Comment: Getting councils and government to work together

How can we make sure our local councils and central government are working in harmony when it comes to regulations that affect us, asks Murray Sherwin.

Local governments are responsible for implementing some of the country's most important regulations such as the Resource Management Act and the Building Act. As part of our inquiry into improving local government regulation, the Productivity Commission has identified around 30 pieces of legislation that assign a diverse range of regulatory functions to local government.

How well local authorities perform these functions impacts not only on the health of our rivers or the safety of our buildings, but also the vitality of the communities in which we live, and the environment in which businesses invest, operate and grow.

The bottom line is that local government regulation is important for New Zealand's economic, social and environmental prosperity.

But councils are only one link in the 'regulatory chain' and, as the saying goes, 'you are only as strong as your weakest link'. In the case of regulation, the chain commonly starts at central government agencies where problems are identified and often regulations are designed in response, and ends with local government where regulations are implemented. In the middle are institutions and processes designed to ensure the coercive powers of the state are used responsibly and that the resulting regulations make a positive contribution to the well-being of New Zealanders.

This system works well when there is good communication between the two tiers of government, when the challenges of implementation are well understood and where local authorities have the information, capacity and skills needed to effectively implement regulations. However, too often, one or more of these elements is missing.

The Commission's work on the regulatory performance of local government has illustrated that there is a disconnect between those designing regulations in Wellington and those implementing regulations 'at the coalface'. This disconnect can create problems at both levels of government.

At the central level, incentives to undertake rigorous analysis of new regulations are weakened when decision makers are shielded from the full financial and political costs of their decisions. This can reduce the quality of regulations that are passed to councils.

At the local level, regulations that do not align with local preferences may not be implemented effectively, or inconsistencies may arise between how regulations are applied from one council to another.

The end result is regulations that either don't achieve what they set out to or, conversely, regulations that achieve their objectives but at a greater cost to the community than was anticipated. Neither result is good for New Zealand.

So how can the chain be strengthened?

The Commission believes that a vital first step is to recast the relationship between central and local government as one of 'co-regulators' or 'policy partners'. This will encourage greater communication during the design of regulations and help to avoid some of the implementation problems that hinder existing regulatory regimes.

Another important step in developing a successful regulatory regime is being smart about the types of regulations that are allocated to local government. In the past, regulations have been allocated in a somewhat ad hoc fashion - with seemingly no consideration of whether local or central government is best suited for the job.

To aid this discussion, the Commission is developing a framework for allocating regulatory responsibilities between different levels of government. The framework poses some important questions that should be answered prior to allocating regulatory functions.

The Commission's draft report, Towards Better Local Regulation, sets out a number of other areas that we believe would strengthen the relationship between central and local government, improve the quality of regulation and lead to better regulatory outcomes for all New Zealanders.

Clearly, there is work to be done. The Commission's task is to propose ways forward.

We are consulting widely on our preliminary findings. In our draft report, available on our website, www.productivity.govt.nz, we have posed some questions which we would like people to think about.

Submissions are invited by March 6. We will then finalise our recommendations for presentation to the Government in May.

Click here to read the Towards better local regulation draft report.

Murray Sherwin is chair of the New Zealand Productivity Commission, which will be doing a presentation at today's local government conference in Tauranga about its draft report on regulatory issues.