Former Economics Editor of the NZ Herald

Calls for public services to be funded by local government

Greater devolution of real authority to local government is seen as an incentive for the public to get out and vote. Photo / Richard Robinson
Greater devolution of real authority to local government is seen as an incentive for the public to get out and vote. Photo / Richard Robinson

Local Government New Zealand and the New Zealand Initiative are calling for more public services to be provided by local government and funded by local taxes.

At least they would like to see a debate about whether the split between the responsibilities of central and local government is optimal.

NZ Initiative executive director Oliver Hartwich said New Zealand was an outlier among developed countries in having so small a share - 11 per cent - of total government spending undertaken at the local level.

The OECD average for spending by levels of government below central government was 30 per cent, he said, and only Greece and Ireland were more centralised.

Local Government NZ chief executive Malcolm Alexander said a greater devolution of real authority to local government might encourage greater participation by the public, pointing to reports that in the local body elections now under way only 10 per cent of eligible voters in Auckland have voted so far.

"We need to have a debate about how local government is run, structured and funded," Alexander said.

Local government was not entering the debate with a prior view of which services would best be devolved to it, or how many local authorities there should be, he said. There are 78 now.

Hartwich argues that where local governments get to tax and spend some of the incomes of people they attract to their cities they have an incentive to pursue policies that will attract them.

That competition to attract businesses and the people to work in them delivered better outcomes all round. "If you don't like it in Wellington you can just move to get a different combination of taxes and services in a neighbouring community."

While attracted to the idea of local income taxes, Hartwich stressed that he was talking about re-allocating tax between central and local government, not an overall increase.

Asked whether it would mean a less redistributive system overall, with richer cities able to afford better schools, for example, resulting in greater inequality nationwide, he said it was a matter of balance.

"On the one hand you would like to have a system which provides the incentive for regions to grow and to get that incentive you have to give them some share of the tax take. On the other hand not all cities have the same chance to develop economically and for that you need some kind of fiscal equalisation mechanism."

Relying on property taxes made for lazy government, he said.

"I would only like to tax things which have legs, whether it is businesses or people, that are free to move, because if you can tax property, you can over-tax property."

Green Party local government spokeswoman Eugenie Sage said local government was marginalised in New Zealand and the Government was making that worse by centralising more and more power in the Beehive.

"National's changes to the Local Government Act, Resource Management Act, Land Transport Act and the recent Housing Accords and Special Housing Areas Act all increase centralisation and ministerial power at the expense of local democracy and decision making by local councils," she said.

- NZ Herald

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