Prime Minister Christopher Luxon and Local Government Minister Simon Watts announced the rates cap range at the post-Cabinet press conference on Monday. Video / Mark Mitchell
The Government is dismissing concerns its rates cap for councils will degrade basic local services like public transport, rubbish collection and libraries.
Prime Minister Christopher Luxon, speaking today alongside Local Government Minister Simon Watts, implored councils to “stop doing dumb stuff” as he announced annual rates increases would belimited to between 2-4%, calculated using typical inflation and economic growth levels.
Consultation will begin immediately on the proposal ahead of legislation passing through the House by the start of 2027.
The cap, to be reviewed every three years, wouldn’t come into full effect until mid-2029, but Watts has warned the Government could use powers afforded to it in the Local Government Act to intervene if any councils set rates higher than the cap after 2027.
Exemptions were possible for councils in “extreme circumstances”, such as when responding to natural disasters, Watts said. They would require permission from a Government-appointed regulator and also need to set out a plan to return within the band.
Asked to explain the lengthy transition period, Watts claimed such significant reform needed time to be fleshed out.
“You’ve got to understand that reform done fast and without care costs ratepayers more than reform done properly.”
Councils that implemented higher rates ahead of the cap’s introduction would do so “at their peril”, Luxon said.
Prime Minister Christopher Luxon and Local Government Minister Simon Watts walk into their press conference. Photo / Mark Mitchell
He shrugged off the suggestion the cap could force councils to cut basic public services, saying they should “stop the dumb stuff”, highlighting Wellington’s $2.3 million public toilets and the country’s “endless speed bumps”.
“[In central government] we end up having to make some tougher choices and you have to be more intentional about what you’re going to do with the money that you do have, and that’s all that this will force local governments to do as well.
“You can do dumb things with the same amount of money and you could actually deploy money in a much smarter, better way to get a better outcome for people.”
While Local Government NZ considered the “rates band” a better option than a cap, chief executive Scott Necklen feared the move would restrict investment in roads, bridges and public transport.
He cited issues felt in the Australian state of New South Wales, claiming a cap had “wreaked havoc” there, with local authorities unable to fix infrastructure.
“[Watts has] taken a pragmatic route and we want the same pragmatism to apply to exemptions,” he said.
Both Labour and the Green Party opposed a rates cap, despite recent polling suggesting 75% of New Zealanders supported the intervention.
Green Party local government spokeswoman Celia Wade-Brown, a former Mayor of Wellington, believed capping rates would do “nothing to fix the decades of significant underinvestment in local infrastructure”.
“It’s also completely at odds with the Government’s so-called ‘localism approach’.”
Labour local government spokesman Tangi Utikere, a former Deputy Mayor of Palmerston North, warned a cap would increase costs for services for communities.
He confirmed Labour would not support the proposed legislation, but would not answer directly whether a future Labour Government would repeal it ahead of the 2029 implementation if it had the chance.
Adam Pearse is the Deputy Political Editor and part of the NZ Herald’s Press Gallery team based at Parliament in Wellington. He has worked for NZME since 2018, reporting for the Northern Advocate in Whangārei and the Herald in Auckland.
