The New Zealand government is cracking down on local councils, urging them to refocus on core services and avoid diverting scarce funds to non-essential projects, Bloomberg reports.
Prime Minister Christopher Luxon criticized councils for undertaking “pet projects and vanity projects,” stating that ratepayers expect councils to prioritize essential services.
The move follows significant rate increases implemented by many councils to address operating deficits exacerbated by rising costs. This has contributed to broader inflationary pressures. Concerns over high debt levels among some New Zealand councils, potentially jeopardizing their credit ratings, as highlighted earlier this year by S&P Global Ratings, further fueled the government’s intervention.
Local Government Minister Simeon Brown attributed some poor decision-making to the Local Government Act’s emphasis on “four well-beings” – social, economic, environmental, and cultural well-being. He claimed this provision has contributed to approximately two percentage points of annual rate increases. The government plans to amend the Act, clarifying that councils’ primary function is to deliver essential services such as road maintenance and water infrastructure repairs.
This refocusing will likely mean reduced investment in social housing by some councils, a responsibility the government intends to address in partnership with community housing providers. Minister Brown emphasized this shift in priorities: “If a council is thinking about its capital budget…and deciding should they be focused on building more social housing or actually fixing the roads that rates pay for, I would suggest they should be focused on fixing the roads.”
To enhance transparency and accountability, the government will introduce annual benchmark reports comparing councils’ performance across various metrics, including rates, debt levels, capital spending, and road conditions. The first report is scheduled for mid-2025, ahead of the next local body elections.
