Legislation the Government says will rein in local authority rates increases was passed yesterday amid Opposition criticism it was unjustified and would result in reduced services to communities.

Local Government NZ warned the law risked leaving councils open to expensive legal challenges which ratepayers would ultimately pay for.

The Local Government Act Amendment Bill passed with the support of the Act and United Future parties.

The act is the brainchild of former Local Government Minister Nick Smith who introduced it with claims local authority spending, debt and rates hikes were out of control as councils spent up on wage and salary increases and on services outside core areas of activity.


However, it was Building and Construction Minister Maurice Williamson who led off the third reading debate, saying the legislation would refocus the purpose statement of local government.

"It will encourage councils to take a fresh look at the services and infrastructure their communities want and are willing to pay for," he said.

The legislation would encourage councils to exercise greater financial discipline, provide a system "the average ratepayer could understand" to assess the financial prudence of their council, make it easier for central government to intervene in local authorities "before situations become critical", and streamline procedures for local council reorganisations including mergers.

But Labour's local government spokeswoman, Annette King, said it was significant Mr Williamson spoke first on the bill rather than Local Government Minister David Carter who had "not fronted once" on it.

"This bill is based on shonky figures and untruths."

The president of Local Government NZ, Lawrence Yule, said it was unlikely to achieve the Government's objectives. The new legislation's purpose clause would leave councils more open to judicial review of their decisions.

"The costs associated with judicial reviews will fall to ratepayers to meet but accountability for such outcomes will rest with the Government."