Blaming the wellbeings for higher council rates is a longbow to draw
An AI-generated image of a young man in a modern suit nervously finding themselves on the field with the Welsh longbowmen at the Battle of Agincourt.
Local Government Minister Simeon Brown’s claim that the inclusion of the wellbeing framework in the Local Government Act has led to higher rates would see him fit in nicely at Agincourt such is the longbow that he’s drawn.
In what is now a familiar spree of local government bashing from the Coalition, Prime Minister Christopher Luxon and Local Government Minister Simeon Brown outlined their plans for changes to the Local Government Act, which include new council benchmarking and the removal of the four wellbeings (social, economic, cultural, and environmental) from the legislation.
In justifying the removal of the wellbeings, Brown has made the claim that advice from the Department of Internal Affairs showed that rates had increased "on average 2% faster" in years in which the wellbeings had been in the Local Government Act than when they hadn't. The NZ Herald has asked for the advice but Brown’s office is yet to provide it. I’ve also asked DIA for both the advice as well as the underlying data and methodology that has been used to make the claim. It’s not that I don’t necessary believe there’s a correlation, but I’m very doubtful there’s a direct causation between the two.
You see, Local Government New Zealand recently commissioned Infometrics to investigate what has been driving recent high rate increases. Now, the graph towards the end of that report could be used to make Brown’s argument. The wellbeings were in place from 2002 to 2012 and then reintroduced in 2019, and there is a dip that seems to start from 2012 onwards which, aside from one spike, sits around 4 percent until the wellbeings were reintroduced in 2019.
The problem is that average rate increases were trending down before the wellbeings were removed in 2012 anyway. After a spike from an adjustment in the way water was charged in 2003, average rate increases hit 8 percent around 2006 before trending downwards anyway. There’s no real evidence that the inclusion or removal of the wellbeings drove anything in local government rate increases.
Where things might get problematic for Brown is if he’s relying on data since the pandemic to make his case. Across 2022, 2023, and 2024 we’ve seen the largest rate increases since the sweeping local government reforms of 1989. Now, despite what Simeon Brown might want to infer, these rate increases haven’t been driven by the inclusion of the wellbeings in the Local Government Act
As Infometrics reports, the drivers have been inflationary pressures. Civil construction costs over the past three years are up 27 percent, while consumer price inflation is up 19 percent. The “core” council services the Coalition are worried about are significantly more expensive. Infometrics reports that sewerage systems are 30 percent more expensive to build, with roads and water supply systems up 27 percent. Labour costs are up too, with local government labour costs up 13 percent. Councils have also been squeezed in the last year by increasing interest rates as they’ve had to borrow more to fund their ever increasing capital project budgets.
Another big driver of increased costs for councils has been skyrocketing insurance premiums. Interest.co.nz reported in April that Christchurch City Council’s insurance premiums had risen 72.5 percent since 2021/2022, with a 20 percent increase just for the 2024/25 financial year. It’s a familiar story around the country, with Tauranga City Council having faced insurance hikes of up to 56 percent, and struggling with how to manage these increasing insurance costs has been central to the issues Wellington City Council has been publicly wrestling with.
In fact, taking a nosey at things like the Consumer Price Index, the Capital Price Index, or the Local Government Cost Index give a much better hint at the underlying forces driving the rates increases rather than anything linked to wellbeing or “core” public services.
All of this is before we even get to the scale of the infrastructure deficit in New Zealand, which has been estimated to be at least $210 billion. This deficit is due to years of under-investment across both central and local government, and in local government’s case we know that this under-investment is now driving the increased need to invest in water infrastructure in particular. So again, much of the increase in rates we’ve seen in recent years is us finally paying the price for lower rate increases in the past when successive councils kicked the can down the road by deferring renewals, maintenance, upgrades, and new capacity in their core services, usually by failing to fully fund depreciation.
It’s simply fanciful thinking to believe that the inclusion of the wellbeings drove any meaningfully higher rate increases, just as it is to think their removal led to some mythical laser-like focus on “core” services. The evidence - including the massive infrastructure deficit we’re now expensively playing catch up with - suggests that councils are going to do what they’re going to do anyway, and there are much bigger drivers of rate increases than what language is used in the Local Government Act to direct councils on how to frame up their decision making processes.
As Victoria University of Wellington’s Dr Dean Knight put it, the inclusion or removal of the wellbeings from the Local Government Act doesn’t make a lick of difference legally to what councils are or aren’t going to do. That’s also been what I’ve established from talking to local government representatives and staff who served and worked through those periods. They basically just change the language they use, but otherwise they keep on keeping on with what they’ve developed with their communities on what they need to do in their long-term plans.
It’s a damning indictment on the approach of the Coalition that they would rather engagement in petty performative nonsense like this, instead of ending their dithering on addressing the underlying structural and financial issues that will still face councils once Local Water Done Well plays out.
All of this is before we even get to the proposed council benchmarking tools. At this stage, the proposal looks unlikely to have any of the context and nuance needed to make it genuinely useful as a comparative tool and instead seems set to be another blunt weapon with which central government will continue to bludgeon local government with ever more misinformation.
