The Department of Internal Affairs

Te Tari Taiwhenua | Department of Internal Affairs

Building a safe, prosperous and respected nation



 

Regulatory system information: local government

Description of the regulatory system

System objectives/purposes

The local government regulatory system aims to:

  • Enable place-based communities to have the ongoing ability to make and implement the governance decisions required for their current and future wellbeing.

Key statutes·      

Key regulations

Brief description of what the system does

The regulatory system forms the core constitutional framework for local government and provides: 

  • legal recognition for the existence of local authorities; the purpose of local government; and processes for abolition, creation, amalgamation and jurisdictional modifications of local authorities (LGA02) 
  • the relationship between local authorities and communities in terms of representation, consultation, accountability, and funding (LGA02, LGRA02, LEA01 and LGOIMA87) 
  • discretionary legal and regulatory powers (LGA02) 
  • Ministerial assistance and intervention powers to protect place-based communities from “governance failure” (LGA02)

The local government regulatory system seeks to promote the strength and resilience of local communities by enabling them to provide for their current and future wellbeing, through an effective system of local governance.

Local government impacts directly on all persons within New Zealand. Many everyday activities are dependent on services provided by local city, district or regional councils, which are in turn often dependent on strategic infrastructure provision and investment decisions over longer timeframes.

These services range from three waters, granting of building permits, car parks, libraries and other recreational facilities, parks, refuse collection and disposal, dog control, and street lighting.

Other important local government activities include:

  • writing and managing plans for their area's development, including management of the natural and urban environment;
  • making bylaws and enforcing them (e.g. dog control, liquor licensing, noise control);
  • participating in community partnerships and initiatives such as reducing crime, increasing jobs or access to housing; and
  • civil defence planning and emergency preparedness.

Agencies involved in the local government regulatory system

The Department of Internal Affairs:

  • seeks to engage with the local government sector when undertaking work on the local government regulatory system;
  • has policy responsibilities under the local government regulatory system; and
  • undertakes some service delivery responsibilities under the local government regulatory system, including offshore islands local authority support and the Taupō Harbour Master.

Regulated parties and non-government stakeholders

Regulated parties and other relevant stakeholder groups include:

  • Local authorities:
    • 11 Regional Councils;
    • 12 City Councils (which are largely urban);
    • 54 District Councils; and
    • Auckland Council, (which amalgamated 8 former councils on 1 November 2010).

Engagement between system agencies and regulated parties

The Central Local Government Partnerships Group in the Department of Internal Affairs was established in 2017. It supports a range of priority activities across central government agencies that interface with local government, raises things with central government that it sees playing out in local government, and initiates key pieces of work that are undertaken jointly in partnership between central and local government.

Fitness-for-purpose assessment

Reviews/assessments of the local government regulatory system

No holistic review/assessment of the local government regulatory system (or even of whole Acts within it) has been undertaken since the component Acts were enacted. Some aspects of those Acts have been reviewed and reformed in the context of policy reviews directed at particular issues and outcomes.

A wider and more stewardship-based review of some Acts is anticipated to commence in the next financial year, but that is likely to focus on specific elements and issues rather than be comprehensive.

The history of frequent legislative amendments, especially to the Local Government Act 2002, has provided opportunities to address identified flaws in the regulatory system in the context of making policy changes. This is less the case for the other legislation. While there is no evidence that the system is fundamentally broken, there is little basis for confidence that it will be fit for purpose going forward.

Review/assessment findings

Effectiveness

The extent to which the system delivers the intended outcomes and impacts

The Local Government Act 2002 (LGA02) clearly states the purposes of local government (although this is currently subject to policy change); and the provisions of the LGA02 and other core legislation adequately promote and supports this (e.g. LGRA02). The stated purposes (current and proposed) are very high-level descriptions of the outcome of the local government system itself and provide little direction to the core legislative framework or the wider regulatory frameworks involving local government. Further work is required to review and assess these relationships and their adequacy in the context of current and emerging challenges.

Risks to the overall outcome of the regulatory system are not well understood, they are likely to vary considerably and some are unknown.

Generally, the local government regulatory system has good financial settings. However, funding pressures are beginning to challenge local authorities’ on-going ability to fulfil their roles and responsibilities.

The capacity and capability of local authorities is varied – smaller local authorities tend to be more limited in their capacity and capability.

Efficiency

The extent to which the system minimises unintended consequences and undue costs and burdens

The local government regulatory system contributes directly and indirectly to Government goals, priorities, and outcomes. It is difficult to quantify the efficiency of its contribution given its constitutional nature, inherent flexibility, and long-term focus.

There are no performance benchmarks to assess the performance of the regulatory system. Voluntary performance assessment programmes for local authorities led by LGNZ and Taituarā — Local Government Professionals Aotearoa (formerly SOLGM) may provide evidence of issues with the system.

In addition, current work (in both central and local government) to review the effectiveness of local governance settings from a wellbeing perspective is likely to contribute to a better understanding of both the overall performance of the system and potential pathways to improvement.

Durability and resilience

How well the system copes with variation, change and pressures

The Department does not have a formal local government regulatory monitoring function, which can pose some challenges in identifying any issues within the regulatory system. However, there are other mechanisms through which the Department is made aware of regulatory stress.

The establishment of the Central/Local Government Partnerships Group within the Department has improved the Department’s capability and capacity to engage with local authorities, which has facilitated a more open dialogue across the system. The Department also engages directly with local community groups in a range of contexts, including via its Community Operations Group and the Office of Ethnic Communities. In addition to these relationships, the Department has regular dialogue with the Office of the Auditor-General and with the Ombudsman to discuss issues arising in local government.

The complexity of the local government regulatory system can, however, make it challenging to distinguish between the regulators and the regulated communities. The Department’s policy and operational responsibilities and the diverse roles and power of local authorities could, in some respects, be seen as both the regulator and regulated.

The framework provides local authorities with flexible legal powers, considerable functional discretion, and some structural flexibility to enable responses in different circumstances and for diverse communities. However, it is uncertain whether the accountability and process requirements accompanying the framework generate appropriate safeguards and incentives to provide legitimacy and acceptance of governance outcomes. This uncertainty may increase as a greater range and capability of technological tools becomes available for community information and engagement. Conversely, if deployed strategically and on a widely accessible basis, new tools may improve the efficiency in community engagement.

There is currently no regular assessment of the current and/or future operating environments in terms of their impact on the local government regulatory system.

Work is required to update and ‘future proof’ the regulatory system, noting that there are known barriers preventing systematic changes and there are also likely to be unknown barriers.

Fairness and accountability

How well the system respects rights and delivers good process

The recognition of residents’ and ratepayers’ rights and the prescription of processes for participation and accountability are key elements of the local government regulatory system.  While these aspects are generally regarded as satisfactory, their ability to adjust to changing expectations and opportunities into the future is not assured.

Local authorities vary in their capability to understand, utilise, and comply with the regulatory framework. While sector agencies such as LGNZ and Taituarā — Local Government Professionals Aotearoa (formerly SOLGM) provide guidance, assistance, and advice to local authorities on the core framework it is unclear whether this is an effective mitigation strategy or whether regulatory system adjustment is required.

The Department (through the Minister of Local Government) has a role in preventing adverse consequences to residents and ratepayers because of significant governance or management failures by targeted statutory intervention (Part 10 the Local Government Act).

Statutory deliverables and timeframes under core local government legislation are generally being met by local authorities.

Local authorities are politically accountable to their communities for non-compliance, but it is unclear whether different or additional mechanisms for aligning local authority decision-making with community needs and expectations incentives should be promoted.

Plans for regulatory and operational improvements

Key regulatory changes undertaken and planned in 2018/19

Local Government (Community Well-being) Amendment Act

The Local Government (Community Well-being) Amendment Act restores community wellbeing to the purpose of local government and restores territorial authorities’ power to collect development contributions for community infrastructure needed as a consequence of development.

Local Electoral Matters Act

The Local Electoral Matters Act is an omnibus Act that amends the Local Electoral Act 2001 and the Electoral Act 1993. The single broad policy of the Act is to provide greater flexibility to enable local electoral arrangements to adapt to changing circumstances.

Local Government Act 2002 Amendment Bill (No.2)

The Local Government Act 2002 Amendment Bill (No.2), as drafted, would amend the Local Government Act 2002 to promote the use of CCOs to provide services and infrastructure, and to provide greater powers to the Local Government Commission (LGC) in relation to local government reorganisation.

The Bill currently provides for a more flexible local government reorganisation process including locally-led reorganisations. Subsequent Cabinet decisions remove enhanced powers for the LGC from the Bill and implement interim measures to constrain large-scale reorganisations. This is stage one of a reform programme to disestablish the LGC in its current form.

Further work is anticipated on the changes to the CCOs provisions in the current draft of the Bill.

Local Government Regulatory Systems Amendment Act

The Local Government Regulatory Systems Amendment Act is a minor and technical omnibus Act that amends seven principal local government Acts. The objective of the Act is to maintain the effectiveness and efficiency of the regulatory systems established by key local government acts. The Act clarifies and updates provisions; addresses regulatory gaps, errors, and inconsistencies; and removes unnecessary compliance costs.

Key service design and operational changes undertaken and planned in 2018/19

The Central Local Government Partnerships Group has been established to provide stronger links between local government and central government. The Group helps to identify issues and supports responses across multiple agencies. The Group is likely to identify changes that are required for the system – arising out of their work leading the Three Water Review, a review of Local Governance for Community Wellbeing, and the Productivity Commission’s Inquiry into Local Government Funding and Finance. Issues arising out of these key pieces of work, are likely to feed into the Minister of Local Government’s reform programme for the Local Government Sector.

The Department also collates issues within the local government regulatory system so that they can be addressed when there is an opportunity.