Local Government Magazine
Governance

Power to the people! Yeah!

But what does that mean?

WHAT’S WRONG RIGHT NOW?

Central government’s getting a free lunch It passes duties and responsibilities to local government. Then gives it little or no extra funding to do all this extra stuff. Besides the ever-unpopular Resource Management Act (RMA), councils must contend with standards for constructing buildings, food and hygiene regulations, the control of liquor and gambling activity, and waste management. Over time, this adds up. Something’s got to give. Adding insult to injury, many of the items on this list are also hot points of friction between councils and ratepayers.

Local government is portrayed as the baddie Central government is quick to criticise local authorities for the rate at which local property taxes are increasing. But it ignores its own role in driving up costs to citizens too. “Between 1900 and 2017, local government taxes as a share of GDP increased from 1.8 percent to 2.1 percent [a multiple of 1.2],” wrote Bryce Wilkinson in a 2018 New Zealand Initiative Report Fit for purpose. He goes on to note that, over the same period, central government taxes as a share of GDP rose from 7.1 percent to 29 percent. That’s a multiple of 4.1.

Local government cops the blame for not performing to ratepayers’ expectations Ratepayers don’t love their councils? Say no more.

There is another path New Zealand is an outlier among OECD countries. Central government controls the purse strings for 88 cents of every dollar of public spending in this country. The average across OECD countries is 46 percent. At the other end of scale is a vastly different scenario. In Germany only 19 percent of public spending comes from a centralised pot. In Switzerland, it’s just 13 percent.

We’re not getting the most benefits There’s a strong correlation between decentralised decision-making and higher productivity. We’re missing out. OECD research has shown that the economic effects of decentralisation are roughly equivalent to a reduction in the tax burden. So, for example, a one percent decrease in the ratio of central to local government decision-making, equates to a one percent decrease in tax as measured impact on GDP.

One size fits all doesn’t work Waitara’s problems are not the same as Wellington’s. Or want an example of bad legislation? Look no further than the RMA which tries to lump together urban, provincial and rural regions even though they have very different concerns.

Consultation / schmonsultation Hands up any ratepayer who really likes the following unwritten rules for community consultation. “Read this 400-page document and tell us if you like it. Oh, and by the way, we’ve pretty much made up our minds anyway.” Some councils are still stuck in consultation mode: they just call it engagement. And many councils’ engagement practices are less than engaging. This is where power to the people must get real.

LGNZ and the New Zealand Initiative have taken a bold step forward with Project Localism. Their new four-pronged programme aims to give greater voice and choice to communities about the nature of public services and how they are delivered. It strikes at the heart of local government’s relationships with central government and communities. If adopted, the change could be far-reaching. Ruth Le Pla was at the launch.

If a feedback session at a recent symposium on localism is a precursor of debate to come, we are heading for interesting times. When LGNZ and the New Zealand Initiative recently co-hosted the event in Wellington, about 140 people fronted up. Most were from local government. There was a healthy smattering of people from business, iwi and NGOs. Plus, a much smaller cohort from central government, including former LGNZ president Lawrence Yule wearing his most recent hat as the National Party’s MP for Tukituki.

So, given that most people in the room had some skin in the game already – and therefore at least a modicum of knowledge about the current situation – their feedback was scattergun, verging on puzzling at times.

Table after table, people threw back questions, comments and challenges. How to ensure certainty of funding for initiatives under contractual devolution? Exactly who sets the agenda in a participatory democracy? Explanations must be couched in plain English, not the language of bureaucracy. Could the country’s increasingly centralised media cover smaller-scale local issues? Should community referenda be binding– and wouldn’t voters feel even more disenfranchised if not? And we need to prioritise Treaty of Waitangi settlements anyway.

Images of blind men feeling the elephant spring to mind.

All these questions, and many more besides, were focused on a four-part proposal to address local government’s problematic relationship with central government and revitalise its work with communities.

Why is this needed? See the box story What’s wrong right now?

FOUR FIXES

LGNZ and the New Zealand Initiative launched the idea of Project Localism back in July last year. At the time, they released a joint position statement. They also mapped out a plan through to around March next year when they aim to put out an agenda for much wider public debate. (See box story Coming up.)

The recent proposal, floated at the symposium, fleshes out some initial thoughts and calls for greater devolution of decision-making in a four-part framework.

1 End the unfunded mandates (aka free lunches) from central to local government. One way could be along similar lines to the Unfunded Mandates Reform Act 1995, passed by the Clinton administration in the US. Even in its least powerful form, this could make central government officials tally up and disclose the cost to ratepayers of new policies. The result should be better transparency and accountability.

2 Contractual devolution. This recognises that some local authorities may be better placed to take on tasks managed by central government in their areas. Visitors from the UK, where council tentacles spread into education and healthcare for example, are frequently surprised at the limited scope of local government here. Devolution has been big business in the UK for years now: partly as part of austerity measures put in place in the face of a severe funding crisis.

The suggestion here is that contractual devolution would be decided on a case-by-case basis. Wellington City Council is already involved in social housing, for example. So much so, that it is now the second largest landlord in the country after Housing New Zealand. Smaller councils may not see the need to play a role in such activities in their areas – or they may not have the skills or capacity to do so. This is a horses-for-courses argument.

Treasury’s Better Business Case framework could be used to assess capacity. Funding and performance could be negotiated up front.

3 Financial incentives. Councils in Germany and Switzerland work hard to attract residents and businesses to their areas because they are directly rewarded with a stronger revenue stream. Not so here where the bulk of any financial gain from local growth goes to central government. Councils don’t have a sufficiently sharp tool to link their revenues to the local business cycle and economy.

The proposal runs through a number of ways to short-circuit the current no-win problem where councils have to trade off maintaining and enhancing existing service levels against investing to provide for the needs of future residents. Our country’s ageing water infrastructure is a prime example.

One suggestion: A tax swap between local and central government on a partial and ongoing basis. This could involve councils giving up a minority share of their rates revenue – say 25 percent – in exchange for the equivalent share of the GST collected in their district on a fiscally neutral basis in the first year.

4 Community engagement. The glue that binds the above three ideas together will be a big rethink on how councils talk with communities. “Councils need to show their decision-making is being guided by their communities to a higher degree than is currently practised,” says the draft discussion document. “… LGNZ’s localist framework is about devolving power to communities through a reform of the local government system, not a devolution of power to local government per se.”

Participatory democracy is based on the premise that ordinary people can decide complex issues. So, not only must central government learn to trust councils, importantly, local government, in turn must trust its communities.

Representative panels of the populace have helped pick energy policy in Texas and constitutional amendments in Mongolia. Closer to home, Melbourne used a citizen jury on an A$5 billion financial plan.

Some Kiwi councils have been inching towards deliberative democracy for some time now.

Between 2005 and 2010, Whanganui held annual referenda, getting community members to say whether they wanted low, medium or high rates increases. (No increase or even a decrease didn’t appear to be on the agenda). Importantly, community members could then see what the implications of their choice might be.

This is exactly the kind of debate many people have been calling for in the country-wide conversation about water services. How much do you want to fork out? Here’s what you’ll get for that amount.

LGNZ says it is “agnostic” as to the preferred form these new types of conversations may take. “Localism is about choosing bespoke solutions to bespoke challenges.”

RABBIT HOLES

In many respects, the feedback session at the symposium mirrored the results of a UMR survey of community attitudes to localism undertaken late last year.

Summarising those findings, UMR director, rural, Marc Elliott said survey respondents frequently fell into conversational “rabbit holes”. For example, a discussion on which types of services would be best handled at the national, regional, local or community level, elicited a comment from one member of the community that if Ruatoria were allowed to run its own police force there would be “vigilante policing”.

“The next stage is to start to craft your messages,” Marc told symposium delegates.

HELL NO!

As executive director of the New Zealand Initiative, Oliver Hartwich has been pumping out reports on localism for the past seven years. He’d been talking up the virtues of Swiss and German localism for many years before that. So, the idea is not new. But this draft document, co-authored with LGNZ, gives it new grunt and relevance.

Faced with the outline of a tangible plan, reaction in many public fora has been negative.

“Oh hell no,” posts ‘Foyle’ on an interest.co.nz forum. “Local govt has been nothing but an abysmal failure in NZ over the last 10 years. Out of control spending, failure to maintain core assets infrastructure and services, massive waste on hobby-horses of special interest pressure groups and mayoral egos, ever-widening regulatory burden placed upon long-suffering ratepayers. It has to stop.”

The post attracts likes.

To have any hope of success in such an environment, the localist “power to the people” message must be loud and believable.

Delegates at the Localism Symposium called for stronger signals that localism is not about councils gaining more power. It’s about inverting the pyramid, so power radiates from communities.

WHAT’S IN A NAME?

Problem is, the very word ‘localism’ doesn’t help much. Marc said it “didn’t test well” on community respondents. “For some, the word didn’t clearly represent the topic. Others felt it held negative connotations such as ‘locals only’ nationalism. It needs to have the concept of community control without the negatives of being too soft and easily swayed.”

One community survey respondent said the term localism is “a nice warm phrase but you have to have two sentences after it to explain what it is”.

Condensing it down into just two sentences sounds like a tall order. Even among people who have already invested plenty of time and thought into the idea of localism, there’s no one agreed definition of exactly what they mean by the word.

Asked to nail down his own definition, LGNZ president Dave Cull says it’s mostly summed up in the explanation of the principle of subsidiarity. “You’re going to get the best outcome if you drive decision-making down to the level of governance closest to the problem or to the people affected by it.”

He adds that people will have different views of it because localism is a “kind of made-up word”, anyway. “I guess if you asked people what they think of enabling community decision-making, they would understand it better.”

He says LGNZ and the New Zealand Initiative may have to confront “sooner rather than later” the possibility of using a different term when they go out to the wider public. “That’s a point that has come up repeatedly,” he says. “Localism is a clunky term. It’s not attractive or particularly engaging.

“What we won’t want to mean by localism is a competition between local and central government to see who can get more power.”

Some people get hung up on whether everyone is talking about localism or subsidiarity – a much easier concept to explain that basically means devolving decision-making to the lowest appropriate level. Others, including Dave Cull, say that doesn’t matter.

Another person proffers the definition that localism “must be about giving voice, choice and control to communities who are seldom heard by our political and economic institutions”.

This definition goes on to say that localism should enable local solutions through collaboration around place and provide the conditions for social action to thrive.

“Localism is about more than local governance structures or decentralising decision-making. It is about the connections and feelings of belonging that unite people within their communities. It is about how people perceive their own power and ability to make change in their local area alongside their neighbours.”

A TALE OF TWO WORLDS

It’s a beautiful sentiment. And therein lies the rub. Start reading up on localism and you enter parallel universes.

LGNZ and the New Zealand Initiative supplied numerous readings on localism a few days before the symposium.

Some writings on the theory of localism are lyrical, verging on hypnotic. They are laced with references to creativity and legitimacy. They paint pictures of “recognising” and “celebrating” difference in thriving patches of community. This is a world of energised citizen activists boldly advocating for the best solutions for their patch of paradise. Localised initiatives are adapted from one place to another with speed and precision.

Paul Buddery in his report People shaped localism reflects on the experiences of the UK’s Wiltshire Council: a local body that regards localism as intrinsic to its aims and values.

Paul says that compared to related concepts such as decentralisation and devolution, which speak to the distribution of functions, power and authority within organisational and bureaucratic forms, “localism’s meaning is more imprecise, seductively so”.

“Its elements include an assumption that a sense of local identity, belonging and connectedness are crucial to subjective wellbeing, life chances, collective inventiveness and resilience.”

But start looking at the practicalities of shifting from centralism to localism and experiences take a darker turn. There’s talk of the “tenacity of centralism”.

Time and again research shows the gap between paying lip service to the idea of localism and central government actually loosening its grip on local government. There’s a real danger of creating a hybrid monster: neither fish nor fowl.

In their book The new localism, Bruce Katz and Jeremy Nowak provide a roadmap for change that starts in the communities where most people live and work. They admit that the “new localism is a nascent phenomenon, a work in progress”.

“The harsh reality is that the dramatic devolution of responsibility has not been met with a concomitant delegation of capacity or resources. Twenty first-century problem solving is essentially taking place amid twentieth century financial and institutional arrangements that are antiquated and inadequate.”

At the Localism Symposium, delegates and panelists looked at a proposal to address local government’s problematic relationship with central government and revitalise its work with communities.

ENTER THE FRAY

This is the zone that our local government is poised to enter. Few people seem to think change will be easy. Or fast.

Back in 2017, NZ Local Government Magazine interviewed Oliver Hartwich for an article Localism: the Swiss Way. When we asked him to score the chances of getting the idea over the line in this country in the next five years, he joked that it was “marginally over zero”.

Talk at the recent symposium suggests nothing much has changed to put localism on a fast-track – although advocates emphasised the increasing need for action.

Individuals at the symposium muttered privately that it’s highly unlikely anyone elected to central government would want to give away power in a hurry.

LGNZ president Dave Cull describes as “naïve” any thoughts that all four proposals would be taken on board any time soon.

Asked if the local government sector currently has the governance strength to take on a holus-bolus big-tick yes to all of its four proposals, he says no.

“The last thing we want is a wholesale shift from central to local government. We recognise there isn’t the governance capacity. There probably isn’t the managerial or operational capacity either because we haven’t been doing this so you wouldn’t expect there to be.

“We want to start a conversation with central government [along the lines of] ‘where should [such and such] a responsibility reside in order to get the best outcomes for our communities?’

“So, at one end of the spectrum you might have foreign affairs and the military which obviously have to reside with national government. Then at the other end you might have something very local – such as weed, pest or dog control – something very specific to a local area. And in the middle you’ve got all this other stuff you can argue about.”

Dave cedes that if the operating model for governance changes and there is more community involvement in some way – say, strengthened community boards – the role of councillors could possibly change as well.

He also surmises that a more engaged community could lead to higher voter turnout at local body elections. The total national voter turnout for the 2016 election was 43 percent.

Local Government Minister Nanaia Mahuta is non-committal about the adoption of localism. Taking the stage immediately after Dave Cull’s direct call for localism at the LGNZ Stakeholders Function in early March, she spoke more broadly about well-being, and funding and financing challenges for the sector.

“The opportunity for the Productivity Commission to consider alternative mechanisms alongside the Tax Working Group, alongside specific work that infrastructure ministers are currently contemplating, will position us around about June to be able to have a very deliberate conversation about what the next steps are.”

The minister also emphasised central government’s focus on regional economic growth and the three waters.

Delegates at the earlier Localism Symposium had mused during a break about how localism could – or couldn’t – mesh with the well-beings in practical terms, for example. It’s too early to gain a clear picture.

MAKE IT REAL

COMING UP

LGNZ and the New Zealand Initiative presented draft discussion papers for comment and feedback at the February 28, 2019, Localism Symposium in Wellington. Here’s what to expect next.

MAY 2019 Publication of a localism edition of Policy Quarterly.

JULY 2019 Localism discussion paper to be launched at the 2019 LGNZ Conference in Wellington.

JULY TO NOVEMBER 2019 Submissions will be sought on the discussion paper through a series of consultations and regional seminars.

EARLY 2020 Localism agenda for New Zealand/Aotearoa to be published.

Meanwhile, as Project Localism gathers steam, practical suggestions may carry more weight than words.

Journalist Fran O’Sullivan, who says she is not a convert to localism at this stage, says the battle is now. “Debate should be about how to stop central government putting its hands on everything you do… Before you start talking esoteric stuff, look at what’s happening right now and push back on that.”

She calls on local government to boil the debate down to hard-core case studies: the centralist approach evidenced in the creation of Urban Development Authorities, its proposal to merge the country’s 16 polytechnics into one national institute and the lack of success of KiwiBuild. “Mobilise around these and that will give you a springboard.”

Mercury chief executive Fraser Whineray says local government could model devolution by giving more power to local communities. “Give it a go with real money and let communities decide some things for themselves.”

Economist Geoff Simmons says localism should entail sharing more information. “If people want the gold-plated version of something, they can see there will be a trade-off elsewhere.”

Arapeta Tahana, a councillor at Bay of Plenty Regional Council, says localism aligns itself very closely to a Maori worldview. “So, done the right way, it is likely to get support from Maori… We would be very keen to engage in conversation about how to make it happen.”

Meanwhile, local government must contend with today’s problems in a local body election year. Along with co-authors Ben Craven and Jack Goldingham-Newsom, Oliver Hartwich released an ‘essay’ #LocalismNZ: Bringing power to the people at the recent symposium.

“New Zealanders love to hate their councils, mayors and local bodies with a passion usually reserved for opposing rugby teams,” they write in the foreword. Would that Project Localism could change that.

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