Why is Central Government Reducing Local Government and Democracy?

 This is an OpEd piece sent to NZ Herald a couple of weeks ago. Unpublished. So here it is:

While it is concerning that all of Auckland’s and Northland’s mayors are resigning ahead of  upcoming Council elections, it is not particularly surprising given the unprecedented and unrelenting attacks that have been aimed at Local Government by the present Central Government and which threaten local democracy and community planning in particular.

Kaipara District Council’s Mayor Jason Smith has given the Three Water Reform which forces all Councils to divest public water assets to entities established by new legislation as his main reason for resignation.

That reform is the latest in a salvo of change striking at the very heart of what local governments in Western countries around the world are for, with New Zealand already near the bottom list for functions and responsibilities delegated to local government, lagging significantly behind Japan, Switzerland, Australia and the USA for example.

The previous National Government was the foundry for much of Central Government’s appetite and ammunition for local government reform. The Hon Nick Smith, past Minister of Local Government and Environment, championed the argument that Local Government development planning and infrastructure construction activities were the principle cause of the steep rise in house prices, and that reform was needed.

He argued that Councils were slow to release land for development, making it scarce and thus forcing up land prices needlessly, and inept at building necessary supporting infrastructure such as roading and water and wastewater networks, thereby driving up the development contributions fees payable on each new lot.

The reforms he led included several Resource Management Act changes requiring large councils to review District Plan documents and make property development less restrictive and quicker.

For the past few years Auckland Council has routinely published data showing that despite its new Unitary Plan releasing huge tracts of land for development, and the consequent yearly construction of thousands more homes than have ever been built before, house prices have persistently shown strong upward growth well before COVID supply line restrictions on construction materials.

The present Government has adopted this argument wholeheartedly, and it continues to underpin its plan of attack on Local Government, despite growing recognition and acceptance of the counter argument that the main driver for house price increases since the Global Finance Crisis is the combination of near zero interest rates, cheap loans and mortgages, poor returns on traditional term deposit savings unlocking that money and further increasing demand for housing investment assets, and few meaningful taxes on capital gains. 

In the last two years economists and policy advisers in Australia have accepted this counter argument, and, interestingly, recent and anticipated reserve bank base rate increases here in New Zealand are cited by economists as the main cause of reductions in house price increases now.  

But still Central Government’s local government reform machine grinds on with consequences for local democracy and communities.

Decades of careful community planning have gone into the District Plans that shape the way towns and urban areas develop, change and grow.  These have been tossed aside by Central Government’s Resource Management Housing Enabling Act which permits three homes, three stories high to be built on most urban lots without need for resource consent.

While this reform should produce more homes, some of which might be “affordable”, the impact of additional housing on infrastructure has been ignored. There will be more pressure on water and transport infrastructure which will require upgrading. This needs to be planned and budget provided. Increased density means more people using community facilities such as halls, libraries, schools, sports facilities, parks and reserves. These community concerns are built into local government plans, and are why local government exists, but they are ignored by Central Government’s edict.

While there is room for improvement in local government three water infrastructure provision, there are many informed reasons not to proceed with the current Three Water Reform proposals which very much risk throwing the baby out with the bathwater.

Key among these are international trends away from centralisation of wastewater systems to de-centralised systems where wastewater is treated as close as possible to its source of generation. Considering the three basic components of a wastewater management system - collection, treatment and disposal – collection infrastructure costs account for about 60% of the total budget for a centralised system. Whereas in decentralised or more local systems, this component is reduced and focused mainly on wastewater treatment and disposal.

Local Government is ideally placed to be incentivised to work with its local communities, invest in new technologies, work hand-in-hand with local iwi, and build and operate efficient and sustainable three water systems that fit the local environment. 

Central Government needs to work in partnership with strong and motivated Local Government attracting the best staff and local representation to get the best outcomes, and deliver democracy.