Windbag: The government's misleading case for rates caps
In Men At Arms by Terry Pratchett, the 15th book in the Discworld series, Captain Samuel Vines waxed lyrical about the cost of boots: 'A man who could afford 50 dollars had a pair of boots that'd still be keeping his feet dry in 10 years' time, while the poor man who could only afford cheap boots would have spent 100 dollars on boots in the same time and would still have wet feet.'
That quote became the inspiration for the boots theory, an economic theory that explains why it's so expensive to be poor. Buying lower-quality products that wear out sooner is an obvious example, but the cost of poverty hits in many more ways. If you can't afford to go to the dentist, the doctor or the mechanic, that short-term saving comes back to bite you with a big, scary bill later on. The cost of poverty traps people in its downward spiral.
Sanctimonious rich people love to lecture the poor about how they simply need to stick to a budget. But it's not the wealthy person's superior budgeting skills that keeps them out of the death spiral – it's the ability to go over the budget when needed. If an unexpected bill arises, they have the flexibility to pay it, even if it means dipping into their savings. To the poor person, their budget isn't merely a target; it's a hard cap, with devastating consequences if they breach it.
In the ongoing war between councils and the Beehive, government ministers are the wealthy elite telling poor councils they just need to budget better. Central government has way more money and flexibility than local government. Rates account for only 7% of the total tax take in New Zealand, and yet, with that small slice, councils are expected to build and maintain some of the most essential aspects of our lives: roads, pipes, public transport and community facilities.
Local government minister Simon Watts says he is considering a law change to cap how much councils can increase rates by each year. (Act and NZ First have raised doubts about the plan, so it's unclear how far it will go.) The political appeal of this idea is obvious. There is a lot of anger nationwide about rates increases. At a time when the household cost of living is high, it can feel unfair for local councils to continue jacking rates up.
The government knows this, which is why it has been so happy to abandon its talk of localism and instead use councils as its punching bag. But Watts is making the critical error of mistaking good politics for good policy.
Council budgets need some flexibility for unforeseen circumstances, like when a major pipe collapses, or a library turns out to be a deathtrap, or you face a period of expected cost increases. Putting a hard cap on rates will inevitably mean that important maintenance is deferred, delayed or ignored. According to the boots theory, maintenance will end up costing more in the future.
We are already seeing the consequences of this in the water network, where councils of the 80s, 90s and 2000s cheaped out on pipe renewals to keep rates artificially low. The bill has come due for the ratepayers of today.
Economist Craig Renney of the NZCTU has written a good analysis of how rate-capping policies have affected councils in the UK and Australia. In the UK, 12 local councils have declared bankruptcy since 2018, including Birmingham City Council, Europe's largest local authority. In New South Wales, researchers found rates capping policies led to 'worse revenue effort equity, greater debt per capita, lower levels of infrastructure renewal and exhibited much less operational efficiency'.
'Fundamentally, local government doesn't have the financial tools it needs to do the job that it has been given. Capping rates doesn't help that – it makes it worse. The UK and Australia both show the negative consequences of that policy,' Renney writes.
Proponents of rates caps argue that councils are essentially irresponsible teenagers who will keep blowing money on stupid shit unless big daddy Watts limits their pocket money. This is the narrative being pushed by the Taxpayers' Union, which is running a public campaign for the policy.
The Taxpayers' Union's team of researchers are excellent at digging up and highlighting examples of outrage-generating spending. The government obviously pays close attention, because you'll often hear senior ministers repeating the same talking points to the media.
Some of this work is incredibly valuable. Local government should be held to account for how it spends ratepayers' money. The problem is that the Taxpayers' Union has been so successful that it has distorted people's views of what councils actually do – voters think rates rises are primarily because of rainbow crossings and karakia rather than pipes and potholes.
This misconception seems to have gone all the way to the top of the Beehive. Prime minister Chris Luxon has repeatedly taken aim at Wellington City Council for spending that isn't focused on the 'basics'. Last week, he highlighted the new $2.3m Inglewood Place public toilets, the $2.3m Molesworth St cycleway (only 10% of which was paid for by the council), and Tākina convention centre, which fell $1.2m short of targeted revenue last year.
For a prime minister who sees himself as a big-picture thinker, it's kind of embarrassing that Luxon gets distracted by, as he would put it, the ' small rocks '. Wellington City Council has planned a budget of $4.9 billion in capital spending and $11.6 billion in operating spending for the next decade. Every little bit counts, but a marginally cheaper public toilet isn't going to move the needle. Pretending colourful toilets are the problem with council finances is like telling millennials they could afford a house if they gave up avocado toast.
If Wellington City Council were uniquely bad at wasting money, it would have uniquely bad rates increases. But it doesn't. Wellington doesn't even make the top 10 for councils with the highest rates increases this year (though it is seventh over the last three years cumulatively).
The Taxpayers' Union's Sam Warren, writing in The Post, said wasteful spending caused rates to rise higher than inflation: 'Between 2022 and 2025, average council rates have surged by more than 34%, compared to inflation at 13.7% over the same period.'
That analysis misses an important point. The usual inflation measure comes from the CPI basket of goods, a list of 598 consumer products: spinach, pillows, hair products, streaming TV services and so on. But councils don't spend money on the same things households do.
The vast majority of any council's capital spending is on construction to build and maintain infrastructure. And construction is really expensive. According to BNZ chief economist Mike Jones, 'Construction cost inflation soared 35-40% from 2020 to 2023. It's since flattened off, but the overall level of costs is still elevated.'
To its credit, the government has taken several steps to address this: reforms in the construction sector, new financial arrangements for water entities, and a proposal to give councils a share of GST on new residential builds.
It would just be nice if ministers were more honest about the problems at hand. Councils are trying to make up for decades of underspending on core infrastructure at the same time that construction costs are at their most expensive. That's the real reason rates are so high.
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This superstructure also includes other forms of discrimination and oppression such as race, sex, sexual orientation and transgender. Sometimes it also includes religion. They exist in a largely capitalist world. But they aren't products of capitalism. They existed in earlier forms of class societies for centuries. It is legitimate to locate them in a superstructure but with an important qualification. To differing degrees, they interact with the underlying structure. Sometimes it is to the extent that it becomes difficult to differentiate. It is these 'superstructural' forms of discrimination and oppression that get labelled as identity politics. The point is not so much the label but whether they are counterposed to class discrimination and oppression or run alongside it, sometimes reinforcing and interactively. A word that should never have been invented A year later (13 April 2024) I discussed 'woke' in the context of a wider discourse on sectarianism: From French Revolution to 'woke'. I concluded by observing that: In my view the word 'woke' should never have been invented….Politics in New Zealand would benefit from a healthy debate on the relationship between class and identity politics. I regard them as interconnected and supplementary rather than opposites. Bomber Bradbury's argument about 'woke' would be strengthened by dropping the term completely (leave it to the political right; it's their political plaything) and instead articulate a more nuanced narrative about identity and class politics. He could take a leaf out of West Indian socialist intellectual and cricket commentator CLR James' 'book' who famously said 'what do they know of cricket if cricket is all that they know'. 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If the term 'left-wing' is to mean anything other than not being right-wing or just having some collectivist impulses, then this needs to happen. Bomber's aim nevertheless deadly accurate In his own expressive literary way, however, TDB is right on the mark in describing the effectiveness and interconnections of the hard rightwing Taxpayers' Union, New Zealand Initiative and Atlas Network. TDB is correct in identifying the high level of their lobbying power, particularly through social media describing them as a '…stable of astroturf organisations to generate lobbyist talking points camouflaged as the opinion of the people.' Bomber Bradbury's most telling point, however, is his assessment of David Seymour describing the latter as '… a philosopher before he is a politician and he believes in a far right libertarian economic platform…' Elsewhere he has approvingly quoted leading Labour MP Willie Watson who has described Seymour has the most dangerous MP in Parliament. 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If there was a 'most prolific blogger while still being consistently thought-provoking' award it would be hard to beat Bomber (Martyn) Bradbury and his The Daily Blog (TDB). His writing is turbo-charged and opinionated but underpinned by powerful compassion and a strong sense of both justice and outrage towards injustice. For me he has been an acquired taste. It took a while and had its moments, but the acquiring proved to be a fascinating journey with the taste acquisition destination reached. I have also appreciated that he republishes my health system (Otaihanga Second Opinion) and politics (Political Bytes) blogs in TDB. He doesn't pull his punches. Occasionally he misses his target but more often he succeeds. He never leaves one wondering what he means. More importantly he invariably raises serious questions which deserve to be addressed. A recent case in point was his 3 July post concerning the challenge of ACT leader and current Deputy Prime Minister David Seymour to the political left in Aotearoa New Zealand: Can the left beat David Seymour and ACT. There are few questions more politically pertinent than this. As Bradbury observes, Seymour has, since 2014, taken ACT from less than 1% to, depending on which poll, a little under or over 10%. However, I have two points of disagreement – TDB's comments on 'woke' and what it means by being leftwing. 'Woke', identity politics and the absence of nuance TDB attributes in part David Seymour's and ACT's relative electoral success to the left allowing itself to be distracted by what it calls 'middle class woke Identity Politics'. I discussed this disagreement over 'woke' in an earlier post (9 October 2023): Structure and superstructure. I considered Bomber Bradbury's then published views on 'woke' too blunt and lacking nuance. Instead I advocated that identity and class politics are better understood in the context of the relationship between structure and superstructure. My criticism was that his argument: …counterposes economic discrimination and oppression to its other forms; it's either class or identity politics! This approach ignores nuance, complexity and layered relationships. In fact, these politics have overlapping layers. The use of the terms 'structure' and 'superstructure' are helpful in this respect. In this context the structure based on the mode and relations of production. Class is defined by its relationship to this production mode. The superstructure, on the other hand, incorporates the various belief systems and ideologies that help rationalise what people do and think (and why), including the law, education systems and religion. This superstructure also includes other forms of discrimination and oppression such as race, sex, sexual orientation and transgender. Sometimes it also includes religion. They exist in a largely capitalist world. But they aren't products of capitalism. They existed in earlier forms of class societies for centuries. It is legitimate to locate them in a superstructure but with an important qualification. To differing degrees, they interact with the underlying structure. Sometimes it is to the extent that it becomes difficult to differentiate. It is these 'superstructural' forms of discrimination and oppression that get labelled as identity politics. The point is not so much the label but whether they are counterposed to class discrimination and oppression or run alongside it, sometimes reinforcing and interactively. A word that should never have been invented A year later (13 April 2024) I discussed 'woke' in the context of a wider discourse on sectarianism: From French Revolution to 'woke'. I concluded by observing that: In my view the word 'woke' should never have been invented….Politics in New Zealand would benefit from a healthy debate on the relationship between class and identity politics. I regard them as interconnected and supplementary rather than opposites. Bomber Bradbury's argument about 'woke' would be strengthened by dropping the term completely (leave it to the political right; it's their political plaything) and instead articulate a more nuanced narrative about identity and class politics. He could take a leaf out of West Indian socialist intellectual and cricket commentator CLR James' 'book' who famously said 'what do they know of cricket if cricket is all that they know'. This could then be turned into 'what do they know of identity politics if identity politics is all that they know'. This could be similarly adapted for class politics. What is leftwing My second disagreement is when TDB refers to the political left in New Zealand it means the Labour Party, Greens and Te Pāti Māori. Unfortunately most of the commentary in the mainstream media around leftwing and rightwing is along the lines that one is what the other isn't; one ends where the other starts and vice versa. This becomes at best bland or meaningless and at worse absurd. Even more unfortunately TDB is uncharacteristically consistent with this mainstream media paradigm. I discussed this question well over two years ago in Political Bytes (30 April 2023): What being leftwing really means. I said that: One way of looking at differentiating between the political left and right is a continuum between collective responsibility and individual responsibility. This leads into the role of the state and to questions over whether healthcare access and educational opportunities, for example, are a right or privilege to one degree or another. …It isn't a bad way of looking at what is left-wing and what isn't. However, it is not enough. We can to better than this. Being left-wing has to be seen in the context of the material system that governs our daily lives. Today in New Zealand, and for the overwhelming majority of the planet, it is capitalism. Wealth accumulation the main driver of capitalism After discussing capitalism's prime driver (limitless wealth accumulation) I observed that: Being left-wing is about wanting to end, or even significantly curtail, the dynamic of wealth accumulation as a driver of societies. This might be through evolutionary or revolutionary means. But what it does require is transformational change. There is a good argument that both the Greens and Te Pāti Māori are transformational (or at least significantly so) this can not be said of the Labour Party. Writing in the context of Labour then being in government, I commented that: Transformational is what the current Labour Party in government is not. It is a political party not of the left but instead of social liberal technocrats with some collectivist impulses. Social liberal values are good and the political left benefits from sharing them. In fact, many people on the political right also share these same values (or at least some of them). In conclusion: …social liberalism of itself does not transform a society which, more than anything else, has wealth accumulation as its dynamic. …The political left needs to expressly differentiate itself from social liberalism in order to overtly focus on economic (as well as social) justice and protecting nature from the ravages of wealth accumulation. If the term 'left-wing' is to mean anything other than not being right-wing or just having some collectivist impulses, then this needs to happen. Bomber's aim nevertheless deadly accurate In his own expressive literary way, however, TDB is right on the mark in describing the effectiveness and interconnections of the hard rightwing Taxpayers' Union, New Zealand Initiative and Atlas Network. TDB is correct in identifying the high level of their lobbying power, particularly through social media describing them as a '…stable of astroturf organisations to generate lobbyist talking points camouflaged as the opinion of the people.' Bomber Bradbury's most telling point, however, is his assessment of David Seymour describing the latter as '… a philosopher before he is a politician and he believes in a far right libertarian economic platform…' Elsewhere he has approvingly quoted leading Labour MP Willie Watson who has described Seymour has the most dangerous MP in Parliament. Again he is on the mark. The reason behind this assessment is that Seymour is a conviction politician; a hard right libertarian. It does not mean that he isn't contradictory. For example, whereas a libertarian might be expected to support small business, Seymour and ACT have a strong orientation to big business, including as donors, with all its consequential anti-libertarian monopolistic traits. But it contrasts with the prevailing opportunism traits of both Christopher Luxon and Winston Peters. Opportunism allows the ability to bend and change somewhat; conviction much less so. In Bomber Bradbury's forthright manner he concludes: The Left [sic] have underestimated Seymour for too long. They need to engage with him in a completely different way and understand they need to push back by offering better solutions and by defining him far more ruthlessly when they do attack him. I agree although I would put it this way. The far right speak in slogans, the rightwing speak in sentences, the leftwing speak in paragraphs, and the far left speak in footnotes. This gives the political right a big advantage. To counter this the political left (plus social liberal technocrats) need to express themselves in plain language sentences that are also translatable into good soundbites. Ian Powell Otaihanga Second Opinion is a regular health systems blog in New Zealand. Ian Powell is the editor of the health systems blog 'Otaihanga Second Opinion.' He is also a columnist for New Zealand Doctor, occasional columnist for the Sunday Star Times, and contributor to the Victoria University hosted Democracy Project. For over 30 years , until December 2019, he was the Executive Director of Association of Salaried Medical Specialists, the union representing senior doctors and dentists in New Zealand.
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David Seymour And The Political Left
If there was a 'most prolific blogger while still being consistently thought-provoking' award it would be hard to beat Bomber (Martyn) Bradbury and his The Daily Blog (TDB). His writing is turbo-charged and opinionated but underpinned by powerful compassion and a strong sense of both justice and outrage towards injustice. For me he has been an acquired taste. It took a while and had its moments, but the acquiring proved to be a fascinating journey with the taste acquisition destination reached. I have also appreciated that he republishes my health system (Otaihanga Second Opinion) and politics (Political Bytes) blogs in TDB. He doesn't pull his punches. Occasionally he misses his target but more often he succeeds. He never leaves one wondering what he means. More importantly he invariably raises serious questions which deserve to be addressed. A recent case in point was his 3 July post concerning the challenge of ACT leader and current Deputy Prime Minister David Seymour to the political left in Aotearoa New Zealand: Can the left beat David Seymour and ACT. There are few questions more politically pertinent than this. As Bradbury observes, Seymour has, since 2014, taken ACT from less than 1% to, depending on which poll, a little under or over 10%. However, I have two points of disagreement – TDB's comments on 'woke' and what it means by being leftwing. 'Woke', identity politics and the absence of nuance TDB attributes in part David Seymour's and ACT's relative electoral success to the left allowing itself to be distracted by what it calls 'middle class woke Identity Politics'. I discussed this disagreement over 'woke' in an earlier post (9 October 2023): Structure and superstructure. I considered Bomber Bradbury's then published views on 'woke' too blunt and lacking nuance. Instead I advocated that identity and class politics are better understood in the context of the relationship between structure and superstructure. My criticism was that his argument: …counterposes economic discrimination and oppression to its other forms; it's either class or identity politics! This approach ignores nuance, complexity and layered relationships. In fact, these politics have overlapping layers. The use of the terms 'structure' and 'superstructure' are helpful in this respect. In this context the structure based on the mode and relations of production. Class is defined by its relationship to this production mode. The superstructure, on the other hand, incorporates the various belief systems and ideologies that help rationalise what people do and think (and why), including the law, education systems and religion. This superstructure also includes other forms of discrimination and oppression such as race, sex, sexual orientation and transgender. Sometimes it also includes religion. They exist in a largely capitalist world. But they aren't products of capitalism. They existed in earlier forms of class societies for centuries. It is legitimate to locate them in a superstructure but with an important qualification. To differing degrees, they interact with the underlying structure. Sometimes it is to the extent that it becomes difficult to differentiate. It is these 'superstructural' forms of discrimination and oppression that get labelled as identity politics. The point is not so much the label but whether they are counterposed to class discrimination and oppression or run alongside it, sometimes reinforcing and interactively. A word that should never have been invented A year later (13 April 2024) I discussed 'woke' in the context of a wider discourse on sectarianism: From French Revolution to 'woke'. I concluded by observing that: In my view the word 'woke' should never have been invented….Politics in New Zealand would benefit from a healthy debate on the relationship between class and identity politics. I regard them as interconnected and supplementary rather than opposites. Bomber Bradbury's argument about 'woke' would be strengthened by dropping the term completely (leave it to the political right; it's their political plaything) and instead articulate a more nuanced narrative about identity and class politics. He could take a leaf out of West Indian socialist intellectual and cricket commentator CLR James' 'book' who famously said 'what do they know of cricket if cricket is all that they know'. This could then be turned into 'what do they know of identity politics if identity politics is all that they know'. This could be similarly adapted for class politics. What is leftwing My second disagreement is when TDB refers to the political left in New Zealand it means the Labour Party, Greens and Te Pāti Māori. Unfortunately most of the commentary in the mainstream media around leftwing and rightwing is along the lines that one is what the other isn't; one ends where the other starts and vice versa. This becomes at best bland or meaningless and at worse absurd. Even more unfortunately TDB is uncharacteristically consistent with this mainstream media paradigm. I discussed this question well over two years ago in Political Bytes (30 April 2023): What being leftwing really means. I said that: One way of looking at differentiating between the political left and right is a continuum between collective responsibility and individual responsibility. This leads into the role of the state and to questions over whether healthcare access and educational opportunities, for example, are a right or privilege to one degree or another. …It isn't a bad way of looking at what is left-wing and what isn't. However, it is not enough. We can to better than this. Being left-wing has to be seen in the context of the material system that governs our daily lives. Today in New Zealand, and for the overwhelming majority of the planet, it is capitalism. Wealth accumulation the main driver of capitalism After discussing capitalism's prime driver (limitless wealth accumulation) I observed that: Being left-wing is about wanting to end, or even significantly curtail, the dynamic of wealth accumulation as a driver of societies. This might be through evolutionary or revolutionary means. But what it does require is transformational change. There is a good argument that both the Greens and Te Pāti Māori are transformational (or at least significantly so) this can not be said of the Labour Party. Writing in the context of Labour then being in government, I commented that: Transformational is what the current Labour Party in government is not. It is a political party not of the left but instead of social liberal technocrats with some collectivist impulses. Social liberal values are good and the political left benefits from sharing them. In fact, many people on the political right also share these same values (or at least some of them). In conclusion: …social liberalism of itself does not transform a society which, more than anything else, has wealth accumulation as its dynamic. …The political left needs to expressly differentiate itself from social liberalism in order to overtly focus on economic (as well as social) justice and protecting nature from the ravages of wealth accumulation. If the term 'left-wing' is to mean anything other than not being right-wing or just having some collectivist impulses, then this needs to happen. Bomber's aim nevertheless deadly accurate In his own expressive literary way, however, TDB is right on the mark in describing the effectiveness and interconnections of the hard rightwing Taxpayers' Union, New Zealand Initiative and Atlas Network. TDB is correct in identifying the high level of their lobbying power, particularly through social media describing them as a '…stable of astroturf organisations to generate lobbyist talking points camouflaged as the opinion of the people.' Bomber Bradbury's most telling point, however, is his assessment of David Seymour describing the latter as '… a philosopher before he is a politician and he believes in a far right libertarian economic platform…' Elsewhere he has approvingly quoted leading Labour MP Willie Watson who has described Seymour has the most dangerous MP in Parliament. Again he is on the mark. The reason behind this assessment is that Seymour is a conviction politician; a hard right libertarian. It does not mean that he isn't contradictory. For example, whereas a libertarian might be expected to support small business, Seymour and ACT have a strong orientation to big business, including as donors, with all its consequential anti-libertarian monopolistic traits. But it contrasts with the prevailing opportunism traits of both Christopher Luxon and Winston Peters. Opportunism allows the ability to bend and change somewhat; conviction much less so. In Bomber Bradbury's forthright manner he concludes: The Left [sic] have underestimated Seymour for too long. They need to engage with him in a completely different way and understand they need to push back by offering better solutions and by defining him far more ruthlessly when they do attack him. I agree although I would put it this way. The far right speak in slogans, the rightwing speak in sentences, the leftwing speak in paragraphs, and the far left speak in footnotes. This gives the political right a big advantage. To counter this the political left (plus social liberal technocrats) need to express themselves in plain language sentences that are also translatable into good soundbites. Ian Powell Otaihanga Second Opinion is a regular health systems blog in New Zealand. Ian Powell is the editor of the health systems blog 'Otaihanga Second Opinion.' He is also a columnist for New Zealand Doctor, occasional columnist for the Sunday Star Times, and contributor to the Victoria University hosted Democracy Project. For over 30 years , until December 2019, he was the Executive Director of Association of Salaried Medical Specialists, the union representing senior doctors and dentists in New Zealand.
