The Department of Internal Affairs
Te Tari Taiwhenua
Purpose
1.
The purpose of this briefing is to provide context for the attached draft Cabinet paper
on removing the four aspects of community well-being from the Local Government Act
2002 (LGA02). We particularly wanted to draw your attention to the key question of
timing:
1.1
introduce a bill sooner and revert to previous legislation; or
1.2
introduce a bill later and consider the option to develop a new purpose
statement.
Background
2.
The four aspects of community well-being were present in the LGA02 when it was
enacted, removed as part of the Better Local Government (BLG) reform programme in
2012, and then reinstated by the previous government in 2019.
3.
Conversely, a list of core services local authorities were to consider in performing their
role was not present in the LGA02, introduced as part of BLG, and then removed by the
previous government.
4.
Your proposal to remove the four aspects of community well-being from the LGA02
was first considered in the context of electoral reform legislation but was reprioritised
to introduce a standalone bill by the end of the year seeking to fulfil this proposal.
Comment
Sending a signal to councils
5.
Legislative changes (e.g., removing the four well-beings and reinstating core services)
can send an important signal to councils about providing only the services most
appropriately undertaken by them. This could help councils to prioritise core activities
at a time when cost pressures on them and the communities they serve are top of
mind.
Alleviating cost pressures on councils
6.
Around 65 per cent of actual and forecast capital expenditure by councils is applied to
core infrastructure.
Appendix A shows observations on council finances, including
spending on core infrastructure as a percentage of capital expenditure.
under the Official Information Act 1982
7.
Removing references to the four aspects of community well-being from the LGA02 is
unlikely to alleviate cost pressures on councils because:
7.1
recent changes to the purpose of local government and related clauses have
not been shown to significantly impact council activities; and
7.2
cost pressures on councils are primarily driven by core activities (capital and
operating costs escalation1).
Released
1 Infometrics: Analysing increases in local government costs for Local Government New Zealand (February
2024)
https://d1pepq1a2249p5.cloudfront.net/media/documents/Analysing increases in local government costs
5qcIa8C.pdf
IN-CONFIDENCE
Page 2 of 6
The Department of Internal Affairs
Te Tari Taiwhenua
Sector support for the four aspects of community well-being
8.
The proposal to reinstate the four aspects of community well-being in 2019 was
supported by sector representatives Local Government New Zealand and Taituarā.
Furthermore, the Review into the Future for Local Government [informed by sector
and public views]:
8.1
stated, “Councils need certainty that the dual well-being and local democracy
purpose will not be subject to regular change,” and
8.2
recommended that the Parliament entrench the [current] purpose of local
government into the LGA02.
Opportunity for new purpose of local government
9.
As an alternative to reverting to the 2012-2019 version of the purpose of local
government, we could do work to help design a new purpose statement that may
better reflect local government’s role in the current climate.
Next steps
Timing considerations
10.
Beyond considerations of policy scope and efficacy, we particularly wanted to draw
your attention to the key question of timing for any legislative change:
10.1
introduce a bill sooner and revert to previous legislation; or
10.2
introduce a bill later and consider the option to develop a new purpose
statement.
11.
Options for removing the four aspects of community well-being from the LGA02 could
be limited by the time available to process any proposed changes. Reverting to
previous legislation would be relatively straightforward from a drafting perspective.
More time would be needed to develop a new purpose statement.
12.
Councils are in the process of finalising their long-term plans (LTPs), set to be adopted
in June. Because of the legislation as it stands, these LTPs will include references to the
four aspects of community well-being. We would need to do further work on the
interplay between a legislative proposal to change the purpose of local government
and the current planning cycle, including consideration of any transitional provisions
under the Official Information Act 1982
that may be needed and what impact this would have on council implementation.
Consultation
13.
As the draft Cabinet paper is exploratory in nature, we have not yet consulted with
other agencies.
Released
IN-CONFIDENCE
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The Department of Internal Affairs
Te Tari Taiwhenua
Preliminary observations from the draft 2024/34 long-term plans (for 21 councils to date):
• 14.6% increase in total rates revenue from 2024 to 2025
• 14.0% increase in “average” rates as indicated in council consultation documents.
Indications range from 7.5% to 27.3%.
Trends and themes from the consultation documents released to date:
• Balancing the significant impact of increasing costs due to rising inflation, interest
rates and insurance costs (some of which are out of council control) with the
requirements for continued service provision.
• Impact of climate events, including need for infrastructure and lack of resilience
(both physical and financial). Some future-proofing for climate change impacts.
• Cannot continue to defer spending on critical infrastructure, more of a focus on the
“basics” and maintaining what they have. Some uncertainty over water
infrastructure.
• Continued focus on efficiency improvements, and in some cases service reductions to
reduce costs (rates increases). Have looked carefully and organisational structure.
• Looking at funding from other sources (sale of shares etc ) as costs are not being met
by rates.
• Increased use of debt. Some high growth councils starting to get close to debt limits.
Local government costs for infrastructure (civ l construction, pipeline, transport etc.) have
been increasing at a greater rate than household costs (CPI).
under the Official Information Act 1982
Statistics NZ Business Price Indices
Released
IN-CONFIDENCE
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Excerpts from Documents 2 and 3
Excerpt from Draft cabinet paper – Refocusing the purpose of Local Government – Dated
19 April 2024
Excerpts from Briefing - Purpose changes in first system improvements bil (Appendix A:
Summary of feedback on proposed purpose changes) – Dated 26 September 2024
Advice from the Treasury
under the Official Information Act 1982
Advice from the Infrastructure Commission
Released
