Are we over being rated?
Who among us does not open the rates bill with a growing sense of dread? As
Stuff has reported this week, rates rises typically outstrip both inflation and income rises in a relatively low-wage economy. It’s no wonder homeowners feel increasingly squeezed and even desperate.
Christchurch city councillor Jamie Gough has a view that borders on apocalyptic. The ratings system is not just ‘‘broken’’ and unsustainable, he says, but is liable to come crashing down, whether that happens in five years or 20 years. Or even less.
Parallel with a growing anguish over rates rises is a concern that some councillors may not be the best qualified to make the important judgments about major infrastructure spending.
Christchurch’s recently approved Long-Term Plan is based on a 53 per cent increase in rates over a decade, which is ahead of rises in Wellington and Auckland, equal to Hamilton and lower than Dunedin’s staggering 59 per cent increase, according to indicative figures provided by councils.
Ratepayers might look darkly at high-profile examples of what they perceive to be wasteful council spending but, in reality, according to Dunedin Mayor and Local Government New Zealand president Dave Cull, infrastructure spending has fallen behind across the country. In most cases, rises are not about nice-to-haves but the essentials. The costs associated with climate change will fall disproportionately on councils, some of whom are woefully under-prepared.
The solution is not a restrictive, freemarket model that would cut council spending to the bone, but a better way of funding councils that is not so dependent on ratepayers. Currently, some 60 per cent of council income comes from property rates, which is said to be high by international standards.
Cull argues instead for decentralisation, or a ‘‘rebalancing’’, as he calls it. His mantra is that 88 per cent of rates and taxes are collected by central government and 12 per cent by local authorities in New Zealand. The opposite is true in Switzerland.
But the Swiss model would be a dramatic ideological overhaul here. The New Zealand Initiative think tank published its report, Go Swiss, in 2017, extolling the virtues of direct democracy and decentralised government. Rather than the ‘‘bigger is better’’ model that created the Auckland super-city, the Initiative was inspired by the idea of Swiss cantons competing for taxes and trying to lure residents.
Hyper-competitive models are out of fashion in New Zealand politics, and a move to a Swiss system would also be hampered by local government’s lingering image problem. As the Initiative noted: ‘‘Many New Zealanders believe local government is the more incompetent and wasteful part of government. Giving [it] more power and money thus seems counterintuitive.’’
Equally, some will see the drive by Cull, Auckland Mayor Phil Goff and others to reform the system in their favour as a form of empirebuilding. Why would central government willingly surrender its power? But if the alarmists are to be believed, a move to some variation on a Swiss model may become necessary.
In the meantime, the Government’s recently announced inquiry into new ways of funding councils, including targeted rates and local taxes, is a welcome stop-gap solution.
‘‘The solution is not a restrictive, freemarket model that would cut council spending to the bone, but a better way of funding councils that is not so dependent on ratepayers.’’