Gareth Morgan, Director of Gareth Morgan Investments
Local councils which levy rates according to a formula whereby higher value properties pay proportionately more, are still muddled in their thinking. To be consistent with recent moves they have made to exit the role of social welfare agencies, they need to reform their rating so that houseowners are rated according to the level of local body services they consume.
Over recent years local authorities have stepped back from assuming responsibility for social policy at the community level. Increasingly it has become accepted that councils are not appropriate vehicles for promotion, management and design of social welfare policy. This responsibility is more that of mandatory-funded central government and it's raft of social policy experts. The collection of taxes by central government is increasingly explicitly for the purposes of such social redistribution. Community-based voluntary funded organisations are then free to operate their sectional interests against the backdrop of supports the government provides.
Central government's accommodation supplement has increasingly been seen as the only fair way to ensure the limited resources available for subsidising housing are spread across all those who qualify – rather than have some people fortunate to obtain a state house while others, equally in need, are left on the waiting list. The change from central government to this more equitable system has also led to a rethink by councils on both the way and the why of their policies on subsidised accommodation. In general the conclusion has been that this is an area for central rather than local government. So a phasing down (and in some cases, out) of direct council intervention in provision of housing subsidies for the less well-off, and moving up of rents on council properties to market levels has ensued. Rather than persist with an ad hoc raft of local housing welfare policies, councils are opting increasingly to exit this business.
The Coalition Agreement indicates that government is intending to spend an extra $110m on accommodation supplement & special benefit. So despite the influence of NZ First there is no signal that government is moving away from preferring the concept of income support for those in need of housing over direct provision of cheap accommodation.
Against this backdrop then – central government assuming responsibility for financing those in need of housing, local councils need to complete the process of abandoning their role in the country's social welfare sector. That process has already begun with their withdrawal from subsidised housing. Not to complete it would defy the logic they have embraced in reducing their role thus far.
So what have they to do ? Probably the most glaring example of local bodies assuming a role in the business of wealth redistribution, is the way they still levy rates on residential property. The differential system which levies these compulsory fees not according to the services a particular household consumes, but according to the market value of the property, is nothing else but a locally-driven social welfare policy. Already we are witnessing the phasing in of user pays for council services in some centres – water meters rubbish collection, and rubbish recycling being examples. But the bulk of one's annual rates bill remains unbundled and is shared according to property value.
If local bodies are going to be consistent with the policy they are already adopting with their housing policy they need to rebase the way they levy residential rates. They have already signaled they are not in the business of social welfare, they certainly do not retain social policy experts on their staff, and the residential rating methods they cling to are an anathema to the achievement of efficient allocation of local body resources. The responsibility for protecting the less well-off is not that of experts in sewerage and building codes. Community-based social welfare is more responsively catered for by the efforts of voluntary organisations and their targeted assistance.
Arbitrary tolls on property values are ability-to-pay based funding of local authority activities. There is no guarantee from such a funding system the services delivered are those which a democracy would vote to pay local taxes for.