Now is your chance to choose strong local governance.
<>Listener: 6 October, 2007. <>
Keywords: Governance; Political Economy & History;
Why are you voting in this month’s local body elections? I’m voting because I believe in the principle of “subsidiarity”, that decisions should be taken at the lowest effective level. That is why I often support market decision-making. The market is reasonably effective in meeting our needs and my view is that the government should butt out in such cases. But there are exceptions.
When it’s a question of collective supply there need to be exceptions, and where individual decision-making -cannot work, the best option at the lowest effective level is often your local government. That is why I am voting: to make sure I have a strong local government and that central government does not have to take over things that can be done at the local level.
Revenue-raising (taxing) is one thing that central government is much better at doing than local government. That is because when one locality imposes income tax or GST, the locals can easily avoid it by going to another area. Rates cannot be similarly avoided – you can’t move land to another city. So local authority rates are the main source of local revenue.
Unfortunately, rates are a difficult tax from other perspectives. Their payment is lumpy, and they tend to impose on the poor, relative to the rich. In any case, there are limitations to the feathers you can pluck from a goose, and total revenue may be less than your locality needs.
Are there alternatives?
Some argue that central government should use its superior taxing power and then transfer revenue to local authorities. My heart favours such a strategy, but the political economist knows it can be a recipe for disaster, because central government will then want to control local body spending.
You see this when members of District Health Boards, for whom you will be voting, complain that they have little discretion. This may appear to be a struggle between the elected members and the management (a problem in territorial and regional local bodies, too), but it is underpinned by the fact that all the revenue comes from central government, which then imposes rules that reduce local autonomy.
A good example of what a disaster this can be is in English local government, where most of the revenue comes from central government and, as a result, local spending is severely circumscribed. The tensions there are palpable: they brought down Margaret Thatcher.
Shifting to user-charges is one means of reducing rates pressure. Locals still have to stump up the cash, but it is now related to what they consume and payment is usually less lumpy. I, for instance, support water-flow charging. Something as vital – and as increasingly scarce – as water should not be provided free. (And why should those with swimming pools not pay more?) But I don’t support flow charging for wastewater because that provides an incentive to pollute the local environment.
Is there another local tax? I have long been a supporter of charging the Local Authority Petrol Tax (LAPT) at a level that pays for all the local transport system – roads and urban transport subsidies. No tax is perfect, and the transport lobbies will grumble (they would rather someone else pay for their roads). But let’s give the regional authorities the power to raise their LAPT to cover all the region’s local transport spending, and leave the locals to decide whether they would rather pay for it out of rates.
So you should vote in the local body elections on October 13: as much as you may support central government, you want local decisions made in your locality. Who you vote for is your own business – but give some weight to those who recognise that local autonomy also means local revenue.