been demonstrated all around the country – as exemplified by the losses on V8 races, entertainment events, swimming pools, sewage schemes, arenas, and exploding levels of debt and rates. Project cost overruns became the norm as a councillors lost control of their staff, consultants and advisors.
The end result has been that most of our councils have been colonized by major corporations who are now busy exploiting the local “environment industry”. These consultancies regard our districts and cities as little more than well-funded ATM machines.

It’s time to take back control of our Councils and their Plans. Hopefully, Dr Smith’s proposed caps on borrowing and rates will restrain these excesses.
The routine response to any problem in local government is to propose amalgamation. The end result is a local authority considerably larger than the one whose problems have proved too big to deal with.

Dr Smith, the Minister for Local Government and the Environment, has recognized that Local Government is dysfunctional, drawing attention to the escalating rates and debt levels that are causing waves of discontent all around the country. These symptoms of widespread failure of are largely the result of the last round of amalgamations in 1989.

But sadly he is also launching a further round of amalgamation. For example, he is promoting the amalgamation of the Unitary Councils of Tasman and Nelson into a single Unitary Council. Kaipara District Council is in financial meltdown and so he has proposed similar amalgamations for Northland.

He says his general aim is to get rid of Regional Councils. However, his current proposals will actually get rid of Local Councils, leaving behind a few truly massive “Super-Regional Councils”. It will take 4.5 hours to drive from one end of the Tasman/Nelson Council to the other. The merged Kaipara-West and Far North Council would stretch from Kaipara Harbour’s North Head to Cape Reinga – another 4.5 hour drive.

This bias is understandable; Dr Smith is an engineer, and he instinctively focuses on the efficiency of regional services which do enjoy the benefits of scale.

But democracy enjoys no benefits of scale. Small local councils can be effectively governed by local citizens and managed by local staff and consultants who actually know their people and territory.

Many councils are in the midst of RMA plan reviews and any amalgamation means the millions of dollars invested in those plans must be written-off and the whole planning process, including Long Term and Annual Plans, begun again. Proposed reforms to the RMA will generate another round of plan reviews. This endless plan writing halts all development because of the consequent DURT (Delays, Uncertainties, Regulations, and Taxes).

This is the time to implement a comprehensive reform of the legislative framework for the whole of local government in New Zealand.


The people of Switzerland place great emphasis on both efficiency and democracy. The average Swiss Commune (district council) has two thousand people. The average Canton (region) has 135,000 people. Switzerland is one of the most successful economies in the world.

Maybe small really is beautiful – and we “Power to the People” folk of the sixties had it right all along.

5 comments:

Anonymous said...

Excellent summary of the perils of centralisation.

Anonymous said...

And don't we Aucklanders know about this, with mayor Len Brown's grandiose schemes which we simply cannot afford. Yes, we would all like nice new public transport systems - a bit like I would like a nice new Ferrari, which I also cannot afford!

Anonymous said...

Yes, as we Aucklanders recognise with the grandiose schemes of mayor Len Brown, which we cannot afford. His nice new public transport schemes are things we cannot afford - a bit like the nice new Ferrari I would like, but cannot afford. They are even planning hugely expensive schemes without any idea where the funding will come from, and trying to ignore the government's stated position thet they will not be contributing. Can it, Len!

Anonymous said...

It is with great sadness to hear 0f Owen McShanes death.During his lifetime he has always demonstrated how easily countries can socialise themselves into insolvency.

AjaxTFC said...

The worst aspect of the 166km rail transit system "in the bottom drawer" is not that it will cost around $10 billion all up by the time that it is through, for merely 0.7% of total daily passenger (and driver) vehicular trips, but that it consumes three to five times the energy per person-km delivered day-long as does automobility, and that it will leave a legacy of annual running costs of the order of a $billion, perhaps 10 to 15% of which will be recoverable from the fare-box.