More Moderation in Council Spending and Rates Needed

Business ratepayers will be relieved that council spending appears to be moderating but they will want restraint to be enduring, said Charles Finny, Chair of the Local Government Forum.

Mr Finny was commenting on the latest (March 2010 Quarter) Local Authority Statistics, released today by Statistics New Zealand.

“Total local authority operating expenditure spending is up 3.8% on the same quarter last year. This is a much reduced rate of growth compared to the previous decade when annual spending growth was regularly over 8%. Similarly, operating revenue is also up 3.8% on the same quarter last year, again a reduced rate of growth compared to previous years,” said Mr Finny.

“However, on the downside, rates revenue grew by more than operating revenue - by 6.7%. Over the past several years rates revenue has grown at a faster rate than total expenditure and this trend appears to be continuing. And also of concern is that the local government sector has now been running deficits for the past two years – sooner or later the gap between spending and revenue will need to be closed which may require some tough choices by councils and communities.

“While any moderation in council spending is welcomed, it is not clear whether this is a temporary slow-down in advance of this year’s local body elections or something more substantial and enduring. The Local Government Act Amendment Bill, currently being considered by parliamentary select committee, is an opportunity for restraint and prudence to be locked-in. The Bill’s objectives of getting councils to focus on core activities, to get them operating within a defined fiscal envelope, and by improving transparency and accountability are all a step in the right direction, but we think they need to go further if the Bill is to have a significant impact on council activity and therefore spending and rates.

“The Local Government Forum will be submitting on the Bill to improve some of its provisions to ensure that in practice the Bill meets its objectives”, Mr Finny concluded.

ENDS

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