Local Government (Rates Capping) Amendment Bill

I move, That the Local Government (Rates Capping) Amendment Bill be now read a first time. I nominate the Finance and Expenditure Committee to consider the bill.

I am pleased to bring this bill before the House today. This Government is focused on easing the cost of living pressures and getting councils back to basics. For too long, ratepayers have been hit with steep and unexpected rates increases, adding pressure to household budgets at a time when many New Zealanders are already feeling the squeeze. Over the past two years, ratepayers have faced median increases in their rates of 14.2 percent and 9.2 percent respectively; that is simply not sustainable. This bill will help keep rates affordable for households and businesses by requiring councils to keep annual rate increases within a target range of 2 to 4 percent per annum.

We’ll also put a break on excessive increases, give ratepayers greater certainty, and sharpen councils’ focus on delivery of the services that communities expect they will get right, like fixing the pot holes, collecting the rubbish, and maintaining pools and parks. This rates cap is about driving greater fiscal discipline, keeping rates affordable, and ensuring that councils are focused on delivering the core services that ratepayers rely on. All councils will be required to have regard for the rates cap from 1 July 2027 and will be required to operate within the cap from 1 July 2029. We intend this bill to be enacted as early as possible in 2027 to allow councils to adjust their 2027 long-term plans accordingly.

There are four key elements to this regime: the target range itself, a limited exemptions framework, a transition period, and an independent regulator. The bill establishes a target range for the annual rates increases of 2 to 4 percent, which councils are required to operate within unless an exemption is approved. The lower limit helps ensure that essential services are maintained, while the upper limit keeps rates affordable for ratepayers. The range will be reviewed before the 2030 long-term plans are reset and reviewed every six years thereafter. The cap applies to the rates price rather than total rates revenue, allowing councils to benefit from growth while retaining flexibility over rating policies and individual rates.

The bill includes two limited exemption pathways to provide flexibility where justified. Type 1 exemptions will be available in exceptional circumstances, such as significant natural disasters, where a council needs additional flexibility to respond to or recover from events beyond what could reasonably have been anticipated. These exemptions will be determined by the Minister for Local Government. Type 2 exemptions will allow councils to apply to move above or below the target range as part of a long-term financial planning process. Councils will need to demonstrate prudent financial management and consult their communities. My expectation is that councils seeking greater flexibility will first show that they have prioritised core services, managed costs responsibly, and fully considered other funding options before placing additional pressure on ratepayers. Applications will be considered by the regulator ahead of the adoption of the long-term plans.

I recognise that this is a significant change for councils, and it is important that they have time to adjust. Councils will be required to have regard to the cap from 1 July 2027, with full compliance beginning on 1 July 2029. This time period gives councils time to adapt their financial planning and work towards operating within the target range. The bill also includes transitional exemptions for 2029-30 to support significant infrastructure projects already planned or under way and to provide a safety net where genuine financial sustainability concerns exist. My expectation is that councils use this transition period to strengthen their financial discipline, focus on core services, and make full use of the funding tools available to them before the cap takes effect.

Finally, the bill establishes a regulator to oversee the rates cap and ensure that councils comply. The regulator will be a statutory officer within the Ministry for Cities, Environments, Regions, and Transport, providing an appropriate balance of independence and cost efficiency. Its responsibility will include advising on the target rate, assessing exemption applications, monitoring compliance, issuing guidance, and reporting on sector-wide trends and risks. A strong regulator will be critical to ensuring the long-term success of the rates-cap regime. This Government is serious about bringing greater stability and predictability to rates, refocusing councils on core services, and helping to keep costs down for ratepayers.

Before I finish, I want to acknowledge my good friend and colleague Paulo Garcia. Paulo, you are an outstanding New Zealander. I thank you for your contribution and all the work that you’ve done for our country. As a good friend, I wish you all the best for the future. I commend this bill to the House.

ASSISTANT SPEAKER (Teanau Tuiono): The question is that the motion be agreed to.

Kia orana, Mr Speaker. It’s a pleasure to rise on behalf of the Labour Party to speak to this Local Government (Rates Capping) Amendment Bill. What is very clear from this Government is that they have a very precarious view of local government as a sector. What is proposed here in front of the Parliament this afternoon is yet another example of a bill within the suite of changes that the Government are seeking to progress without real understanding of the sector.

Last year, we heard about the prospect of a rates cap being introduced by this Government. We have waited for quite some time to see the specific details of this legislation, which finally landed just last week. So we had been waiting for, I think, quite a significant amount of time to understand what the detail of the bill will contain. Having it just last week puts into context that delay in terms of wait over an extended period of time.

What we did see last week is a little bit of clarity that was provided, but none the less there are still a number of questions that remain. At a time where cost of living is a significant issue on doorsteps and in kitchens all around this country, we just need to step back. The price of food is increasing. Rent is increasing. If there are folks who have insurance, that is increasing. Petrol is increasing. Under this National Government, they will continue to whack additional petrol taxes on in the future—that’s their plan. Of course, rates are increasing.

Currently, councils really only have two avenues by which they can generate revenue. The first, which we understand, is rates, and the second is through a traditional user fees and charges sort of approach. There are no other sustainable revenue streams that this Government seek to be promoting or indeed understanding as part of this bill that’s in front of us today.

We’ve been very clear that we intend to support this bill going through to select committee, but there is no guarantee that that support will exist beyond that. It is important that councils are able to share with the Parliament what is the impact of this proposed bill in its current form. That is extremely important because the Government’s own advice received from officials is that there has been an insignificant amount of time available to them to actually indicate what that would look like.

So the select committee process will provide the Parliament with an opportunity to consider exactly what that looks like. Councils need to be able to share what the impact is. We hear from the Minister that this is about maintaining a range of things, including pools and parks. Well, if this bill is implemented, what will pools and parks in terms of access mean for communities all around the country? Will it mean that there will suddenly be a price that will need to be introduced to access parks that are currently enjoyed freely by communities? Will it mean that libraries, pools, and other recreational spaces will suddenly have a charge associated with it? So I do invite councils to share directly with members of Parliament through the select committee process what this change will mean for them, given that the Government have not done their homework around this.

Now, just recently, we’ve heard that the average savings float around $34 a year—$34 a year in some quarters. So there needs to be a real consideration around are communities and households prepared to forgo $34 a year but the increase in charges and other fees is going to be far outstripped in terms of that number. This is yet again from a Government that promised to make the cost of living better and it has only made things worse. It’s very clear at the moment that New Zealand cannot afford another three years of National.

There are a range of issues here outlined in this bill that sending it to select committee will provide a little bit more sunlight to be the disinfectant on this bill, to ensure that things like the exemption process, things like the role of the Minister, things like whether the regulator is truly independent when, effectively, they are coming from the Minister’s own department—these are the sorts of things that need to be considered in the fullness of not just time but of a clear and transparent select committee process. So it’s on that basis that we support it going to select committee.

Thank you, Mr Speaker. I acknowledge the Filipino community up in the gallery. I’m sure they’re not here to listen to us at this point in time, but enjoy. I rise on behalf of the Green Party in opposition to this bill—an anti-democratic and completely at odds with the localism cry that this Government campaigned on last election. Elected councils are accountable to their communities for the decisions they make. If the residents don’t feel their views are being heard, they certainly make that clear.

What is also clear are that the figures that the Minister gave last week during oral questions on rate capping in the House were misleading. The Waitaki District Council annual plan increase of 16.9 percent included water services—the very costs that are excluded from this bill. Waitaki water services were 31.4 percent of the rates bill increase by 43 percent this year to meet their obligations under the Government’s approved water services plan. Without the water services, the savings would have been significantly less than the figure the Minister gave in oral questions.

What we will see with rates cap is that communities will have lower levels of services and higher user charges. The price to enter pools will become more expensive. The maintenance in parks will decrease. We could see library hours shortened and roading maintenance deferred. All this will lead to sweated assets. Roads and community facilities will deteriorate. It will cost communities more to fix and replace in the future.

What we’ve seen from this bill is there will be a new regulator. I ask the Government: will this be another cost to local government, just like they have to currently pay for the water regulator? Another unfunded mandate. What we’ve seen over the years is a significant proportion of the cost to councils are completely out of control of the council themselves: insurance, inflation, and let’s remember it is construction inflation—local government inflation—it is not Consumers Price Index. They are not buying cereal, they’re buying roading materials.

What about the Government mandates that they continue to push down on to councils, costing councils millions, whether that be changing road speed signs, reorganisations, and the Resource Management Act changes, just to name a few. We have seen numerous Government agencies and ministries outline the risks with a rates cap, and yet we have no idea of the evidence the Minister has shown that the benefits of a rate cap outweigh the many risks that have been identified. I’m guessing that’s because there is no evidence. Rates caps, coupled with the systems improvement bills, will hurt communities across the motu. What we need to be talking about is actually the funding sources that local government has: bed levies, GST sharing. Mayors and councillors across the country have had concerns and they are not being listened to. Councils do not push up rates just for fun, they do it because they have to.

As we have seen time and time again from this Government, those who will save the most are the wealthiest. Those who will save the least and will be most impacted by the higher charges are those who are the poorest. I’m sure that those who are wealthy and sorted with their multi-million-dollar homes and their multi-million-dollar holiday homes will be the biggest benefactors of this bill. The people—[Interruption] You heckle because you know it’s true. The people that this Government is here to serve: the wealthy and the sorted.

This bill is a ministerial power grab that enables the Minister of Local Government to change the rate targets and micro-manage council reporting at will through Orders in Council. So I ask: what happened to localism? It turns out that the Greens are its only champion. Kia ora.

Well, that last contribution was a little bit loose, wasn’t it? But let’s come back through the Local Government (Rates Capping) Amendment Bill. What this bill does is make sure that the population of New Zealand can be confident in their rates increases in the future years—no more blowout of budgets, no more “Next year is going to be higher and higher and higher.” It’s putting a cap to that. We as a Government are saying that local governments should do fewer things but do those things properly and deliver value for money.

A rates cap is part of what the Government is putting through right now and it’s a great thing to see this bill going to select committee with support across the House. But this Government has also done other things to enable affordability, better infrastructure, and local government to be able to make its way in the world. We’ve done infrastructure funding and financing reform, enabling infrastructure to be built and financed. We’ve got an infrastructure fund—$400 million—that incentivises local government to enable housing, one of the most important things for having a generational contract that makes New Zealand succeed in the future. In the ACT Party, we have got an announcement of a tourism dividend, a local fund that pays when councils around the country have higher and higher accommodation use in the short term. It makes sense. It’s a way to get it cheaply, affordably, and quickly for local government and is not another tax such as a bed tax.

This Government’s done other things this term. We have refocused the purpose of local government and we’ve done that through the Minister’s innovation of the Local Government (System Improvements) Amendment Bill. Local government has also had a champion in this House coming to you from a member’s bill in the name of Saint Stuart Smith. What that has done is said that local government needs to be accountable but also needs be able to manage and govern and for people to know their roles in that space. If you are a councillor, it is not good enough for you not to have access to the information that means you can make the right decisions for your community. Tauranga is a prime example, as Sam Uffindell can attest. We need to have councillors that have access to the information. We need to have clarity of roles. We need to have this bill now. Thank you, Mr Speaker.

SPEAKER: Thank you. We come now to a point where we’re not quite at the moment that we expected, I think.

Cameron Luxton: Mr Speaker.

SPEAKER: No, you can’t call twice. Have you got some point you want to make?

Andy Foster: Do you want to go straight to the speech behind me? I want to take five minutes, so—

SPEAKER: If this debacle could just go on for another minute and a half. [Interruption] Just a minute, please. Just calm down. Sit down.