I recently had occasion to hear Rodney Hide speak in Napier. As most BayBuzz readers will know, he holds rather conservative views on the role and spending of local bodies. So given our focus in this edition on our Councils’ budgets and planning, and his post as Minister of Local Government, I sought this follow-up interview with Mr. Hide. Whether one agrees or disagrees with Minister Hide, it is refreshing to hear a politician speak as bluntly as he does. Only a bit of hedging here and there.

BayBuzz: Most of us know you believe local councils should stick to quite limited core activities, and shed the luxuries. What are the core activities you consider appropriate?

Local government has tended for political and legislatively-mandated reasons to spend too much time on process. We have thousands of people following processes, filling out paperwork, as opposed to getting on with the business. You have councils engaged in all sorts of activities which you’d expect to be the last thing for them to be doing, when in fact they’re the first things they are doing – things like monuments, business ventures that you’d expect business to be doing … the latest proposal to come out of local council is to start a banking service, which is the last thing I’d expect to come out of local government. We want to concentrate local government on getting its core business done, which is getting adequate water systems, sewage systems, road and transport systems in place, before they start doing the flash stuff.

Let me try some examples. What about tourist attractions?

Yes, but in doing activities like that they should be sure they have the community’s support. I can imagine there are a lot of community events that are good for the community and good for business, but councils need to make sure they have community support rather than just heading off and doing them.

Property development?

I wouldn’t expect local councils to be involved in property development. Because then you have them acting as both the regulator and the developer, which seems silly.

Water storage?

Sure. The interesting question is who pays for it and who drives it? But it is something that has to be done at a community level.

Many Councils use the benchmark of keeping rate increases at the rate of inflation. Is that a good enough measure?

It’s a good start … The problem has been councils running way ahead of inflation in general. I accept the point that there are costs that councils incur, in particular roading costs, that don’t necessarily follow the CPI. I’m having the statistics department do some work on what would be a good inflation measure for local councils to follow for that reason.

What about public employee costs? Outside government, people are losing jobs, not  getting automatic raises, but arguably public employees are insulated from the pain others in the community are feeling.

Politicians are the same. Civil servants, council staff are guaranteed salaries put in their bank accounts each week, whereas everyone else is out there having to earn it. Those in the protected sector don’t feel the sharp end of the recession. That’s why it is so important that we strive for efficiency and good service and low cost approaches from government. What we have had for many, many years is bloated and big government, which has put further pressure on the tradable sector, which is ultimately the source of New Zealand’s income and wealth. The world is now telling us that we need to live within our means and that includes government.

Local governments say that labor agreements are the barrier to curbing public employee costs. Is that right, or is it just a lack of political will on part of elected officials?

There’s been a change of government and there’s been a recession. We’ve had a Government that was big on spending and spent a huge amount at central government and required a huge amount to be spent by local government. And of course that was through the good times. Now we got the bad times, but a new Government that’s a bit tougher on spending and a new minister of local government who is very concerned about rate costs and the pressure being put on home owners and businesses. So I think it’s a changed dynamic compared to what we had in the past.

With the recession, a lot of proposed spending by local government, especially on infrastructure, is now defended as priming the pump economically. Just about anything people want to spend money on locally has become infrastructure. Do you think local officials are paying fast and loose with this?

Of course. Governments are doing that around the world. No one more so than in the United States, where the fiscal spend-up is so extraordinary. Of course, I don’t belong to the camp that says we can spend our way through the recession.

Your supporters up here are pretty conservative with regard to what should be within the circle of core services. But we also have some local elected officials here who are busily promoting so-called infrastructure spending.

I understand that. If there’s pork being thrown around, people will want it coming their way.

How are you fending that off?

Look, people know that I’m the last person to come to. Very early on in the piece, I was at a meeting of the Auckland mayors. John Key explained they were going to be spending-up on infrastructure. The question was asked: “Who should they approach in Government if they had some good infrastructure projects?” John Key suggested myself. I said “no way, because the answer from me will always be no.” I’m the last person to be approaching about spending more taxpayers’ or ratepayers’ money.

Let me ask about debt. Some councils appear to be holding rates down by borrowing more instead and using loser definitions of capital spending.

Sure. That’s why in central government we worked so hard on the Fiscal Responsibility Act, to ensure that we follow the proper accounting procedures about debt and the calculation of assets. Ultimately there’s politics coming up against proper accounting.

Is there some benchmark or rule of thumb you would apply to define the appropriate level of debt for a local council?

No, because even with regard to expenditures at the local level, we have local governments for a reason. They need to make those decisions locally. So, while I don’t want money spent on luxuries and I want that goal of holding it to the rate of inflation, I’m not going to dictate that nor can I. Because ultimately, it is up to the local community and the Councillors to be making those decisions. Likewise, the level of debt the community carries. What I want to achieve is a level of transparency and accountability so that ratepayers and people in the community know what they’re voting for.

Speaking of local accountability, do we need elected Health Boards?

No, we don’t need them.

You’d toss them?

Yes. It’s been ACT’s policy all along.

Will the underlying decline in property values, which underlie the rate base, have an impact on the funds local councils will be able to raise?

Well, you’d think that. But advice I’ve had is that the way they strike the rate is that they work out how much money they need, and then work out the rates accordingly. So it doesn’t follow that their income will fall if property values fall. Ever increasing expenditures are imbedded deep in our body politic. We tend to take our current spending and then think of a few more things to spend on. The pressure is always upwards.

Have you heard of the edifice complex – the compulsion to spend on big structures?

Yes.

Is now the time to making those kinds of expenditure – sports parks, municipal theatres, museums? Many ratepayers support such amenities, but is now the time to be making those kinds of investments?

I think we have to be very conscious of the costs. And the money we need to earn to cover the costs. We need to be very honest about the situation we find ourselves in. We have to be honest about the ultimate costs. We’ve seen in local government time and time again the statement: “Well, it won’t cost the ratepayers a dime.” And then down the track ratepayers are left with the large bills. So I am looking at getting greater transparency and accountability around issues like that.

Mr Hide concluded the interview with some kudos to Mayor Yule.

I have established a great working relationship with Lawrence Yule. We’re lucky in local government to have someone who’s actually outside of one of the main metropolitan areas representing the local councils. He’s helped me a lot actually, because it’s a new job for me. He’s been good at helping me and taking on board what I’ve had to say.

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