Steve Forbes looks at why strange bedfellows the New Zealand Initiative and Local Government New Zealand have teamed up in a push for greater devolution of power to local government and what they hope to achieve

By Steve Forbes

A campaign kick-started in February this year by Local Government New Zealand (LGNZ) and the New Zealand Initiative calling for greater devolution for the country's councils is still going strong almost six months later.

But the two organisations make strange bedfellows. And while it’s not surprising that LGNZ is calling for greater powers, forming an alliance with the right-leaning think tank appears to be a strange marriage.

So what’s behind it and what’s in it for the New Zealand Initiative?

The New Zealand Initiative was launched in 2012 after the merger of the Business Roundtable and the New Zealand Institute with an agenda of promoting pro-market economic and social policies. Local Government New Zealand is an incorporated society formed in 1988 to represent the interests of the country’s territorial local authorities and regional councils. 

LGNZ says the country's centralised approach to government is holding back our economy, diluting democracy, and crowding out community input. The key message from its conference last month was a call for greater devolution. LGNZ spells out its case in its latest discussion paper released to coincide with the annual event titled: Reinvigorating local democracy: The case for localising power and decision-making to councils and communities.

“LGNZ, with the support of the New Zealand Initiative, is calling for a shift in the way public decisions are made in New Zealand by seeking a commitment to localism. Instead of relying on central government to decide what is good for our communities it is time to empower councils and communities themselves to make such decisions,” LGNZ president Dave Cull says.

“This means strengthening local self-government, putting people back in charge of politics and reinvigorating our democracy. We are seeking an active programme of devolution and decentralisation.”

Ongoing campaign

It’s no surprise to hear a group representing the country’s councils calling for more powers for its members, but to hear it has formed an alliance with a think tank that traces its roots back to the Business Roundtable is perhaps surprising. Even if the New Zealand Initiative’s executive director Oliver Hartwich doesn’t think so. Hartwich says he has a long running interest in localism and the latest campaign is just an extension of that.

The German-born economist says he started looking at the issue about 15 years ago when he was working for the Policy Exchange think tank in London. Hartwich says he was working on a housing affordability project and soon discovered England’s centralised government and restrictive town and country planning requirements were at the heart of the problem.

“We spoke to a county councillor from Kent who said if he could he would build a wall around Kent to stop more people moving into the area. Whereas where I grew up in Germany development was celebrated as something that was good for the community,” he says.

Hartwich says the county council was expected to invest in the area, but the benefits and taxes it collected went to London. He says this meant there was no incentive for the council to foster development in the area.

Hartwich says the British approach to government is far too centralised, whereas in Germany and other countries in Europe such as Switzerland and Denmark it is far more localised. He says local government in Germany controls everything from passport applications to policing and collects its own taxes, while in Denmark even the health system is decentralised and controlled at a local level. (See more On Hartich's views on local government and housing affordability here and here).

Hartwich says government in New Zealand is far too centralised.

“In New Zealand 91% of every dollar in taxes is centrally controlled. Only Ireland and Greece are worse.”

Something that was outlined in the recent LGNZ discussion document which said as a fiscally centralised nation our responses to emerging problems and challenges tend to be “top down” and “one size fits all” in nature.

Downsides of devolution

But a 1999 Columbia Law School paper by Richard Briffault titled Localism and Regionalism looked at the tensions between localism and regionalism in the United States and highlighted some of the pitfalls of devolution. It states:

“Localism is not simply a theory intended to advance certain normative goals. It is also a means of protecting the interests of those who receive advantages from the existing governance structure, including, but not limited to, local government officials, businesses that reap the rewards of the interlocal competition for commercial and industrial activity, real estate interests that profit from the system’s propensity to promote the development of new land, and residents of more affluent areas who enjoy the benefits of an ample local tax base.”

But Hartwich says increased competition between New Zealand’s councils as outlined in the Briffault paper wouldn’t be a bad thing.

“We want competition. Neighbouring councils put pressure on each other because they want to be competitive in terms of their tax rates and services. Just as citizens want choice as consumers, they should have choice between competing jurisdictions.”

Hartwich says his interest in localism isn’t new and it doesn’t sound like he’s about to give up anytime soon.

“I came to New Zealand seven years and started a campaign for localism, everyone else thought I was crazy at the time, but I was driven to do it.”

He concedes the partnership between the New Zealand Initiative and LGNZ might seem strange and admits it wouldn’t have been possible with the organisation’s precursor the New Zealand Business Roundtable.

“The roundtable never liked local government and they thought it needed to be reined in and thought it should be abolished. They said we have to control local government. But I couldn’t care less [about the Roundtable’s position], they had a different mandate.”

LGNZ’s part in the puzzle

Hartwich says he started at the New Zealand Initiative at the same time LGNZ chief executive Malcolm Alexander started in his role. Hartwich says while they don’t agree on everything they have a good rapport. Alexander says at the heart of their localism campaign is the fact both organisations have the same goal.

“We both see the merits in good public policy,” he says.

Alexander says both organisations want to see the country’s councils given greater powers as too much of the control rests with central government.

“We’re saying in the New Zealand context the pendulum has swung too far in one direction. And the [local government] rating system is under strain.”

He says LGNZ doesn’t want to see rates scrapped, but councils and authorities need more tools to raise revenue and they shouldn’t have to go cap in hand to the Government every time they need additional funding.

Alexander says the Auckland Council’s battle to introduce a Regional Fuel Tax is the perfect example, as it required getting central government approval to do it. He says local authorities should have to the ability to introduce such policies without the Government’s consent.

He says he wants to see the benefits of localism brought to bear in New Zealand and doesn’t want to see it hijacked by special interests.

“If it was only about enriching a sector or group in New Zealand society then that would be a failure.”

Government’s response

Local Government Minister Nanaia Mahuta says she can see some merits in the New Zealand Initiative and LGNZ campaign.

“We share many of the goals of LGNZ’s localism project, most especially empowering communities to involve themselves in decision-making about their own well-being,” Mahuta says.

“This is why alongside the reintroduction to the Local Government Act of the four well-beings – cultural, economic, social and environmental – as core functions for councils, officials are looking at how we can work together to make this a reality.’’

But she does add a caveat.

“We do not think that wholesale devolution is the answer to the many challenges we face at the local government level. Whatever we do has to work for our own circumstances and our own communities.”

And she says the examples of European countries that have greater devolution aren’t necessarily applicable to New Zealand.

“Certainly we can learn from what other countries do, but Germany or Switzerland have vastly different histories, demographics, economies and democratic traditions from New Zealand. How they run local government may not be appropriate here.

“I think many New Zealanders would be concerned if we were, for example, to have local councils issuing New Zealand passports or running their own police forces.’’

And Mahuta is more than aware of the ongoing issues the local government sector is facing over funding and finance.

But when asked for her response to the strange alliance between LGNZ and the New Zealand Initiative she sidesteps the issue.

“That is a question for ratepayers and LGNZ to consider.’’

UK example

But localism in the UK, where Hartwich cut his teeth with the Policy Exchange, provides an example of where devolution can go wrong if it isn’t done properly. The Conservative-Liberal Democrat coalition government between 2010-2015 attempted to introduce its own form of localism during the height of its austerity programme and the results were somewhat mixed.

A 2013 article in the UK's Guardian newspaper by the Mayor of Hackney and chair of London Councils Jules Pipe was less than glowing in his assessment.

"When the Localism Act was introduced in 2010, there was much fanfare. It was going to be groundbreaking: the start of a new era and the catalyst by which decision-making powers would be devolved from central government control to individuals and communities.

"But it hasn't exactly worked out that way. The Localism Act has had little effect on the balance of power between local communities and Whitehall, or on the balance of power between central and local government.

"​Services have been devolved to boroughs, yet it is often simply a cost-shunting exercise rather than a true devolution of power and fiscal autonomy – that is, the responsibility is devolved, but not the money to fulfil it.”

But Pipe said there had been some success stories, including council run welfare-to-work schemes. And despite his criticism of the then Government’s attempts at localism Pipe said increased devolution was still the only credible way cities like London could begin to tackle the chronic need for housing, new infrastructure, etc.

So just like in the UK the battle between central and local government for control continues. Exactly what form localism would take in New Zealand, if any, is anyone’s guess. But the LGNZ/New Zealand Initiative campaign for greater devolution looks set to continue for some time yet.