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This policy fails to address the real issue, which is spending. When rate increases are capped, but costs keep rising, councils end up squeezed between political optics and financial reality. Cap rate increases while leaving spending untouched and councils will simply shift the problem into more debt or more deferrals. This is precisely what central government does.
In theory, a cap could force discipline. In practice, given the incentives politicians respond to, it is more likely to lead to asset sales, deferred maintenance, and the accumulation of long-term liabilities. And when that happens, it is the basics that suffer first. I rail against $2 million rainbow illuminated toilets and empty bike racks as much as the next person. These are examples of inexcusable mismanagement that do more than waste hard-earned money; they do serious damage to the legitimacy of our democratic institutions and, understandably, the trust the public has in them.
But when a council goes from planning a 10% increase to being legally limited to 4%, the colourful toilets and ornamental bike racks are not where they will make up the difference. Those line items, while wasteful, are not doing any heavy lifting.
Instead, it is the basics, where most of the funding goes, that suffer. What if we sweat our waste management assets an extra 10%? What if we defer road maintenance another year? What if we delay service requests by three more days, on average?
A rate cap produces exactly the false economy New Zealanders distrust. We fix the optics and break the infrastructure. We get the press release while the real costs quietly accumulate.
This is what has happened in Australia, where Sydney councils are living this reality. There, councils can increase rates only by an annual peg set by the state regulator. When Northern Beaches attempted a large increase to address infrastructure backlogs and cost blowouts, the regulator rejected most of it and the council had to cut about $25m from its budget. The cuts were not ornamental fluff but basics like maintenance, renewals and essential services. The facts are clear. Rate caps distort behaviour and create short-term political wins while undermining long-term sustainability.
This policy also risks confirming what many already suspect: localism in New Zealand is a facade. The decision by central government to limit councils’ ability to generate revenue, and to subjugate them to yet another regulator, means local democracy isn’t worth its name. A voter turnout rate below 40% nationally suggests most Kiwis already sense this, and that is bad news for our democracy.
A cap on rate increases might look like a necessary correction, a sign that someone in Wellington is finally paying attention to household pressure. But if it does not address the underlying incentives, and if it further hollows out local autonomy, it becomes another example of the political class choosing the easy way out at our expense.
Liberal democracy relies on citizens capable of self-government and willing to serve their communities. No council has increased rates without a technical public mandate. But far too many New Zealanders have simply disengaged from their duty to participate, whether by voting or by running as candidates willing to cut the nonsense, and the spending.
My wife, a 30-year-old business owner and mother of three, is not the obvious example of someone looking to add more to her plate. But she recognised it was her duty to offer an alternative. And that has directly saved residents in our district every quarter.
The problem we face is not only wasteful spending or high rates. The deeper problem is disengagement and apathy toward the freedoms and privileges we have inherited through democracy, a refusal to live within our means, and an expectation that someone else will deal with the consequences.
Simply creating yet another regulator will not fix this.
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