Do We Need Larger Local Authorities or Ones More in Touch with the Localities?

The Wellington kerfuffle over whether its eight territorial local authorities and the regional council should unite into a single regional entity might at first seem oh-so-Wellington – petty parochialism with small-minded politicians keen to maintain their remuneration. But other regions are struggling with the same problem. Unnoticed is a strategic issue of how decentralised New Zealand governance should be.

In 1876 the central parliament abolished the provinces, giving the central government dominance over the localities. As New Zealand urbanised and regionally integrated the hotchpotch of local authorities made little sense. From the 1970s there were moves to rationalise them but local interests fiercely resisted. In 1989 the Lange-Douglas government blitzkrieged a major restructuring, replacing around 850 single- and multi-purpose local bodies with 86 multi-purpose local authorities, typically at two levels: regional councils with broad environmental responsibilities, territorial local authorities with a community focus.

Neither central government politicians nor the bureaucracy which advises it are enamoured by local democracy. It was not beyond central government to pass on to the local council some tiresome tasks. But it retains ultimate power, sacking an elected board if it is deemed dysfunctional. It would replace it with commissioners rather than immediately arranging new elections (as has happened to the Canterbury Regional Council and the Area Health Boards in 1991).

The governance problems of local authorities are underpinned by the inadequacy of the funding of local bodies. Their dominant (discretionary) source of revenue is local authority rates (taxes levied on properties). Rates are not a very effective tax because they are regressive against the poorest (especially when user charges are added) and they are intrusive, requiring a regular payment by the property owner.

However, the 1989 consolidation was insufficient for Auckland, with a population of a third of the country. In the late 1990s economists’ thinking – led by Treasury – turned to the need to strengthen Auckland’s economic base, in contrast to the past preoccupation with regional development and stagnating rural areas. The underlying notion was that the existence of economies of urban agglomeration meant New Zealand needed at least one large urban metropolis in order that some industries – such as head offices, finance, biotech – had a chance to survive here rather than move offshore to Sydney:

The policy conclusion was that the Auckland metropolitan area with seven territorial councils (it had 33 before 1989) and a regional council was not functioning cohesively. In 2009 a Royal Commission on Auckland Governance recommended a unitary Auckland Council. The National Government implemented the general tenor of the recommendations, without a lot of public consultation and with differences reflecting its political preferences.

The outcome presents the intriguing possibility that a unified political agency representing about a third of New Zealanders, and led by a mayor elected with more votes than any other New Zealand politician, may be able to contest power with central government in a manner that no local body has been able to in the past. (It will still be handicapped by limited funding.)

The contesting may already be beginning. The Auckland Council has announced it wants a ten-year agreement with central government on its development direction. The government (which is up to our necks in its funding commitments from general taxation) has rightly said it will await the public response to the proposed Council ten-year plan. But you get a sense that unlike some foolish outbursts of arrogance in the recent past, this time it is warily entering an engagement. A new minister (Paula Bennett) or an acceptance of political reality?

So Wellington, so Canterbury, so Hawkes Bay, so everywhere: are they going to leave this engagement only to Auckland and the central government? You can be darn sure that there will be no separate plans with the nine Wellington local bodies.

Instead of Wellington (and elsewhere) squabbling about restructuring they should aim for a regional authority large enough and strong enough to negotiate with the central government. The design issue is how, at the same time, to devolve the maximum decision-making to the communities of each’s region.

Comments (4)

by Rich on January 13, 2015

 Rates are not a very effective tax because they are regressive against the poorest 

I don't see how - most property owners in NZ will have made substantial untaxed capital gains. Rates go a small way to even out the economic disparity between asset holders and wage earners in NZ.

[Wellington]  should aim for a regional authority large enough and strong enough to negotiate with the central government

Given that the total population of NZ is less than many overseas cities, the most cost effective approach to local governance would be to abolish all councils and create a Ministry of Local Services.

The reason we don't is in order that local government is able to reflect the different needs and attitudes of different populations. The people of central Wellington do not want to be governed in the same manner as Porirua or Masterton. 

Equally, the primary purpose of local government is not economic development. It doesn't have the budget or the ability. Local councils primarily need to provide efficient services and appropriate regulation to meet the needs of their populations. 

I actually think central Wellington would be better served with a smaller, more accountable council covering just the central city and with outer suburban areas like Tawa and Johnsonville detached to another district.


by Charlie on January 14, 2015

Brian: The governance problems of local authorities are underpinned by the inadequacy of the funding of local bodies

How is that justified? Not because there is always a shortfall surely?

Since buying a house in Auckland 17 years ago, my rates increases have always been above the inflation general inflation rate, initially I was OK with this because it was used to cover the replacement of dilapidated storm water and sewerage infrastructure but more recently it seems it is used to fund the dreams of a bloated bureaucracy and incompetent mayor.

Another factor is the outcome of the leaky building debacle - the council now employs a regiment of Consenters and Inspectors to cover its backside.

So I think that in Auckland there is indeed adequate funding via rates, but it's just poorly managed.


by Brian Easton on January 20, 2015
Brian Easton

Charlie. There is no reason why the cost of local government services should go up at the same rate as that of all consumer prices. They contain more services whose prices rise faster than goods. An additional complication is the public may want more local government services as their income rises, in a manner similar to people having a high income elasticity for health services.

Given the first fact and supposing the assumption is true, you'd expect your rates to rise, if they are the main source of revenue for local authorities.

Rich: I guess I have less faith in the effectiveness of central government. 



by william blake on January 21, 2015
william blake

Thanks for raising this again Brian, it is a vitally important issue, especially for the Wellington region. I won't reiterate my usual rant about Auckland's super city, instead I will just say that local government is designed with communities and people in mind, a centralised, super city model is regional or second tier government. Auckland used to have a Regional Authority but this was scrapped along with the Local Authorities. Local representation is now attended to by odd little community boards with poor budgets.

We are left with a Regional Council arguing with Central Government about big business and big infrastructure, while local needs wither and die.

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