By Jonathan Barrett*
Where should real political power and authority reside in New Zealand? Since last year’s election, that’s been the central question behind a number of significant policy reversals.
Water infrastructure, health, tertiary education and tax have all been affected by the political and philosophical tensions between competing models of local and central decision making.
Put simply, the previous Labour government tended to favour centralising authority, while the current National-led coalition is more sympathetic to forms of “localism”, or delegation of power from central to local government.
Whether one agrees with one side or the other on any specific issue – one main polytechnic provider or numerous local institutions, say – both administrations were trying to place decision making at what they saw as an appropriate level.
What is lacking, however, is agreement on some guiding principles to help choose the best solutions for different challenges. History and international experience can show a way forward.
Money must follow responsibility
Local Government New Zealand, which represents the country’s councils, has long proposed localism. In fact, it is hosting a conference – Superlocal24: bringing localism to life – next month.
The New Zealand Initiative think-tank agrees, and in 2017 hosted Christopher Luxon – before he entered politics – on a visit to Switzerland to look at whether the Swiss model of cantons (confederated states) could provide a template for local government in New Zealand.
But the canton system has developed from the 13th century and arose from language and cultural differences, as well as accidents of geography and history. It cannot easily be transplanted.
Nevertheless, New Zealand shares its unitary (non-federal) system with more than 85% of United Nations member countries. Many have far greater power distributions, including taxing rights, at local levels.
Denmark (which Luxon has also visited) is one such country, and provides a more plausible model of power sharing between central and local government. Unlike Switzerland, Denmark’s move to more localised governance started in the 1970s with an aim of delivering better quality public services.
Sub-national forms of government now raise about 36% of total revenues. And while devolution is not guaranteed by Denmark’s 1849 constitution, current arrangements seem well-established and resistant to radical change. Significantly, the power to tax has followed this devolution of decision-making responsibilities.
Risks of localism
The notion that decisions should be made at the most appropriate level of government is known as “subsidiarity” and is a founding principle of the European Union.
Italy’s Lombardy region provides the best-known example, with decisions commonly made at the lowest level of government and then shared with non-governmental organisations, the church and families.
(This form of subsidiarity is perhaps too closely aligned with Catholic doctrine to have universal appeal.)
By contrast, UK governments – including Northern Ireland, Scotland and Wales – are highly centralised. But the previous Conservative government entered into devolution arrangements with some major English regions.
Taxing powers were not passed down, however. Areas such as metropolitan Manchester, which were dependent on government grants, needed to implement austerity measures handed down from central government.
Grants to local authorities reduced by 40% in real terms between 2010 and 2020, from £46.5 billion to £28 billion in today’s prices.
In 2024, Birmingham, the UK’s second largest city, declared itself bankrupt and has resorted to penny-pinching initiatives such as two-weekly rubbish collection and dimming street lights.
Policy reversals
In New Zealand, political decisions are invariably made at national, regional or local government levels. But this has seen power shift between them as central governments have come and gone.
The establishment of 21 district health boards in 2001, for example, was an attempt to create appropriately sized health organisations to match population needs rather than simply reflect established council regions.
But the previous Labour-led government abolished these because it thought standardised services could be better provided through national health bodies Te Whatu Ora and Te Aka Whai Ora. The current government is now undoing that.
The Three Waters scheme was also based on perceptions of how regions and districts could be best served. It would have created four water services providers rather than the current 67. It too has been abandoned.
Replacement models that give local authorities more autonomy are now being devised. But localism isn’t necessarily the catch-all solution. The level of government at which decisions should be made will differ and needs proper consideration.
5 guiding principles
Rather than seeing these issues as binary and in need of either local or central solutions, New Zealand needs a more flexible approach. For want of a better word, we need “optimalism” – in other words, the optimal solution to suit the circumstances. This would be based on five broad principles:
1. Money must follow responsibilities: local government only raises about 4% of New Zealand’s tax revenue, hardly enough to fund greater responsibilities.
2. One size doesn’t fit all: delegating more decision-making powers, including taxing rights, to major metropolitan areas may be sensible, but it might not work for every territorial local authority.
3. It should be depoliticised: without cross-party agreement on funding allocation, tax sharing or regional taxes, localism in practice could represent a poisoned chalice for local government.
4. Some decisions require higher authority: as well as shifting some powers to a local level, some decisions may be better made at a regional, national or even trans-Tasman level.
5. The Crown must negotiate with Māori: optimal levels of decision-making may give greater autonomy to larger iwi (tribes) but could further marginalise smaller ones without central government support.
*Jonathan Barrett, Associate Professor in Commercial Law and Taxation, Te Herenga Waka — Victoria University of Wellington.
This article is republished from The Conversation under a Creative Commons license. Read the original article.
6 Comments
The government absolutely does not want to give local government more power. Nationals localism only applies when local desires align with their own.
The previous government gave road controlling authorities discretion to set appropriate speed limits.
The current government is taking away that power and forcing blanket speed increases on everyone, even when people and their elected councils want to set targeted appropriate speed limits.
I totally agree with devolution of power. Speaking of authoritarianism. I think the National government are on an unfortunate trajectory to major political damaged because of a Trojan horse left by Labour. Namely, the decision by Ashley Bloomfield to fluoridate the water supply. I think National has no idea how much negative sentiment is about to befall them if they do nothing.
I'd have thought that the end of the Auckland Fuel Tax/Levy would signal that central government are not interested in divesting responsibility.
Also given many local governments are so poorly handling even basic infrastructure development, like water and sewage, there isn't a great case for divestment of responsibility and associated taxation. Local governments are performing very poorly and giving them more opportunities to screw up won't help New Zealand overall.
More academic nonsense from VUW that completely ignores the undemocratic evolution of Local authorities since Helen Clark enabled them to step out of their primary purpose lane in the 2002 Act (endorsed in default settings by subsequent National governments).
https://democracyproject.substack.com/p/the-illusion-of-power-how-local…
I'm all for localism. But not for the current state of localism. Local government as we know it, is shot. It is a dead man walking in its current incarnation. Regions would be better served by a recommissioning of the rules of engagement & in this instance I see a need for balanced budgets or indeed, profits. Running regional governments as for-profit organisations is the only way to attract the best people to run the operations. Regions will be responsible for [or receive] about a third of the tax-payer funded revenues [similar to the Swiss model] with the rewritten constitution affecting the whole nation. Yes, Wellington would be smaller but the regions would be responsible for a large part of their own success, which if it made a profit, could be re-invested into future regional budgets, or paid out to ratepayers/local tax payers in the form of dividends. In this brave new world, every single person is responsible for their own contributions & personal accountability across the board is encouraged. Localism would mean that everyone will be a part of the success or failure of their region's results. There would be no hiding. Yes, some regions would fail, but the successful templates would soon be applied to the other regions, and, in my view, creating regional loyalty through teamwork, with success celebrated & encouraged. In other words, a template for getting better not worse. Localism becomes regionalism as a going concern, underwritten with individual responsibility. It's worth a shot.
ABSURD. Local govt rates are already a massive drain on post tax incomes. Rates are already taxation.
In a country of only 5m people (population of Sydney or Melbourne) we don't need further devolution.
a) Central govt can manage the net inbound immigration rate down to a sustainable level so that local govt is not forced to have to respond to such large growth rates.
b) Merge local govt areas to reduce overheads. Many local govt areas are already too small and uneconomic.
c) Central govt to pay rates on all Crown land. This subsidy must go.
d) Central govt to legislate to force local govt spending on specific projects & line items to go through proportionate cost/benefit analysis that is made publicly available for annual plans and 10 year plans. This will force local govt to spend efficiently e.g. asset renewals rather than vanity projects.
e) Central govt could legislate to force greenfields developers to pay the full costs of greenfield development rather than being partially subsidised by existing ratepayers. This would help tilt the playing field towards efficient use of brownfields land.
f) Local govt could make substantially more revenue on car parking, much of which is provided to drivers for free.
g) Central govt could legislate to allow local govt to set parking pricing at private carparks in areas where travel demand management (congestion management) is needed, e.g. commuter parking in CBDs. Any levies would go back to local govt.
h) Central govt can legislate to allow congestion charging in all main cities. This will delay /delete the need for many major road network improvement projects saving local government millions of dollars while raising revenue (some/all to go to PT/active mode travel)
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