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#localismNZ: bringing power to the people

28 Feb 2019

Few ways are guaranteed to make yourself unpopular in New Zealand: try claiming that pavlova was an Australian invention; hating the All Blacks; or maybe expressing sympathy for local government.

New Zealanders love to hate their councils, mayors and local bodies with a passion usually reserved for opposing rugby teams. Such strong feelings probably originate from the range of regular interactions residents have with local government over their rubbish, water connection, roads, and so forth. We need council approval for all building and renovation works. We even need councils to check whether we have fenced our swimming pools properly.

Sadly, the average New Zealander interacts with local government regularly but gives it no credit. Rather, we cavil against it. We disregard our smooth roads but squawk over the pothole we just discovered. We forget the bus service when it is working, but not when it is delayed. And we take our drinking water for granted until it is not available.

While interactions with local government happen all the time, few of us can recall having any direct dealings with, say, the Ministry of Foreign Affairs and Trade, the Treasury, or the Education Ministry.

This discrepancy between less direct dealings with central government and more ‘in your face’ dealings with local government is mirrored in taxation. We pay central government taxes usually by stealth through PAYE. Similarly, we pay 15% GST on top of our shopping bills without even realising it.

Paying tax to local government on the other hand is more visible: Councils send regular invoices to property owners, the large majority of New Zealanders. These owners cannot ignore the tax bill because they have to physically transfer money into the council’s bank account. Ironically, average New Zealanders pay much more tax to central government than to local government, but it is the local rates they gripe about.

Local government in New Zealand is also highly visible to citizens, more so than central government. This transparency works against local government.

It gets worse. Often local government must execute – and pay for – unpopular policies central government has designed. Even when these policies bring in extra income taxes and GST to the local economy, they do not help local government because any new tax revenue is dispatched to central government coffers. Councils thus have no incentive to promote local economic growth if it brings them only costs without generating any additional revenues.

This stylised sketch of New Zealand local government shows an unpopular tier of government operating in a highly centralised country. Local government is mostly not well understood and often disliked.

Against this backdrop, The New Zealand Initiative has been urging over the past six years a rethink of local government. We proposed a localism where more public policy decisions are made locally, and both local and central government have incentives to do what is good for the country.


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