Independent inquiry into rates

There is the old saying that a week can be a long time in politics. The events of this week in our National Government certainly seem to add truth to that saying. First, we had Rodney Hide, the leader of the ACT party, promoting his Local Government (Rating Cap) Amendment Bill, which would have put a cap on rates increases. Along with this, we had the Greens and the National Party calling for a select committee inquiry into rates. They had met to discuss a draft Terms of Reference for this parliamentary enquiry, which was due to be before Parliament tomorrow. Rodney Hide’s Bill was defeated on its first reading and the Government moved quickly to announce an independent (ie. not Select Committee) inquiry before National and the Greens could do anything.

On the face of it, the Government’s announcement appears to be a good thing. We all know that the Government needs to look carefully into council funding. National has identified at least 67 law changes introduced by the Government since 2000 which loaded costs onto ratepayers. In the past five years, Government has been shifting more and more responsibility onto councils, without providing any funding for the ensuing costs - that has been left to ratepayers to cover. We have some councils around the country upping rates by more than 20% in a year, and the average increase is 10% - well above the rate of inflation and far in excess of anyone’s pay increases.

In my opinion, an inquiry is definitely overdue. My concern, however, is that with so little agreement within Government over the right way to conduct this, and the lack of any terms of reference at this stage, all we have is the feel-good announcement that there will be an independent inquiry. For me, the arguments that the costs of national dog registries, or dog microchipping, or new national accreditation schemes (which can cost thousands of dollars to council for each staff member or elected member to gain), or any of the other 67+ pieces of legislation that impose compliance costs on council, should be local costs, paid for by local ratepayers, just don’t wash. National legislation enacted for national benefit should not be passed on to local communities in the form of property taxes. Where this might be slightly more palatable is if it also worked the other way around. If the GST paid in local communities stayed in local communities to offset rates, rate increases would not be as problematic for councils and their communities. Heck, if the GST we all pay on our rates was given back to councils (or better yet, not charged at all) we would all be better off.

NZ First is saying today that the inquiry should look into poll taxes. NZ First local government spokesman, Brian Donnelly, said the inquiry should study whether a poll tax – under which councils levy individuals instead of property owners – was a fairer method. This concerns me for two reasons. Firstly, attempts to introduce a poll tax in Britain in the early 1990s caused riots and should our government think its a good idea to do this here, I would expect a similar reaction. I would certainly be protesting! Secondly, the statement makes me wonder just why NZ First called for the independent inquiry. Surely it is to look at the costs government has imposed on councils and ways in which to mitigate these, and not just to look at what alternative methods of charging could be imposed on councils?

There is nothing fair or equitable about rates. No matter what system is used, some people are disadvantaged. To me, the issue is less about the way in which rates are charged than the amount. Local government, working with their communities, can choose between land value and capital value, or a mix, in working out what method best suits their local communities and provides the greatest equity. I can’t recall anyone ever complaining that councils don’t know how to charge ratepayers. It’s time for central government to look at the impact of their legislation and how it has passed costs from central to local government - and do something about it!