Local government is back in the firing line
They don't want reform, they want rates-capping. This is a bad idea, but it will play well in the 2026 election.
They’re coming after Councils again.
New legislation and Ministerial grandstanding signal short-term cost-cutting and scapegoating, dressed up as reform. This is populist performance politics.
Cutting short-term costs and capping funding further will only leave communities, infrastructure, and local democracy worse off.
The NZ Government is coming after Councils again
I’m speaking to a large group of local government managers on Wednesday to help prepare them for this year’s local election, and here’s what I’ll be telling them: Treat the local election as a warm-up round. It’ll be the general election in 2026 when the knives really come out for Councils.
Two big things happened in local government last week. Ministers attended the Local Government New Zealand conference in Christchurch and swung their d… directions around, and a new Bill was introduced to the House proposing new/old/new/old tinkering to the weary, stitched together Local Government Act. At this point, the LGA is starting to resemble broadband-era footpaths: dug up and stitched back together so many times, it’s more patch than pavement.
Neither the local government ‘refocus’, nor the planning freeze implemented by Minister Bishop is the starter for bold reform. It just rehashes outdated ideas dressed up in short-term spin, blaming Councils for complex national failures while softening the public up for a destructive rates-capping campaign in 2026.
Constantly rewriting local government’s purpose, pushing a short-sighted economic agenda and removing Councils’ mandate for the very things that make communities liveable is not the way to improve local government.
But it is a good way to prop up a political agenda, sway local elections and set up a 2026 campaign promise.
Constant mandate changes make Councils’ jobs impossible
The Local Government (System Improvements) Amendment Bill removes the four community ‘well-beings’ (environmental, economic, social and cultural) from the purpose of local government - again.
It’s the third time in 22 years the very purpose of Councils has been rewritten. Given the other legal requirements Councils face, such as ten year strategic planning and thirty-year infrastructure strategies (both of which are more onerous and far-sighted than the expectations Government has of it’s own forecasting) this is extraordinary.
With no constitutional protection, local government is uniquely vulnerable to this kind of political gaslighting. Councils are supposed to lead long-term strategy and local identity, while every new government moves the goalposts. It doesn’t work.
This is worse in New Zealand and Australia, because of a few historical quirks that lead to a uniquely constrained portfolio of service delivery. In the UK, Europe, and Canada, local government has a far broader ‘services to people’ remit (social services, education, health, et al). In NZ and Australia, post-war colonial governments opted for a narrow ‘services to property’ approach. The goalposts on this have shifted many times over the following decades, with governments ordering Councils to do everything from social housing to swimming pools.
The only truly consistent message from central government around mandate throughout the years has been this: “you’re doing it wrong.”
Berating Councils for not achieving outcomes outside their mandate – and stripping away what little grounding they do have – is misdirection that not only undermines long-term planning and strategic consistency, but sets Councils up as pawns in a broader political strategy.
This is not new. Pointing at Councils to deflect attention and blame for larger issues has always been effective. As the closest tier of government to the community, Councils are uniquely visible and accessible. People know their local Councillors and see local services on the daily, while the operations of other tiers of government remains largely opaque.
Councils are not Crown agents of economic growth
Minister Bishop told Councils, in his LGNZ speech, that their job is to drive economic growth in their communities. This is a cynical recasting of local governance, to suit the agenda of the current government. It is also inaccurate. Economic growth has never been Councils’ purpose. (Though ironically, economic wellbeing is one of the four wellbeings that will be removed if the Government’s new Bill is successful.)
If the government would like Councils to be Crown agents of economic growth, they will have to amend their mandate and funding model to reflect that. The only growth Councils financially benefit from is increasing property values, which is exactly the crisis they’re also being told to solve. In fact, in the current environment, Councils are the only stakeholders in their communities who do not benefit directly from economic growth.
If a Council invests their time and money into economic growth initiatives, residents and visitors benefit (with higher incomes and better access to products and services), businesses benefit (with increased revenue and growth), and the Government benefits (with increased GST and income tax). The rates-based model sees Councils generate value, but not capture it unless the values of properties in their municipality increase, which has a three year valuation lag.
Councils already do tremendous work at the front-line promoting economic development and wellbeing in their local areas - participating in and funding regional economic development agencies, working with local business, supporting responsible development, and so on. This work is in the context of, and balanced by, their (largely regulated) roles in protecting public health and the natural environment, facilitating vibrant and safe communities, as well as place-shaping to create liveable neighbourhoods, towns and cities.
Councils are not Crown agents of a single-minded economic growth agenda, whatever the current political spin might suggest.
On that note: Ministers should stay out of local elections
Minister Bishop told LGNZ this week that “This year, elected members will be judged by New Zealand for their commitment to growing their local economic and their regions. They will be judged on whether they are going to help the housing crisis or hinder it."
That’s not just wildly inappropriate - it’s democratically irresponsible. Just as local government is not responsible for economic growth and housing, central government has no mandate to meddle in local elections or dictate the agenda for campaign issues.
Short-term cost-cutting has long-term consequences
I support several of this government’s proposals for local government – city and regional deals and changes to development contributions, in particular. Done well, these ideas could support Councils to lead and shape communities. But that’s not what’s happening here. What’s happening here is punch-down politics and short-term cost-cutting.
When your financial projections only look as far as the next election, that makes sense. But if you’re in the business of long-term planning, infrastructure provision and intergenerational outcomes, it’s catastrophic.
Much of what the Minister had to say was clearly written for the media, not the audience he was speaking to. “It’s ok to build a local road without spending hundreds of thousands on artworks.”, he patronised. “Not everything you do has to be an architectural masterpiece. Not everything has to win awards for being the most sustainable or the most innovative or the most beautiful.”
He urges cost-cutting on quality, sustainability, or contribution to social and civic life, as part of a (perennially popular) ‘back to basics’ approach to infrastructure. In his speech, the Minister declared that supermarkets and quarries are “essentials to human life,” while the environment is a “nice-to-have.”
That’s not just a fundamental misunderstanding of what sustains human life on earth (and possibly a poor reflection on New Zealand’s education system?), it’s a throwback to 1980s-era growth-at-all-costs thinking that ignores everything we know about sustainable development, place-based economic success, and civic wellbeing.
Refusing to take action on long-term sustainability and prioritising savings today has an exponential impact on costs for future taxpayers and ratepayers, effectively pushing the cost downstream. As public philosopher Roman Krznaric explains in The Good Ancestor, applying discount rates to long-term public benefit calculations is a form of intergenerational theft - effectively colonising the future. Short-term savings now become exponential costs later.
It also won’t achieve the stated outcomes: making communities a place that people want to live, spend money, grow businesses, and have a great life.
The Government is attacking what makes communities liveable
Calling design, natural environments, or arts and culture “nice-to-haves” or “gold-plating” ignores the data on what drives place-based growth and wellbeing.
Why do they think people move somewhere? Choose a location to grow their business and families? Participate in public life, volunteer at a sports club or local centre? It’s not because the pipes are cheap. It’s because of precisely the community elements they’re mocking Councils for worrying about: green space, libraries, parks, community feel, natural environment, thriving events, and arts and culture.
The sustainability of a community needs more than slashing expenses or depending on perpetual growth of the population (a physical impossibility in an urbanising Western world with falling birth rates) or economy. Long-term place-shaping and thriving communities are driven by strategic investments that cultivate social capital, environmental resilience, and quality of life, not just by cost-cutting or population growth.
Research from the OECD highlights several key drivers of sustainable community success: well-designed, accessible public spaces, social connectivity and inclusion, environmental stewardship and economic diversity (i.e. , the four things that the government is now trying to take out of the Act.)
Short-term cost-cutting measures that dismiss these foundational elements may provide immediate political capital but ultimately undermine the very fabric that makes communities viable, attractive, and sustainable in the long run.
Infrastructure deficits aren’t caused by Councils
Local government is being slammed for the state of national infrastructure. This is more gaslighting. Central government, which controls funding, regulation, and most major assets, has a much larger infrastructure shortfall than Councils. Blaming councils for systemic national underinvestment is bad faith politics.
Te Waihanga estimates the national infrastructure deficit at over $210 billion - most of which sits squarely with central government: schools, hospitals, rail, defence.
If central government, who have all the money and make all the laws, can’t solve this one (or the housing crisis, for that matter), expecting local government, with their constrained funding and much tighter regulatory constraints, to do it seems… ambitious.
Councils are productive and efficient, despite overregulation
Councils operate under overlapping mandates, extensive consultation requirements, and relentless waves of reform. Despite this, they are significantly more productive, dollar for dollar, than any other level of government.
In Australia, Councils deliver 25% of public services for 4% of the tax take. Here in New Zealand, the ratio is comparable - but we don’t measure it. Why bother with analysis when you can just blame the people with the smallest slice of the tax pie and the biggest share of frontline service delivery?
This week’s comments are just the latest in a long campaign of political gaslighting and constant tinkering. Deliver intergenerational outcomes, but don’t use intergenerational funding. Find innovative ways to drive economic growth but only deliver core services. Dance, monkeys, dance.
Other tiers of government are safely removed from the populations they serve. Their physical operations and daily decisions are hidden. But in local Councils, residents are on the local Facebook page debating the make and model of Council’s fleet vehicles, the playground equipment installed on their street, and the spend on catering for Council meetings.
Councils are often accused of wasteful spending, but the data doesn’t bear this out. Councils are highly exposed to price inflation of specialised materials used to build and maintain infrastructure, over which they have little control. When you take this into account, Councils’ operating expenditure per person grows at just over 1% a person per year - well below inflation.
The National Party will campaign on rates-capping in 2026
This is all a scene-setter for the next election. The National Party will campaign on rates-capping - and people are going to love it.
Rates are politically toxic because they’re visible. They’re not quietly deducted from your wages like income tax or hidden in consumer prices like GST: you get a bill in the mail. This makes Councils the perfect scapegoat. Especially for voters who don’t understand that local government costs are mostly fixed, mostly mandatory, and mostly handed down by central government itself.
But rate capping is a failed policy - and we only have to look across the ditch for proof of how badly it’s going, with representatives from both states urging New Zealand not to follow suit.
NSW’s ‘rate-pegging’ has left councils with $7.2 billion in backlogged infrastructure renewal and forced asset sales to plug the gap. A wave of controversial Special Rates Variations flooding into state government have some Councils needing a rate rise of 87% just to break even.
Victoria’s Essential Services Commission found caps led to service degradation - cuts to libraries, local roads, and community services.
Northern Territory rate capped for three years between 2007 and 2010 during a period of amalgamation. They already had evidence of a severe infrastructure backlog in just three short year, with Councils unable to raise sufficient funds to maintain, support or repair the infrastructure inherited through the amalgamations.
A 2019 Treasury review into local government funding and financing found that the current rates-based model, while not ideal, is overall appropriate for the scope of local government services in New Zealand. What Councils need to make it work is more targeted funding support from central government for particular areas (like treaty settlements, climate mitigation, tourism costs) and more flexible capacity to use existing tools.
Rate capping adds layers of bureaucracy to an already over-regulated sector and makes services and infrastructure harder to fund, both of which impact the smallest Councils and communities hardest.
This attack is globally trendy and deeply destructive
The broader agenda of the current Government is consistent with the wave of short-term populism sweeping politics globally - a backlash to the emerging severity of our biggest, curliest problems we don’t know how to solve. Picking at minor issues (or picking on Councils) is a great way to avoid uncomfortable and uncertain conversations about climate, conflict, AI, and pandemics.
Our moment in history will pass. But every time my work takes me overseas, I cringe as NZ’s global reputation dulls. The things we’re admired for on the world stage - social progress, environmental standards, creative industries, public health protection, start-up ingenuity - are being sold out.
The solutions proposed by Ministers Bishop and Watts are consistent with other short-sighted, punch-down policies introduced by this administration (pay equity, anyone?) and do nothing to address the core tenets of our productivity problem: investment in people, infrastructure, and institutions that foster long-term capability and resilience.
If this Government were treating New Zealand like a turnaround project - stripping costs to juice the short-term balance sheet before flicking it on - they’d be bang on. It’s a great strategy for a corporate asset flip.
But we’re not a distressed company looking for a buyer. We’re a country with people, places, and a future. It’s a bloody mess. We deserve better. And I hate to say it, but I think it’ll work.
Politics, eh?
AM
About Alicia McKay
Alicia McKay is a strategist, commentator, and author of three books, including Local Legends: How to Make a Difference in Local Government. A trusted advisor to local, state, and federal governments, Alicia partners with local government associations to deliver training and has worked with dozens of Councils across New Zealand and Australia to build capability, improve decision-making, and lift strategic focus. She was named one of LGIU’s Top 25 Thinkers in Local Government for 2025 and speaks at global committees and conferences on local government issues.
Website: www.aliciamckay.co.nz
Media contact: info@aliciamckay.co.nz
Absolutely fantastic analysis and explanation! Many thanks Alicia!
Thank you for your insights in this article.