Centralisation and Decentralisation.

Do We Need Larger Local Authorities?

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 the 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 s 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.)

Perhaps the contesting is already 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.