Pondering localism

Michael Reddell Housing, local government, New Zealand Initiative, Productivity, Uncategorized

I’m spending much of the day at Local Government New Zealand’s Localism Symposium

When it comes to centralisation, New Zealand is an outlier amongst developed countries, with decision making heavily concentrated in central government politicians and officials. For every tax dollar spent by local authorities, Wellington spends $7.30.

This is not a record to be proud of. Comparisons with OECD countries show that productivity per capita and decentralised decision making are correlated, and on both measures New Zealand ranks back of the developed world pack. More practically, New Zealand’s diverse communities have long outgrown one-size-fits-all policy making, and there is a growing acceptance that we need to devolve and decentralise decision making to celebrate and leverage our differences.

The challenge is how do we do it?

Local Government New Zealand and The New Zealand Initiative have joined up to develop a policy roadmap on just how to devolve and deconcentrate power through our Localism Project.

On 28 February 2019, LGNZ and the Initiative will present the first cut of this work at the Localism Symposium. We invite interested parties to come and critique our work in a workshop session in Wellington to help develop a robust framework through which communities can have their decision making powers restored, and share insights into public perceptions of localism and local government.

Count me sceptical.  I’m unpersuaded the local authorities should get more power.  Given the choice between the New Zealand government –  of whatever stripe –  and Wellington City Council, I’ll take the former any day.  Not only are they generally more competent (and regular readers will know I’m no fan of any recent government) but it is a great deal easier to monitor them and hold them to account.   Then again, perhaps I’m just a died-in-the-wool central government bureaucrat (“you can take the boy out of the bureaucracy, but not the bureaucracy out of the boy”).   But what could one reasonably expect of the council of one of my old haunts, Kawerau (population <7000)?

And I’m more than a little sceptical about whether there is any meaning in that reported correlation: after all, the United States has plenty of fiscal decentralisation, but New Zealand is about the same size (population) as the median US state.

The New Zealand Initiative has been championing varieties of decentralisation models for some time.    I wrote, sceptically, here about one of their earlier reports.   As I noted, among various other points

I’m a South Islander by birth and inclination, and if someone proposed a genuine federal model for New Zealand –  South Island, lower North Island, and Upper North Island –  I’d probably be emotionally sympathetic to it.  But even then I’d refer supporters to the Australian experience, and wonder just how much genuine decentralisation would occur and for how long. 

Australia struggles to maintain effective federalism.

In the material they’ve sent out for the workshop today, there are some interesting ideas I could probably support and even champion.  For the rest, I guess I’ll be a voice of critique…..and open to being persuaded that more of the case is persuasive than I think now.  I suspect a really compelling case for decentralisation relies either on geography, strong and settled regional identity, or history.  We are a small country, fairly recently settled, and there will be few people for whom (say) the sense of being a Taranaki-ite is at least as important as being a New Zealander (unlike, say, the situation in Scotland or Texas).    To that point, US state boundaries haven’t changed in a very very long time, while two of the four local government areas I lived in while growing up simply don’t exist any more – abolished at the stroke of a ministerial pen.

Had we kept the provincial government system  –  avoided the Vogel money grab –  perhaps we’d now have a similarly long tradition of decentralised government. In days of easy travel and easier technology it is hard to create a stable and enduring constituency –  other than local government politicians and officials –  for trying to create it de novo.   And –  although we can’t run the experiment –  I’d bet against it having made much difference to things that ail us, like house prices or productivity.

I did notice however that the New Zealand Initiative’s enthusiasm for Switzerland –  which really does have lots of decentralisation –  carries over into the material.  The Initiative has long been keen on singing the praises of Switzerland, which is much richer than we are.  But, as a reminder to people, here are the productivity growth performances of the OECD countries since 1970 (when the OECD databases start).  This is total growth in real GDP per hour worked from 1970 to 2017.

Switz

Bad as New Zealand’s productivity growth performance has been over this period, Switzerland is still the only OECD country to have had (slightly) less productivity growth.    And it isn’t just the early part of the period: for the period since 2000 you need to go to two decimal places to separate the (lower quartile) productivity growth rates of the two countries.

Switzerland is rich, and pleasant in many respects.  But relative to the rest of the OECD it used to be much richer.  Appealing as the Swiss decentralisation seems in some ways –  and much of that reflects deeply rooted histories of separate distinct communities, including linguistic and religious differences –  it isn’t obvious why it offers some path to better productivity growth in New Zealand.

Fixing the housing mess is also claimed as one of the possibilities of the sort of reforms LGNZ and the New Zealand Initiative are suggesting.  Did I ever mention –  why, yes I think I did – that Switzerland not only has very high house prices, very high levels of household debt, and very low levels of home ownership?    Not outcomes to envy.   They aren’t (I presume) because of decentralisation, but they’ve happened despite it.

 

23 thoughts on “Pondering localism”

  1. Yes, count me skeptical too. But I too am pleased the discussion has been raised, as I do think we need better local governance. I do wonder whether better is less/fewer local authorities and less/fewer responsibilities and decision-making powers (i.e., the opposite of localism). Amalgamation to my mind makes a lot of sense – despite the impression that Auckland Council failed to realise/demonstrate any of the promised efficiencies and savings associated with amalgamation. I suspect the ‘mess’ that beset Auckland Council has affected the general public’s view of amalgamation – given when it has been put to public vote in other localities, I think every vote has failed. We are to my mind overly-parochial as it is – I worry that localism might make us even more so that way.

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    • The amalgamation has delivered the Unitary Plan which I must say has added multiunit sites onto my 11 property portfolio which under the previous District Plans were single unit dwelling zones. I must say it does add substance to prices in Auckland doubling again in the next 10 years and some revenue justification for the CGT which us poor property investors would be hammered again and again by a communist Labour/Green/NZFirst government intend on stealing wealth.

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    • Accountability

      You have to wonder why Central Government implemented the Petrol Tax Levy without exacting a requirement of the ACC that they must first fulfil the savings and benefits of amalgamation.

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    • Totally agree.

      We need centralise further, not localise.

      1) Combine local and regional government into unitary authorities
      2) Require them via legislation into business case and regulatory impact assessment processes for all their spending.
      3) Standardise the planning and infrastructure via national standards.

      We dont have the population or enough people with the skills to support additional localism.

      The localism desire is probably driven by two components:
      1) democratic representation
      2) desire for more money to spend – the productivity commission is looking into this. My personal preference is to allow local government to rate central government land to remove the distortion and potentially provide additional revenue. (although I think this is explicitly excluded from the productivity commissions scope)

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  2. “Fixing the housing mess”

    A fix implies (a) forcing prices down by 50%, or (b) raising the financial status of the Riff-Raff, Peons, Serfs, peasants, proletariat, or (c) do nothing and smoke some more “hopium”

    The time for fixing this mess was 2012

    It is now beyond fixing

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    • Nick Smith did try very hard but as Phil Twyford has found, it is a rather complex situation with most of the large land supply already been bought by Kiwi Income Property Trust and Other mall owners in expanding their shopping malls, Fletcher Building and the Todd group after having sold Shell Petrol stations and cashed up. This means that you are left with the millions of small, typically less than 1000sqm plots in private ma and pa ownership. Ma and Pa home owners are just not developers and they like their houses and have an emotional attachment. Try getting them to sell up for development could take a lifetime waiting.

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    • Nothing is beyond fixing. You fix it by stopping policies to “fix it”. With house prices twice what they should be in NZ and three times in Auckland – all created by regulation – why have the Govt involved in houses at all? Texas has no town planning/zoning and it gets along just fine. Does a single level house with a light weight roof and cladding need to have ANY regulation apart from what it had in the 1930’s – a fire rated wall if it was 3 feet from the boundary. That was it

      Any possible benefit of town planning or the building act is outweighed by the misery created by houses and rents taking up two to three times the money people have. A boat has no construction rules – you could sell a brand new boat with a hole in it which would be guaranteed to sink as soon as the buyer put it in the water. Why all this nonsense about houses? How dangerous are they? A dangerous as a grumpy guy who can’t afford to pay his rent or mortgage?

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      • A boat has no construction rules – you could sell a brand new boat with a hole in it which would be guaranteed to sink as soon as the buyer put it in the water.
        —————–

        Not quite. There’s a boat building standard in NZ. It’s called New Zealand Audited Boat Building Standard Compliance Plate Certification programme and most boat builders in NZ comply with it.

        As for housing…it’s a simple question of supply and demand…

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      • “all created by regulation”
        Most but not all. Worldwide low interest rates have also pushed up asset prices.

        Also its doubtful even with an elastic land use supply whether Auckland could have actually built houses fast enough to keep up with the immigration rate, at least in the short term.

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  3. Does the outperformance by Ireland in the graph include the prolonged effects of the “Double Irish” with a “Dutch Sandwich”

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  4. The Auckland experience of amalgamation has not been the promised shining example of “big is better” governance. But to dismiss the result as an aberration makes it too easy to ignore examples of sound governance by smaller councils. Otorohanga District, for example, has a strong balance sheet, low rates rises (1.7%), low unemployment and a pretty tiny ratepayer base. Perhaps a better approach would be to incentivise/force councils to learn from best practice wherever it is. Size is rarely a proxy for quality or, as Auckland demonstrates, efficiency..

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  5. Spain has had no government at all for 9 months and the unemployment is down from 21% to 18%. GDP has risen strongly. Not sure whether its an argument about about local or central government – or none at all!

    The current NZ Govt is showing excellently the folly of intervention and initiatives – we need a lesson every few years.

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  6. I had the misfortune of reading through NZ localist and subsidarity literature. It’s mostly comprised of gut pontificating by a select few academics and policy makers. No evidence, no remotely respectable methodology.

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  7. The call for Unitary councils is a mistake.
    It always comes from those who have no understanding of the different roles of district councils and regional councils.There are very strong reasons why they should remain separate .Remember RC’s were set up based on catchments which has been forgotten by many.
    Having been a councillor I feel that local government does not need any more responsibilty and in fact should have strict roles.
    The bureaucrats in local government just expand and expand for no reason.
    New Zealand is a very diverse country and I am concerned Auckland is going to dominate too much .For example sending the decision on fireworks to government .Auckland councillors should not be able to dictate to the rest of the country.
    I suggest that there are many parts of local government legislation that need to be changed to make things like productivity better but will never happen because politicians do not understand our economy any more.

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    • Under MMP where party votes count more than electorate seats, Auckland should dominate having the most number of people.

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    • I agree with you the push to control fireworks from Auckland council does show democracy not working. My own view is that just on balance in Auckland fireworks at home should be banned but only if I can persuade the majority to agree with me. The main argument against is the danger and disturbance to neighbours and their animals – in a less densely populated area where you know your neighbours there would be less reason for a ban. So Auckland council’s request to change the law for everyone in NZ is wrong. It is also wrong because they claim public support based on 90% of 8,000 submissions. I support that majority but what about the other 1.5 million Aucklanders? This is a classic example of a decision that should be made locally – suburb by suburb.

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