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Local Government Minister to propose policy that caps rates

Local Government Minister Simon Watt. Photo: Alex Burton A policy proposing a model for capping local council rates will be taken to Cabinet before Christmas, The Local Government Minister says. The government has previously signalled it was considering options to control rate rises - including placing a cap on how much local councils can increase rates. Local Government Minister Simon Watt told Morning Report there was a big gap between the country's average rate increase last year at 9.6, and population growth and inflation which sat at around 1.6 and 2.2 respectively. "[What] ratepayers are saying is they can't afford to continually see the degree of rate increases that are well above inflation and well above population growth," he said. Watt said he was working at pace on the proposed policy and feedback would be sought later this year. He said the government were looking at the Australian model - which already did rate capping - to take any "learnings" from it before implementing a similar policy in New Zealand. He said they wanted to make sure it worked and didn't in effect restrict any other policies, particularly those focused on increasing housing growth. Finance Minister Nicola Willis. Photo: RNZ / Mark Papalii Last month Finance Minister Nicola Willis told Morning Report that the the government wanted councils to stick to the basics and not waste ratepayers money. "We are concerned that the rates bill is a big part of the cost of living for many households, and rates have been going up very fast and are set to keep going up very fast across many councils," she said. "Councils don't always do a great job of spending your money like you would spend it. There are wasteful projects - there is evidence of that. "We want councils focusing on the things people expect them to do, which is the rubbish, the roads, the pipes, the basics - and not all the fanciful projects." Labour Party leader Chris Hipkins. Photo: RNZ / Mark Papalii Meanwhile Labour Party leader Chris Hipkins said the reason rates were going up at the rate they were, was because the government abolished reforms such as Three Waters. "The biggest contributor to rates going up around the country is the fact that our water infrastructure is in such a state of disrepair, capping the rates, in order to say 'well we want you to not do water infrastructure', just pushes the problem further into the future," he told Morning Report in July. "If you look at my area, Wellington... basically in the summer you can walk around and see all the leaky pipes because it's the only green spots on the grass at the side of the road. "Simply saying 'well just don't spend money on that' is going to make that problem worse not better." ACT leader David Seymour and New Zealand First leader Winston Peters. Photo: RNZ Both ACT and New Zealand First have previously cast doubt on whether capping council rates is the answer . ACT leader David Seymour said "you've got to be able to control the costs first". Seymour said the issue was being looked at, but he was "really strong" on making sure "you're saving money before you cap the revenue". "The only thing I'd say, if you're asking me, is don't cap your income until you've got your spending under control." When asked for his position, Winston Peters responded by saying "every other party is interfering in local government" and that New Zealand First had never interfered in local government. "It's a case of doctor, heal thyself" he said, "we can't be preaching to them when we haven't got our own spending under control ourselves." Local Government New Zealand has also cried foul over potential rates capping , saying such a policy would only drive them up. Local Government New Zealand President Sam Broughton. Photo: RNZ / Angus Dreaver In March, LGNZ President Sam Broughton said the government's proposal for a cap on rates increases would only make things worse, with Australian examples showing it would do the opposite to what the government wants. "A rates cap will have unintended consequences on communities, it will restrict the ability of councils to invest in infrastructure and risks their financial instability, and we need to avoid this," he said. "In the past, councils have had their own voluntary rates caps in many respects with elected members deciding that they'll keep their rates increases at 2, 3 or 4 percent or whatever is palatable to the community. "Over generations of that decision making we have a massive... multi-billion dollar infrastructure deficit as a country, and so we don't want to exacerbate the situation that we're in." He said South Australia, for example, had used transparency and accountability rather than the rates capping approach taken in Victoria and New South Wales, and was seeing lower rates rises as a result. "Sometimes, if you have rates caps, then you're making artificial decisions about the investment required. And if investment in infrastructure isn't kept up to date, then the catch up is very expensive later on. "We would rather have tools and availability to show our community the value of council investment and infrastructure as required and over the medium term." Sign up for Ngā Pitopito Kōrero , a daily newsletter curated by our editors and delivered straight to your inbox every weekday.