Local Government Legal Forum, Stamford Plaza, Auckland

Good morning, 

I am pleased to be here today to talk about the ‘new government's perspective on local government'.

This morning I intend to outline the policy objectives underpinning the Government's agenda for local government reform, tell you about some of the initiatives that are under way, and touch upon the issues of rates and local government expenditure.

First, however, I would like to take you back to our local government policy, as expressed in our pre-election policy statements, which remains essentially the same. 

The preamble to that policy states an incontrovertible proposition - that good local government is essential for our communities, our economy and our environment. The task then is to deliver the government's policy objectives while taking into account the challenges posed by the global economic recession.

In our policy, we stressed, and I believe the Government has developed - an honest and open working relationship with the local government sector. We made a commitment to regular formal consultation, in the shape of the Central Local Government Forum, which is scheduled to meet around the middle of this year. 

There was recognition that there cannot be a one-size-fits-all approach to local government, given the diversity of needs, resources and priorities across our communities. We acknowledged both the impact on rates of a looming infrastructure deficit and the legislative and compliance burden created by government regulations, such as the Resource Management Act and the Building Act. 

I am pleased to say, on behalf of the Government, that regulatory reviews are well under way on both of these pieces of legislation.

Our local government policy set out a comprehensive range of objectives. I'd now like to take you through these and outline what we are doing to address them. The first commitment was to boost infrastructure - this recognises the scale of local government infrastructure - which has an asset base of $87 billion and planned capital expenditure representing about half of New Zealand's total infrastructure spend. 

We committed to involve local government in the preparation of a national infrastructure plan to set clear directions for infrastructure investment, and to develop a common investment framework for infrastructure which includes a range of financing tools. 

The preparation of a national infrastructure plan has been entrusted to a newly created infrastructure unit within Treasury, and local government will be involved in the identification and evaluation of projects.

Work is under way on new debt financing tools for local government, to aggregate smaller council financing requirements, but also to price the cost of local government debt in a way that more accurately reflects the quality of that debt.

The second commitment was to address the legislative burden. The Minister for Regulatory Reform is leading a review of the legislation that central government places on local government, to ensure that costs fall appropriately. The Government is well advanced on reviewing and amending the Building Act, to reduce compliance issues, and reforming the RMA, to simplify and streamline consent processes.

The ultimate beneficiaries of both these initiatives are small businesses and householders across New Zealand, in reduced cost and time. Local government has committed to pass on the benefits of the Government's regulatory reform. I should also flag that it is possible that we may need to make some changes to the Local Government Act.

The third area was a commitment to retaining the rates rebate scheme, while making it easier for people to get their rebate. 

Our primary focus remains on reducing the cost burden on councils, but the scheme recognises that affordability of rates and taxes is always an issue for less well-off households. The rates rebate scheme targets those most struggling to pay their rates.

Another commitment was to encourage and work with local government to ensure the sharing of best practice information across councils. There is already significant work under way, with the Department of Building and Housing and the Ministry for the Environment, in identifying and promulgating best practice. 

One of the outcomes of the February Job Summit was the establishment of a joint Government-local government working party to achieve an outcome that councils agree to roll out good practice and streamline consenting practice. 

This group reports back to the Minister for Local Government in August, and I understand that an open and productive working relationship has already been established between the Minister and Local Government New Zealand. We are encouraging and working with local government to develop joint service delivery, with a view to saving ratepayers money.

We also made a commitment in our policy to implement the new Waste Minimisation Act with local government to ensure that its application does not cut across existing successful local government initiatives.

And finally, in the middle of last year, we committed to reforming local government in Auckland, by supporting the key recommendations of the Royal Commission. 

Our purpose was to implement changes that will best achieve the goals of good regional infrastructure, sound and consistent regulation, and economic growth throughout the region. While the Commission had a strong focus on the economic well-being of the Auckland region it was also important that each community in our largest city feels appropriately represented. I will return to Auckland reform later in my address. 

It is also important to make reference to the working relationship between the Government and ACT - whose leader, as you know, is the aforementioned Minister of Local Government and Minister for Regulatory Reform. Among the significant and numerous points of agreement between our two parties was a shared desire for institutional and policy change to achieve significant improvement in productivity; and an appreciation of the immediate and serious economic risks due to the international financial crisis and global recession.

The Confidence and Supply Agreement between National and ACT is based on good faith and no surprises. It includes regular meetings between the Prime Minister and ACT Leader, and identifies seven policy areas in which ACT requires progress to be made in the current term of Parliament. 

The three that could potentially impact most on local government are controlling government expenditure, regulation, and the Resource Management Act. The Agreement focuses specifically on controlling central government expenditure, aligned with National's objectives of placing a cap on the core bureaucracy and moving resources out of back office processes and into frontline services. On regulation, National and ACT agreed to establish a taskforce to carry forward work on the Regulatory Responsibility Bill.

I signalled the intention to talk about rates and infrastructure. To do so requires me first to acknowledge the competing demands for councils to be responsive to what their communities can afford and their obligations (as laid out in asset management plans), and the need to maintain and pass on the community assets they manage, in a robust condition, to the next generation. 

Our government strongly supports both imperatives. At the February Job Summit, the Prime Minister made the following statement about local government: "I was interested to hear what local government is considering. I think it is vitally important for local government to keep reviewing expenditure, to continue to think about reducing compliance costs and red tape, and to maintain investment in infrastructure. In that way, councils will be doing their bit for enhancing growth when the recession eventually ends." End quote. 

To take the latter point first, local government, either directly or through entities such as Council Organisations or Council Controlled Organisations, have oversight of $85 billion of assets, and, on 2006-16 projections, had $32 billion dollars of capital expenditure intentions or obligations over the life of their ten year plans. 

I choose the word obligations advisedly, because the larger part of council expenditure is rigidly stipulated, and is mandated through asset management plans. If councils do not fulfil these obligations to sound infrastructure stewardship, they are at risk under audit of acting "imprudently" and of having their Long Term Council Community Plan's qualified by the Auditor General. 

To return to the numbers - they are large by any measure. The asset value of local government is twice the current capitalisation of the New Zealand stock market, but equally we need to appreciate that many of these assets are neither tradable nor convertible.

The Shand Report, released following the Inquiry into Local Government Rating, pointed to the pressures that maintaining infrastructure places on rates, as they are a primary funding tool for councils' capital expenditure. The Government acknowledges this, but it is also mindful of the weight of local government infrastructure in the economy, and the need for local government to keep maintaining and developing those assets to support both economic growth and employment.

Taking all that into account, I can say that the government accepts that it also has a role in educating the public about the linkages between rates rises, robust infrastructure and economic prosperity.

And finally, I turn to the most topical of topics, Auckland and its future shape. Following the presentation of the report by the Royal Commission on Auckland Governance, the Government has responded with a decision that preserved the single Auckland-wide unitary council model, but rejected the proposed second tier six council model in favour of 20-30 local boards. 

The Auckland Council will have eight councillors elected at large and 12 councillors from wards to be determined by the Local Government Commission. The Commission will also determine the number and the boundaries of the local boards. 

While the Auckland Council will retain the power of general competence, the powers of the local boards will be determined by statute and by delegation from the Auckland council. Although the local boards will not have the power to rate, they will have the opportunity to petition the Auckland Council for specific additional activities in their areas of responsibility. These decisions will go through a select committee process, giving the community the opportunity make submissions.

As the Prime Minister stated at the time of the release of the Auckland model in early April: "Our plan will allow Auckland's civic leaders to think regionally, plan strategically and act decisively in a way that has not happened for the past six decades. The combination of the new Auckland Council and the local boards will lead to better connections across the region, better value from rates and central government funding and community control of what matters in our neighbourhoods." End quote.

The Government shared with the previous government the awareness of the inability of the existing eight Auckland councils to agree and implement regional priorities. The issue is primarily one of structure and a lack of clarity about the division of responsibility. 

Some progress was made in recent years on joint initiatives such as the One Plan. Voluntary cooperation would not go far enough. It's important to note that the need for change has been recognised for a long time - not least by the councils themselves. So change was inevitable. 

The change process and the specifics of the new Auckland governance model are being led by my colleague, the Minister of Local Government. Suffice to say that we are committed to holding elections under the new model at the time of the 2010 triennial local body elections. 

The Establishment Board, appointed by Government to work with existing council chief executives in the transition to the new authority, will manage the details of the organisational mergers, and the resource and staff requirements of the new body. Not all of the process will be achieved by October 2010, but it is imperative that the focus of the new Auckland Council is on the future of Auckland, and the transition into an internationally competitive city.

This concludes my address today. May I finish by reconfirming the Government's commitment to a productive and cooperative relationship with local government, based on shared clarity on roles and responsibilities, and mobilising local government's detailed knowledge of the needs and the aspirations of its communities. 

Thank you for your attention.