Comment: Complaining about local government is a perennial pastime for the minority of New Zealanders bothered enough to care. Unfortunately, that indifference is helping to make us poorer.
We react to the symptoms, but across four governments the system producing them has never become a headline part of the country’s economic strategy, from Helen Clark’s Economic Transformation Agenda and John Key’s Business Growth Agenda to Jacinda Ardern’s Wellbeing Approach and Christopher Luxon’s Going for Growth plan.
Successive governments have approached the problem from opposite directions. The last Labour government commissioned a root-and-branch Review into the Future for Local Government that reached beyond council boundaries to functions, funding, democracy and central-local relations. But it became an encyclopedia of reform rather than a programme for government. Its recommendations could not be turned into a prioritised, funded programme capable of surviving a change of government.
The current Government has instead taken a segmented approach: restructuring water delivery and planning, refocusing councils on core services, proposing a rates cap and inviting councils to consider larger unitary authorities. Regional deals offer a more integrated central-local partnership but remain at an early stage. If sustained beyond the election, these reforms may address real problems and reduce duplication. But they remain separate work streams rather than a coherent settlement of functions, powers, funding and accountability.
This matters far beyond council efficiency. Fragmented authority, uncertain funding and repeated central intervention delay housing and infrastructure, impede access to jobs and skills, and weaken firms’ willingness to invest. These costs show up in lower productivity. A country cannot become wealthier while treating the machinery of its major urban economies as a second-tier concern.
In a chapter in Facing Up to Our Future, to be launched on July 29 by the Helen Clark Foundation at AUT, I argue that New Zealand lacks a compelling national narrative about its cities. We still imagine ourselves primarily as a rural and primary-producing economy, even though cities are where people, skills, capital and firms cluster – and where agglomeration drives productivity. Primary industries directly generate about 8 percent of national GDP; Auckland alone generates close to 40 percent. That does not diminish the primary sector. It exposes the mismatch between New Zealand’s economic geography and the attention our cities receive.
The economic penalty is visible in Auckland, whose output per person is estimated to be 15 to 20 percent below that of comparable cities, while congestion is forecast to cost $2.6 billion this year.
New Zealand remains highly centralised. Subnational government accounts for only 10.3 per cent of public expenditure, against an OECD average of 36.6 per cent. Our councils do not run schools, hospitals or social protection, but carry major responsibilities for roads, water, planning and growth while controlling a remarkably narrow part of the public system.
The consequences are national. Councils plan to spend nearly $50b on water networks over the next decade, with the New Zealand Infrastructure Commission warning of affordability pressures and the risk of crowding out other infrastructure. The RMA consenting system costs infrastructure developers an estimated $1.29b annually, while direct consenting costs have risen about 70 percent since 2014.
Governments therefore return with discrete responses: transport agreements, planning changes, successive water reforms, financing tools and now regional deals. They respond to the leaks without redesigning the plumbing. Responsibilities are narrowed or reassigned, but the underlying settlement remains unresolved. A larger council that must still queue outside the Beehive for permission and money is not empowered local government. Amalgamation without devolution, adequate funding and certainty merely creates bigger supplicants.
Durable reform starts with the function, then assigns the appropriate geography, powers, funding and accountability. Transport, housing, water, climate adaptation and economic development do not all operate at the same geographic scale. Each should be assigned to the level best placed to deliver it, with the necessary revenue and authority – and clear responsibility for results.
England’s metro-mayor experiment offers a useful, if incomplete, lesson. Directly elected mayors lead functional city-regions with devolved responsibilities for transport, skills, regeneration and economic development. They remain reliant on Whitehall, but – as Andy Burnham has shown – they have made regional leadership visible. Polling found that 74 percent of residents could name their metro mayor, compared with only 20 per cent who could identify their council leader. Satisfaction varies with performance – which is precisely the point. Citizens can see who speaks for their city-region and whom to reward or blame.
Citizens are not innocent bystanders in New Zealand’s failure, but nor is this simply a failure of citizenship. The system itself teaches disengagement. When responsibilities overlap, councils lack the power or revenue to deliver, and Wellington can intervene or reverse direction, citizens struggle to know who is responsible – or whether participating can change anything. That weakens public interest, further reducing the incentive for national governments to undertake difficult reform. Disempowered local institutions produce disengaged citizens; disengaged citizens leave those institutions disempowered.
Local-election turnout has fallen to 39 percent – its lowest level since the current system was created in 1989 – while national campaigns barely debate how the places generating most economic activity are governed. Citizens conclude that participation changes little, governments conclude that comprehensive reform offers more risk than reward, and piecemeal intervention becomes inevitable.
This is not about learning to love councils or excusing poor performance. Local government affects our incomes and opportunities. Citizens should demand clear answers: which decisions belong locally, regionally or nationally; which geography fits each function; what revenue powers follow; and who is accountable when delivery fails.
Regional deals could provide part of the answer: durable central-local agreements around a few priorities, backed by predictable funding and public reporting. But they will matter only if they transfer meaningful authority and resources – and endure politically.
Effective local government is not just rates, roads and rubbish. It is part of the country’s economic infrastructure. Breaking the cycle requires citizens to organise, argue and vote for change. Otherwise, governments will keep making cautious changes to a system everyone says is broken. We will keep complaining about the symptoms, and New Zealand will remain less productive – and poorer – than it should be.
