Frank Newman: The promise of better local government

On Monday Nick Smith was standing next to Prime Minister announcing a comprehensive and contentious reform of local government. On Wednesday he was standing in Parliament announcing his resignation as a minister. 

From the high peaks of 21-years as a career politician, to the valley of public disgrace within 48 hours - such is the precarious nature of politics. I imagine no-one other than Nick Smith will care enough about his Shakespearian fall from grace to reflect on the consequences for him personally, but there are many who will be reflecting on the implications for the “Better Local Government” reform package that he designed and promoted just a few days before.

While Nick Smith is human and therefore not without criticism, he has qualities most politicians don’t have - courage and conviction, a little like a terrier hanging onto your trouser leg

It is this terrier-like characteristic that made him well suited to lead major and much needed reform of local government.  With Smith driving the reforms, few could doubt that it was actually going to happen, despite what will inevitably be a tidal wave of opposition from vested interest groups who are doing quite nicely from local government as it is now. Opposition is already beginning to come from activist organisations and the Local Government Association (the trade union of local councils). Further opposition is likely to come from the planning industry protecting itself against the inevitable income loss that would come from simplification of planning regulations, and councillors themselves who rather like being bigger somebodies in their local community.

So what exactly was Nick Smith proposing? There are a number of fundamental changes.

The first is the removal of all reference to “well-beings” from the Local Government Act which enables local councils to pursue anything imaginable on the grounds of cultural, social, economic or environmental well-being. In truth these well-beings don’t drive council policy, they simply justified it. I recall the Whangarei District Council considering funding for a hot-dog eating competition on the grounds of social wellbeing! Unfortunately this type of laughable proposal for ratepayer funding was, and I am sure still is, commonplace.

The pursuit of the four well-beings is to be replaced with the role of council being defined as the provision of, “good quality, local infrastructure, public services and regulatory functions at the least possible cost to households and business.” That unfortunately still leaves a lot of scope for interpretation.

A second fundamental change is the introduction of central government limits on council finances, including debt limits and annual rate increases. This is designed to address the current reckless financial mismanagement by local councils with little regard for the long-term effect on ratepayer’s pockets. There is no better example of this than the Whangarei District Council who change their debt limit policy whenever the limits are breached, instead of cutting back their spending! Clearly central government wants to avoid a situation of having to bail out councils in the future – a problem that would be many times worse than the collapse of the finance companies.

Attached to the new prudential supervisory requirements are a range of proposed “interventions” by central government to “assist” councils. They start with the appointment of a “Crown Manager” to direct the operations of a council to resolve or avoid a significant problem, the appointment of a Commissioner to carry out the role of CEO, or dismissing a council and holding new council elections.

The last major fundamental change proposed for this year is with respect to amalgamations. It would become considerably easier for councils to amalgamate. In essence Nick Smith has proposed that amalgamations be decided by the Local Government Commission. The Commission describes itself as, “an independent statutory body of three members who are appointed by the Minister of Local Government”.

From my experience, the Commission was far from independent and somewhat lacking in rigor. I have no reasons to believe that the members of the Commission would not be hand-picked by the Minister and therefore likely to provide outcomes desired by the Minister. That desire is for the devolution of regional councils into local authorities.

In Northland that would mean the Regional Council’s functions and assets ($130 million) would pass to the Whangarei and Far North councils (a windfall they are no doubt looking forward to). In my view making local councils bigger is not is as the answer. Smaller is better.

A second tranche of changes are proposed for 2013. These include reviewing development contributions. In my view the manner in which development contributions were introduced locally was scandalous and would not stand up to scrutiny if challenged in the courts. The shear cost of doing so has blocked such a challenge to date.

What is clear from the proposed changes is that local councils will need to change the way they operate. The as yet unanswered question is whether the new Minister of Local Government will have the same strength of character to carry through the reforms.