Simon Watts: Local Government Minister says incoming rates caps tough but necessary

On Monday the Government announced an annual 2-4% rates cap range will be fully implemented by 2029.

The cap applies to all rates, including general rates, targeted rates and uniform annual charges, but excludes water charges and other non-rates revenue like fees and charges.

Local Government Minister Simon Watts told Heather du Plessis-Allan, "it's going to be tough Heather, but guess what, it's been tough on everyone - households, businesses.

"You think about those on fixed income, in particular, double-digit rate increases, some up to 20%. It's just simply not feasible, and that's what we've been hearing loud and clear from ratepayers"

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Episode Transcript

Speaker 1 (00:00):
Afternoon. The government's putting a stop to your constantly ballooning
rate spill. The councils will now only be allowed to
raise rates by between two and four percent unless they
have permission from a government appointed regulator to go beyond that.
Water rates and other fees and levies will not fall
under the cap. Simon Watts is the Local Government Minister
High Simon hi Heather. Why four percent?

Speaker 2 (00:20):
Well, four percent represents the long run economic growth number.
That means that council's got a clear cap on total expenditure.
We're set a range between two and four the twos
at the midpoint for inflation. We think that's a sensible
band for councils to maintain their expenditure within.

Speaker 1 (00:36):
Okay, I mean this is going to be tough, isn't
it Because in the last financial year only five out
of seventy eight councils managed to come under that.

Speaker 2 (00:44):
Yeah, it's going to be tough, Heather, But guess what
it's been tough on everyone households, businesses, and you know,
you think about those on fixed income in particular, double
digit rate increases, some up to twenty percent. It's just
simply not feasible and that's what we've been hearing loud
and clear from rate payers. We've got a range, we've
got a model that we believe will ensure that councils

(01:05):
are going to be able to get to that point.
And at the end of the day, you know, I
think this is a sensible policy and it's going to
be one that protects and supports rate pers.

Speaker 1 (01:14):
Are you worried about the third maintenance where instead of
cutting you know, instead of cutting the nice to have
that we would like them to, can't they start just
not fixing the pipes like Wellington's done.

Speaker 2 (01:24):
Well, look, no one's capping infrastructure. We're capping inefficiency. And
I said today that New Zealand has not got low
productivity because councils were too disciplined. That's actually the opposite.
And so that's why we're coming in with this reform.
We know that infrastructure is a challenge and working our
way through. You've seen that with our water reforms. But again,

(01:46):
using the GDP economic growth rate is an upper band
provides us with a long run target, which we think
is appropriate. And I've had an independent reference group led
by Cameron Baggery to help develop this policy. They had
local govern reps and also people from offshore as well.
They did a lot of thinking around this and we
believe this is probably one of the first instances of

(02:06):
the world where they're using a range based target model.

Speaker 1 (02:10):
Look, it doesn't kick intil you know fully in effect
until twenty twenty nine. Are you worried that in the
intervening three rate cycles that they have left, they may
just go healthful leather and raise a whole bunch of money.

Speaker 2 (02:22):
Well, no, it's going to be legislated and in law
by the first of January twenty twenty seven. The full
regulated model won't be fully in play by twenty nine.

Speaker 1 (02:32):
So that rates cap. So does the four percent kick
in in twenty seven?

Speaker 2 (02:36):
It kicks in from twenty seven. First of January twenty
twenty seven is when the law comes in. And to
be honest, Heather, I expect counsels out there today. They've
had a really clear signal from government today that the
range is two to four and you know, you see the.

Speaker 1 (02:49):
Light and this is important. At which point do they
have to abide by the cap?

Speaker 2 (02:57):
So that will be once the regulator is in place
twenty nine point nine, So they've got three faster.

Speaker 1 (03:03):
Yes, but what I'm maybe you can do it faster,
but in the intervening period, are you worried that they
will go?

Speaker 2 (03:08):
Right?

Speaker 1 (03:08):
We just need to get it up as high as
we possibly can to make sure we've got lots of
income coming in.

Speaker 2 (03:12):
Will you look at how many mayors and councilors got
taken out at the lost local government elections who were
not campaigning on reducing rates. I think it's been pretty
clear from rate payers. They're telling their counselors, get with
the program. We want you to be managing your budgets
like households are. Now we've got a clear signal around
what the expectation is on that.

Speaker 1 (03:30):
Okay, the exemptions, I mean if one of the exempts,
So the exemptions are obviously things that you can't expect,
you can't anticipate like that traditional circumstances, right, Yeah.

Speaker 2 (03:39):
Absolutely.

Speaker 1 (03:39):
One of them is basically to deal with deferred maintenance,
which I would have thought is basically all councils.

Speaker 2 (03:45):
No, it's there's a mechanism there in certain circumstances, but
none of these things. It's not a default exemption. You
have to apply to the regulator. The regulator you have
to consider that you'd have to provide a plan of
how you're going to get back to range. And again
these will be given out only an exceptional circumstances. Pretty
much well, all councils will need to operate within the

(04:05):
band unless they've got an exemption and I wouldn't expect
me need to have.

Speaker 1 (04:08):
That, all right, Simon, thank you very much for your time, Simon,
what's the local government Minister?

Speaker 2 (04:12):
For?

Speaker 1 (04:12):
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