Local Government Magazine
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Keep control of funding and spending

People and businesses are suffering economic pain from the pandemic, but that is not a good reason for local authorities to reduce rates. By Linda O’Reilly, partner, Brookfields.

 Local government is not like central government. It cannot create its own money supply.  Beyond rates and user charges the only form of direct funding mandated under the LGA is to beg or borrow from central government. Realistically, stealing is not an option.

Yes, I know I am ignoring financial and development contributions. But councils cannot control this money supply, which the GFC showed to be an extremely unreliable source in times of economic instability.

User pays has a limited application that can disadvantage those most hurt by an economic downturn, and now is not the right climate for setting up trading enterprises in competition with the private sector.

While special interest groups use appeals to sympathy and attempts at shaming to persuade local authorities to cut back and reduce rates, neither is a good reason for handicapping the ability to provide services and infrastructure to the community.

Still less are emotional appeals good reason to stunt the future well-being of communities.

The reality is not everyone needs rates relief right now. I don’t. If you are still in paid employment, you don’t.  Some businesses have thrived under lockdown. Why give a handout to those who do not need it?

Many businesses will fail with or without rates relief. Why would local authorities take fewer rates to prop up businesses that will ultimately fail?

More importantly, why hand control over a local authority’s money supply, and effectively over what is best for that community, to central government?

Local authorities are elected to lead and serve the needs of local communities. It says so in the Local Government Act 2002.

The purpose of local government is to “enable democratic local decision-making and action by, and on behalf of communities” and “to promote the social, economic, environmental, and cultural well-being of communities in the present and for the future”.

The four well-beings have never seemed more important.

There is an additional concern for those councils that change their rating levels mid-stride, so to speak. Having made provision for specified levels of service and capital expenditure in long-term plans, and in proposed annual plans already under consultation, any substantive reduction in funding from rates is likely to impact on the services, programmes and activities proposed in the current planning round.

This calls into question the need for adequate consultation. Local authorities can undoubtedly heed submissions to restrict proposed increases in rates, or even to reduce the current level of rating.

But this should only be done in conjunction with transparent consideration of which services and capital projects will be curtailed to achieve savings, or what alternative funding sources will replace the depleted rates income. These are wider issues than just deciding to reduce or limit rates and ought properly themselves to be the subject of consultation.

That is not to say that the impact of rates on people and businesses in financial distress can or should be ignored. It is possible to give rates relief to those ratepayers who truly need it through the application of rates remission and postponement policies.

Take a look at your council’s policies now. See if they need amending to allow for some broad criteria around financial hardship, whether for businesses or homeowners or both. It may also be useful to facilitate the application process for remission or postponement by ensuring appropriate delegations are in place; providing guidelines and instructions for applicants, and even providing pre-printed application forms that are generic to some extent to make it easier for applicants.

Whatever they decide to do, it is to be hoped local authorities will not throw out financial autonomy and leave no wriggle room to reinvigorate communities when they most need it.

Government is best placed to stimulate the macro-economy. Take advantage of the increased infrastructure funding on offer. But, not at the expense of the welfare of local communities or leadership.

 

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