Nick Clark: Localism – NZ needs a better system

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A burst pipe flooded Wellington’s Kent Terrace. Photo / Ethan Manera
THREE KEY FACTS:
Nick Clark is a Senior Fellow at The New Zealand Initiative.
OPINION

A short walk from Wellington’s shiny Tākina Convention Centre, a burst water main floods Kent Terrace. This contrast between impressive
civic buildings and failing infrastructure captures local government’s challenge: finding a balance between ambition, financial responsibility, independence and accountability.

Prime Minister Christopher Luxon’s broadside at last week’s Local Government New Zealand (LGNZ) conference ignited a fierce debate about the future of local government. His call for councils to focus on the basics ‘brilliantly’ – fixing pipes, filling potholes, collecting rubbish – was met with applause from ratepayers and indignation from mayors and councillors.
But beneath the surface of this spat lies a more profound struggle, a tug-of-war that has been simmering for years and pulled back and forth with the political pendulum. A contest between those who want councils to do more in the name of ‘localism’ and those who say councils are not performing their current responsibilities well enough to be trusted with more.
A survey by The New Zealand Initiative reveals a strong appetite for localism among council leaders. 94% of the mayors, councillors and council CEOs who responded believe central government exerts too much control over local affairs. Nearly three-quarters support a moderate devolution of power from Wellington to town halls nationwide.
Respondents said they know their communities best. They want the ability to make decisions that suit their specific local needs rather than having one-size-fits-all rules imposed from Wellington.
A desire for more local government autonomy is not new. Oliver Hartwich, The New Zealand Initiative’s Executive Director, has advocated for localism for two decades. He argues that local decision-making would lead to greater responsiveness and efficiency. Importantly, a localist approach could also be more fiscally prudent than the current system, which he has described as “broken”.
Even so, how some councils have acted makes the localist case difficult to argue for. In his address to LGNZ, Hartwich pointed out that Wellington City Council has raised rates by 17%, spent $180 million on a convention centre and $55m on raised pedestrian crossings. Successive councils have neglected Wellington’s leaking pipes and ageing infrastructure. These and many other spending priorities, large and small, provide ammunition for those who argue that councils cannot be trusted with greater autonomy.
Luxon announced a new, hardline stance and Local Government Minister Simeon Brown put flesh on its bones. He promised to repeal the “four wellbeings” from the purpose of local government and floated ideas like benchmarking of councils and capping rates increases for non-core spending.
These moves were met with cries of “assault on local democracy”. Green MPs argued that limiting council spending amounts to imposing “austerity” on communities. Labour leader Chris Hipkins suggested the government’s approach disadvantages people who rely on public amenities.
The doomsayers did not seem to recognise that the government’s strategy is not solely about reining in spending. Its Regional Deals framework, also announced at the conference, offers a glimpse of a potential middle ground.
Regional deals will forge partnerships between central government, councils and the private sector to increase economic growth, deliver better infrastructure and improve housing supply. Their focus on long-term planning, strong accountabilities and improved funding tools are all positives.
These deals could make a real difference for the “up to five regions” invited to participate. In the longer term, they could build trust on both sides, leading to devolution of services and opportunities to trial different policies.
The government’s approach to water infrastructure provides another model for balancing local control with operational efficiency. The “Local Water Done Well” approach involves councils establishing separate water entities. This approach should free councils up to focus on other core activities while ensuring professional management of critical infrastructure.
The challenge lies in crafting a better system that harnesses the benefits of local knowledge and community engagement and ensures fiscal discipline and efficient service delivery.
The government wants to wield the “stick” against councils. Some of them might need it. But in many cases, promoting bottom-up transparency and accountability rather than top-down caps on spending and rates increases might be more effective. Ratepayer referenda on discretionary projects, like convention centres and stadiums, and large rates increases would be more localist, giving power to the billpayers and giving councils a defence against central government claims of profligacy.
There could be a more flexible approach to devolving power, with councils getting different levels of autonomy based on their track records. Funding from central government could be used to incentivise good outcomes, like boosting the supply of housing. These “carrot” approaches would encourage and reward good governance and performance.
As the tug-of-war between central and local government plays out, one thing is clear: It is time to reimagine the relationship between the two tiers of government. New Zealand needs a better system that uses incentives to empower communities, ensure fiscal responsibility and deliver the infrastructure and services we all need and deserve.
As Hartwich told LGNZ, “hate the game, not the player”. The burst water main in Tākina’s shadow is a potent reminder of what’s at stake.
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