If amalgamation weakened accountability and drove costs up in 1989, is there any reason to believe that even more heavy-handed mergers can deliver the opposite today, asks NZ Centre for Political Research founder Dr Muriel Newman. Abridged for LG magazine.
The Coalition’s proposed shakeup of local government is well underway.
This is not the first time local councils have undergone major structural reform. Let’s see whether any lessons have been learned.
In the 1980s, New Zealand had around 850 separate elected local authorities serving our 3.3 million population. This included 250 city, county and borough councils operating alongside hundreds of single-purpose boards including pest destruction boards, drainage boards, and harbour boards.
Controlling all of this was difficult for any sitting government, especially as communities had been empowered with a mechanism in the 1974 Local Government Act that enabled any merger efforts by central government to be defeated.
A poll provision in the Act gave locals an effective power of veto over unpopular amalgamation proposals. If the Local Government Commission planned to combine councils, residents could block the move if 15 percent of voters signed a petition requesting a public referendum – and if more than 50 percent of registered voters opposed it.
Despite that extremely high bar, fearing the loss of their local identity and concerned about rate increases, communities routinely mobilised in sufficient numbers to block amalgamation attempts.
Frustrated by local opposition, the Lange Labour Government introduced the 1988 Local Government Amendment Act that removed the veto rights of communities and granted Sir Brian Elwood’s Local Government Commission temporary powers to issue binding reorganisation schemes.
Using this mechanism, Labour was able to force through amalgamations that consolidated the number of local authorities to 86.
Prior to the reforms, local body rates were low. With minimal bureaucratic overheads, smaller councils were able to contain compliance and administrative costs. Councillors and board members were highly accessible, with street-level engagement commonplace. Local working bees and other community-led initiatives that helped maintain parks and public spaces, fostered a level of social cohesion rarely seen today.
That sense of community diminished in many areas following the 1989 amalgamations. While those promoting reform said the benefits would eliminate inefficiency and duplication, creating organisations that would deliver lower rates – the very same arguments being used by the Government today – the record shows otherwise.
In the immediate aftermath of the 1989 reforms, New Zealand experienced some of the highest rate increases in our history. Hundreds of local boards that were often volunteer-driven were replaced with professional bureaucracies, as highly paid managers drove up costs. Cross-subsidisation of rates was rife, with larger councils demanding higher payments from new ratepayers to fund more costly amenities and higher debt.
And now, almost 40 years on, the reality is that while Labour’s reforms most certainly resulted in the widespread consolidation of local government, the mergers failed to deliver the downward pressure on rates that was promised, as larger councils expanded their balance sheets and borrowed aggressively.
In other words, if amalgamation weakened accountability and drove costs up in 1989, is there any reason to believe that even more heavy-handed mergers can deliver the opposite today? And if ratepayers are already disillusioned under the present system, what chance is there that they’ll feel better off after the reforms?
Without a doubt, these reforms represent the most significant restructuring of local government since 1989. But – as was the case back then – local residents and ratepayers have been locked out of the process.
Under current law, Schedule 3 of the 2002 Local Government Act requires that any council reorganisation proposal can only proceed if it wins majority support in a binding referendum run by the Local Government Commission.
However, the Coalition has sidelined the referendum safeguard by replacing the Local Government Commission’s statutory restructuring responsibilities with its Ministerial‑driven Head Start process. With the public’s right to approve or reject proposed changes now removed, councils were forced to reorganise without the consent of the communities they serve.
Not only is this heavy-handed and anti-democratic, it is also deeply ironic.
Back in 1988, when Labour was pushing through the legislation to deliver local government reform, National was fiercely opposed. By stripping communities of their democratic right to demand a referendum on amalgamations, they accused Labour of totalitarianism – and insisted the public should have the right to determine the makeup of their local authority.
National argued that no government had the moral authority to abolish councils, redraw boundaries, or impose new structures without first securing the consent of the people affected, and they condemned Labour for centralising power, ignoring local voices, and forcing through changes under urgency.
National took the same stance in 2021 when Labour’s Nanaia Mahuta abolished long‑standing petition rights over Māori wards. Again, they argued that stripping ratepayers of the ability to challenge structural changes was an unacceptable erosion of democratic safeguards.
Yet today, National is doing exactly what it once condemned – removing the public’s right to approve or reject major local body restructuring and forcing councils into amalgamation without community consent.
The party that once insisted that local democracy must not be sidelined is now sweeping it aside.
By suspending the referendum safeguard, the Coalition’s Head Start programme not only silenced communities and blocked the Local Government Commission, but it also imposed on councils an impossibly tight timeframe to decide on amalgamation proposals before the election.
Their justification is familiar: in 1988 Labour said reform was urgent, the system was fragmented, and central direction was necessary. National is now saying virtually the same thing.
But political urgency should not eliminate democratic rights. A restructuring of the magnitude of what’s being proposed should not be imposed by Wellington. National once understood that principle. It needs to honour it again.