Category: Other

Article: The argument against council rate caps

Posted on by Dave Stewart

OPINION: What do we do about 78 councils, rising rates and the need to improve efficiency and focus on the basics?

Some argue the Government should simply pass a law to cap rates and let ‘the market’ sort itself out. But history tells us blunt interventions often generate unintended consequences.

When councils have focused purely on rate minimisation in the past, they’ve generally cut infrastructure maintenance, inspections and deferred capital investment, contributing to a significant proportion of New Zealand’s $200 billion infrastructure deficit.

Government wants to grow the economy and speed up housing development. Yet, ironically, it needs councils to enable housing growth, through investments in roads, water, transport and other essential services.

Capping rates without addressing the funding model simply kneecaps councils’ ability to invest. Without money, projects don’t proceed and assets deteriorate.

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Article: John MacDonald: Capping council rates isn’t a solution

Posted on by Dave Stewart

The other major issue is the whole funding structure for local government. Which is why I think the Government is taking a very narrow approach here. How on earth the Government thinks it could put a cap on annual rates increases without looking at the wider issue, I don’t know. And that wider issue is the fact that local councils are being asked to do more and more under their own steam, without any extra funding to make it happen. Example: the Government wants more tourists coming here, but what about the infrastructure needed to support that growth? The Government doesn’t pay for that. Local councils do.

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Article: Rates will never be enough – councils need the power to raise money in other ways

Posted on by Dave Stewart

Local Government New Zealand recently estimated an extra $11 billion is needed over the next seven years to meet unexpected cost increases. The credit rating agency S&P Global has downgraded 18 councils and three council-controlled organisations, and given negative outlooks to three more councils.

The auditor-general reported in February that inflation has driven up the costs of construction, insurance and debt servicing. This is putting pressure on operational expenses and capital improvements at the same time as demand for council services is increasing.

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The Observer view: sticking to fiscal rule will imperil Labour’s future

Posted on by Dave Stewart

To react to this fiscal crunch by cutting public spending – both capital investment and current – is the wrong approach macroeconomically. It risks making the problem worse: depressing growth further, and reducing tax revenues and hence the resources available to improve public services. The economy will not sufficiently grow while people sit for months on NHS waiting lists unable to work; while children from poorer backgrounds are held back from achieving their full potential at school; and while the housing market is so dysfunctional that lack of affordability prevents people taking up economic opportunities.

There are other options available.

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