Localism: Will Humpty Dumpty crush local government?

The recent election has rung down the curtain on what has almost certainly been the most centralising government New Zealand has ever seen.

It’s been replaced by what seems a much more appealing idea; localism. This article explores what that could mean and highlights the serious dangers for local government because there is no shared understanding of localism. Current discussions, when examined closely, imply a range of possibilities from localism as load shedding from central government to localism as voice choice and control for communities.

The New Zealand Initiative (NZI) sees localism as the common thread linking together the three potential coalition partners. Christopher Luxon as incoming Prime Minister has strongly embraced the concept, stating in a recent interview with Andrea Vance, a senior Stuff political journalist, “We believe very strongly in localism and devolution.” Elements of both ACT’s and New Zealand First’s policies have also been seen as consistent with localism.

Local Government New Zealand (LGNZ), looking to reposition itself in response to the report of the Future for Local Government Review Panel, is strongly promoting localism (see www.localism.nz ). It sets out its vision as:

·?????? Localism provides a way to strengthen and build upon those things that make us special - developing better, local solutions to problems, fostering stronger local ties and engagement, and, ultimately, ensuring the places where people live and work become the places they want them to be.

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·?????? It’s about creating a brighter future for Aotearoa and our communities by harnessing the power of local decision making. When localism is in action, communities are supported by councils who bring together, enable and empower citizens to develop local solutions, and strengthen wellbeing.?

Enter Humpty Dumpty

“When I use a word,” Humpty Dumpty said, in rather a scornful tone, “it means just what I choose it to mean – neither more nor less.” “The question is,” said Alice, “whether you can make words mean so many different things.” “The question is,” said Humpty Dumpty, “which is to be master——that's all.

Humpty Dumpty has posed the vital question; “which is to be master?” LGNZ speaks in glowing terms of localism but nowhere provides a description of what it actually means in practice - it has simply provided a series of case studies of councils doing good things with their communities but with nothing in the case studies to differentiate those council examples from a number of equally impressive examples which individual central government agencies could produce from their work. Where is the evidence based research which substantiates a unique role for councils in localism?

Left unexplained is who would hold what decision right at a local level, would communities become decision-makers with authority, or simply the subjects of a somewhat more empathetic but still inherently top-down process under which the Council remained the decision-maker. How will communities manifest themselves in some manner which will give them a measure of permanence, and the structure/capacity to become partners in decision-making?

The potential coalition partners are equally vague; ACT cites specific initiatives it wishes to put in place including restoring charter schools but seems not to have any great ambitions for local government/local governance - its website still showcases this statement from its local government spokesperson: ““Our communities want their councils to get back to the basics. Water, rubbish, housing and roads is what councils should be focussed on. The last thing they need is another word salad from the Government like the Review into the Future for Local Government”.

New Zealand First presents itself as the party of the regions but has no specific policies on local government or local governance other than comprehensive opposition to what it understands as co-governance.

So, what might Humpty Dumpty mean?

First, who in this discussion is playing the role of Humpty Dumpty? Almost certainly the New Zealand Initiative. In 2018 LGNZ and the New Zealand Initiative jointly launched the Local Government Position Statement on Localism (see: https://www.lgnz.co.nz/our-work/publications/local-government-position-statement-on-localism/ ). Although LGNZ was a very willing participant, it was the New Zealand Initiative which provided the policy rationale and developed most of the arguments for the benefits from a radical, by New Zealand standards, policy of devolution. This was based largely on a 2011 OECD working paper “Decentralisation and Economic Growth - Part 1: How Fiscal Federalism Affects Long-Term Development”. This extract from the paper’s abstract summarises the principal results:

decentralisation, as measured by revenue or spending shares, is positively associated with GDP per capita levels. The impact seems to be stronger for revenue decentralisation than for spending decentralisation. Decentralisation is strongly and positively associated with educational outcomes as measured by international student assessments (PISA).

The paper is much more nuanced and qualified than the LGNZ/NZI paper. That is not the only reason for exercising significant caution in assuming devolution in the New Zealand environment as advocated by LGNZ/NZI would on balance result in improved outcomes for communities. In considering different models for local government, context is crucial. Typically the present role of local government in any given jurisdiction is very much a product of the history of that jurisdiction. As one example, most European countries, which comprise the majority of OECD membership, are of relatively recent origin as nation states bringing together a multiplicity of formally self-governing cities, principalities et cetera. New Zealand, as a Westminster jurisdiction country, comes from a long tradition of centralised top-down governance. In contrast to many OECD countries, there is no deep-seated commitment to region or place such that extensive devolution is inherent to the preservation of the nation state.

So, what might the NZI mean by devolution? Perhaps the best indication is this statement from the joint LGNZ/NZI position statement on what would localism mean for New Zealand:

A localist future is one in which public policies and programmes are designed from the “bottom up”, rather than “top down”. Instead of a “one size fits all” approach, public policies and programmes should be designed to be sensitive to local needs and circumstances. This requires re-distributing roles and function between central and local government.

At this point it is important to stress designing public policies and programs from the “bottom-up” rather than “top-down” does not necessarily imply delivery is the responsibility of a series of localised entities. It’s entirely consistent with the “bottom up” having a strong decision-making role over how services are designed, targeted and delivered that delivery remains the responsibility of central government albeit within a very different accountability framework.

It’s clear from reading both the OECD report, and various statements from the New Zealand Initiative, that for Humpty Dumpty localism means responsibility for major services being passed from central government to local entities, presumably councils, along with one or more means for funding those services. Responsible advocacy for this kind of shift means much more than simply highlighting presumed benefits. Especially in an economy such as New Zealand’s with the challenges it faces, it means a razor-sharp focus on just exactly what this shift would mean in practice - who would be doing what and how? What capacity and capability would be required? Would such a shift be manageable at a local level or place such undue stress on local entities and the demands of service delivery that we would be facing a worse collapse than what is currently happening with the health system?

This means taking a hard look at three separate issues:

·?????? Capacity and capability.

·?????? Funding.

·?????? Risk.

?Capacity and capability

The OECD report notes that the two most common services delivered locally in jurisdictions where there is significant decentralisation are health and education. Are advocates for devolution seriously proposing that New Zealand’s local authorities should take over responsibility for health services? Clearly this could not be territorial authorities - we do not need 67 territorial local authorities taking responsibility for health services within their districts. Does this mean 11 regional councils becoming a reinvention of district health boards? How sensible would it be to impose this kind of shift on councils which are already seriously overstretched for a variety of reasons including the damage done to staffing by the way the previous government approached resourcing the intended three waters entities? What other services might the incoming government wish to devolve? Education? Police? Social welfare? These are all services which are commonly delivered by local government in other jurisdictions and, if they remain a central government responsibility under current arrangements would mean New Zealand still had quite a highly centralised government.

Funding

The OECD report put more emphasis on decentralisation of revenue than on decentralisation of spending in terms of the benefits that come from decentralisation. Generally, this has been achieved by ensuring local government has sufficient ‘own source’ revenue to meet the costs of service delivery. In practice this means giving local government access to major taxes - in New Zealand this would mean either a dedicated share of one or more of income tax, corporate tax and GST or the power to impose their own equivalent taxes. It is extremely difficult to see any New Zealand government agreeing to this kind of shift in power.

An alternative is the approach which has been followed in the United Kingdom; central government commits to supplementing local government ‘own source’ revenue with a transfer from central government revenue. For many years this was done through what was known as the revenue support grant established in accordance with a formula intended both to achieve a measure of horizontal equity as between different councils, and overall to be sufficient to fund an adequate level of services.

Risk

There are two aspects which matter - the risk that whatever funding arrangements are in place may not be adequate to cope with increased costs and or demand and the risk that the funding itself may be significantly reduced or removed but with councils remaining responsible for the associated services. The first risk is minimised where councils have independent authority over their ‘own source’ revenue. However, where funding comes via a government grant the risk that government may not fully compensate for increased demand costs is substantial.

The second risk is a showstopper. The closest parallel to what seems to be in mind for devolution in New Zealand is the situation in the UK. For many years the revenue support grant was sufficient to support the delivery of the major social services for which local government was responsible. With the election of the Conservative government in 2010 and its focus on reducing the budget deficit, this changed. The revenue support grant was drastically reduced (much easier for ministers to cut funding for local government then to cut funding for services for which they or their colleagues held ministerial responsibility). Over the following decade councils lost as much as 40% of their total revenue without any reduction in service delivery obligations. Many UK councils are at or close to the equivalent of bankruptcy as a result. No one interested in preserving responsible local government would support exposing it to an equivalent of the UK situation.

There is a further risk which also needs to be considered. Technically it is possible to devolve services, but that does not involve political responsibility. It’s hard to believe that the New Zealand public would accept central government no longer had accountability for the effectiveness of service delivery simply because it had been devolved to local government. It seems virtually certain that devolution of major services would be accompanied by intense ministerial oversight.????????????

The Luxon variation

The Andrea Vance article already referred to includes this statement about what could be Christopher Luxon’s priority for and currently perhaps only initiative for devolution:

Luxon … advocates a ‘city or regional deal’ model – identifying a package of priority projects such as transport, housing and other infrastructure and establishing a growth benchmark, usually a local GDP, then shifting control of decisions away from central government.

If this were the only devolution, it would leave much of current central government policy still highly centralised and immune from significant community input. The ‘city or regional deal’ model will also be open to exactly the same issues as have just been discussed including what looks to be? significant bureaucratic complexity - for example how could a government at the same time deliver the certainty for industry which National party policy intends to enable through the establishment of a thirty-year infrastructure pipeline when the ‘city or regional deal’ model proposes shifting control of decisions away from central government?

The Luxon variation suggests a willingness to explore different options, and highlights the need to learn a great deal about how different options have worked in other jurisdictions (there is a very real risk the benefits of PPPs are often oversold).

Localism as it should be

The argument that too much decision-making is centralised in Wellington creating a pressing need to shift responsibility for determining how best to design, target and deliver services much closer to the actual recipients is compelling. And it’s not just about efficiency. There is now a great deal of research internationally supporting the proposition there is a strong positive correlation between community well-being and the extent to which people feel their voices are heard and they are able to shape decisions affecting their place. The Carnegie UK trust has been a leader in much of this work. The report of Locality’s commission on the future of localism, chaired by a former head of the UK home civil service makes a strong case for shifting decision-making from Whitehall past councils to communities and has given rise to the mantra ‘voice, choice and control for communities over decisions that affect their place’.

This does not mean communities taking over the management and control of services. It does mean strong community control over how those services are designed, targeted and delivered. This imperative has seen an increasing emphasis on the place of communities, and different tools for ensuring a strong and informed voice on the part of communities ranging from the development of anchor institutions, through to participatory budgeting, to local place planning and enabling and empowering self-identifying communities (this reflects the reality that it is the people of the place who know the place, not officials applying a statutory formula).

It is time to put Humpty Dumpty to one side and assert the reality that localism is based on a shift from ‘top-down’ to ‘bottom-up’ which empowers the voice of community.

The experience, the research, and the support needed to enable localism in this sense is now readily available. Local government now has the opportunity of choosing localism with the choice being between Humpty Dumpty and a serious risk to the future of local government, or localism as empowered community voice, immensely strengthening the place and relevance of local government.

The local governance think tank is firmly on the side of localism as empowered communities. It is strengthened in this commitment by a wealth of international research, practice and support. To learn more visit https://www.lgthinktank.org.nz/our-choose-localism-strategy