Dr Muriel Newman: REFORM UPDATE

The Coalition’s proposed shakeup of local government is well underway. Time is now running out for councils to decide on the shape of their mergers.

This is not the first time local councils have undergone major structural reform. Let’s see whether any lessons have been learned. 

In the 1980s, New Zealand had around 850 separate elected local authorities serving our 3.3 million population. This included 250 city, county, and borough councils operating alongside hundreds of single-purpose boards including pest destruction boards, drainage boards, and harbour boards.

Controlling all of this was difficult for any sitting government, especially as communities had been empowered with a mechanism in the 1974 Local Government Act that enabled any merger efforts by central government to be defeated.

A poll provision in the Act gave locals an effective power of veto over unpopular amalgamation proposals. If the Local Government Commission planned to combine councils, residents could block the move if 15 percent of voters signed a petition requesting a public referendum – and if more than 50 percent of registered voters opposed it.

Despite that extremely high bar, fearing the loss of their local identity and concerned about rate increases, communities routinely mobilised in sufficient numbers to block amalgamation attempts. 

Frustrated by local opposition, the Lange Labour Government introduced the 1988 Local Government Amendment Act that removed the veto rights of communities and granted Sir Brian Elwood’s Local Government Commission temporary powers to issue binding reorganisation schemes.

Using this mechanism, Labour was able to force through amalgamations that consolidated the number of local authorities to 86.

Prior to the reforms, local body rates were low. With minimal bureaucratic overheads, smaller councils were able to hold down compliance and administrative costs. Councillors and board members were highly accessible with street level engagement commonplace. Local working bees and other community-led initiatives that helped maintain parks and public spaces, fostered a level of social cohesion rarely seen today.

That sense of community diminished in many areas following the 1989 amalgamations. While those promoting reform said the benefits would eliminate inefficiency and duplication, creating organisations that would deliver lower rates - the very same arguments being used by the government today – the record shows otherwise.

In the immediate aftermath of the 1989 reforms, New Zealand experienced some of the highest rate increases in our history. Hundreds of local boards that were often volunteer-driven were replaced with professional bureaucracies, as highly paid managers drove up costs. Cross-subsidisation of rates was rife with larger councils demanding higher payments from new ratepayers to fund more costly amenities and higher debt.

And now, almost forty years on, the reality is that while Labour’s reforms most certainly resulted in the widespread consolidation of local government, the mergers failed to deliver the downward pressure on rates that was promised, as larger councils expanded their balance sheets and borrowed aggressively.

In other words, if amalgamation weakened accountability and drove costs up in 1989, is there any reason to believe that even more heavy-handed mergers can deliver the opposite today? And if ratepayers are already disillusioned under the present system, what chance is there that they’ll feel better off after the reforms?

So, what are the Coalition’s amalgamation demands?

In November last year, consultation was invited on a plan to “simplify” local government. It was claimed that 11 regional councils, 11 city councils, 50 district councils, and 6 ‘unitary authorities’ involved too much fragmentation to deliver the streamlined system planned under the resource management reforms.

In response to the feedback, the “Head Start” programme was announced in May, giving local authorities three months to submit amalgamation proposals to the Government before the 9 August deadline. The Coalition believes that by working with neighbouring councils to combine regional and territorial functions into one or more unitary authorities, restructured councils will better support the new planning system, reduce duplication, and deliver services more efficiently.

Any council that fails to agree on a plan will have a default arrangement imposed, so the Government can phase out regional councils altogether and deliver fewer, larger unitary authorities after the 2028 local body elections.

Without a doubt, these reforms represent the most significant restructuring of local government since 1989. But - as was the case back then - local residents and ratepayers have been locked out of the process.

Under current law, Schedule 3 of the 2002 Local Government Act requires that any council reorganisation proposal can only proceed if it wins majority support in a binding referendum run by the Local Government Commission.

However, the Coalition has sidelined the referendum safeguard by replacing the Local Government Commission’s statutory restructuring responsibilities with its Ministerial‑driven Head Start process. With the public’s right to approve or reject proposed changes now removed, councils are being forced to reorganise without the consent of the communities they serve.

Not only is this heavy-handed and anti-democratic, it is also deeply ironic.

Back in 1988, when Labour was pushing through the legislation to deliver local government reform, National was fiercely opposed: by stripping communities of their democratic right to demand a referendum on amalgamations, they accused Labour of totalitarianism - and insisted the public should have the right to determine the makeup of their local authority.

National argued that no government had the moral authority to abolish councils, redraw boundaries, or impose new structures without first securing the consent of the people affected, and they condemned Labour for centralising power, ignoring local voices, and forcing through changes under urgency.

National took the same stance in 2021 when Labour’s Nanaia Mahuta abolished long‑standing petition rights over Maori wards. Again, they argued that stripping ratepayers of the ability to challenge structural changes was an unacceptable erosion of democratic safeguards.

Yet today, National is doing exactly what it once condemned — removing the public’s right to approve or reject major local body restructuring and forcing councils into amalgamation without community consent.

The party that once insisted that local democracy must not be sidelined is now sweeping it aside.

By suspending the referendum safeguard, the Coalition’s Head Start programme has not only silenced communities, but it has imposed on councils an impossibly tight timeframe to decide on amalgamation proposals before the election.

Their justification is familiar: in 1988 Labour said reform was urgent, the system was fragmented, and central direction was necessary. National is now saying virtually the same thing.

But political urgency should not over-rule democratic rights. A restructuring of the magnitude of what’s being proposed should not be imposed by Wellington. National once understood that principle. It needs to honour it again.

Communities must be given the opportunity to properly consider the restructuring options that are being planned by their councils - so they can constructively engage in the process.

A growing number of Mayors from all around the country are now asking for more time. They want local referenda restored so communities can decide their own futures – as Wellington Mayor and the chairman of the Wellington Regional Forum Andrew Little recently explained:

“For me, the bottom line is this - local people should decide the future of their local governments. Local government belongs to the people of this city and this region. It does not belong to mayors or councillors. It certainly does not belong to the Beehive or unelected council chief executives.

“Any change to our local governance arrangements must have public buy-in. That means people need proper information and enough time.”

Looking objectively at the shape of local government in New Zealand, there are clearly situations where combining councils makes a great deal of sense – as voters in Wellington’s Hutt City and Porirua City demonstrated when they supported the concept of a merger in non-binding referenda that were held during last year’s local body elections.

In addition, folding regional council responsibilities into district and city councils, to turn them into unitary authorities again appears to be sensible, as the six unitary authorities that are already operating this structure - Auckland Council, Chatham Islands Council, Gisborne District Council, Marlborough District Council, Nelson City Council, and the Tasman District Council – demonstrate only too clearly.

However, given New Zealand’s geography and sparse population, expecting full mergers between distant and disparate councils defies common sense - as this week’s NZCPR Guest Commentator, Kaipara District Councillor and former Mayor Craig Jepson explains:

“Switzerland thrives with highly localised governance, strong subsidiarity, and empowered communities. It is ‘over‑governed’ on paper but well‑governed in practice. New Zealand, by contrast, is under‑governed — too much power sits with bureaucracies, not communities. Amalgamation would make that worse.

“The proposal to amalgamate Whangarei District Council, Far North District Council, and Kaipara District Council into a single super‑authority is being sold as efficiency. In reality, it risks creating a distant, debt‑laden bureaucracy that weakens rural communities, strips local voices, and repeats Auckland’s mistakes on a smaller scale.

“When Auckland amalgamated, ratepayers were promised efficiency. Instead, the super‑city produced over 8,000 more bureaucrats than the combined former councils. Large CCOs like Auckland Transport became unanswerable behemoths — expensive, distant, and disconnected from communities.

“Northland is being told to follow the same blueprint. We should be running in the opposite direction.

“Kaipara District Council is one of the strongest arguments against amalgamation. While Whangarei and the Far North carry significant debt, Kaipara has next to none. We have kept rates comparatively low, invested wisely, and delivered real results — not through empire‑building, but through being small, nimble, and accountable.

“Amalgamation would bury that success under layers of bureaucracy, consultants, and corporate directors — the very structures that failed Auckland.”

There are many reasons the Coalition should press pause on its local government reforms — not least because bigger is not always better, and in many areas smaller, more tightly prescribed councils would serve communities far more effectively. But the central concern is the draconian nature of the approach being taken. It not only disregards the wishes of local communities; it tramples on their rights to determine how their assets are managed and how their voices are represented around the decision‑making table.

The reforms should be put on hold until after the election, and the democratic rights of ratepayers to have a say restored.

One final point. It’s increasingly obvious that in many parts of the country iwi leaders have gained a disproportionate influence over local government. Through the help of council staff – but without ratepayer approval - multiple advisory positions have been created on council committees and a wide variety of co-governance arrangements have been put in place. These include Mana Whakahono a Rohe agreements, Memoranda of Understanding, Joint Management Agreements, Iwi Participation Arrangements, Strategic Partnership Agreements, and Cultural Impact Agreements - to name but a few!

In some regions, iwi authority has now become so dominant that they are proposing Head Start mergers to restructure local government around tribal boundaries and a Maori world view.

With iwi influence over councils coming at the expense of democratic accountability and ratepayer rights, the future of local government is now under genuine threat.

The Coalition, elected on a mandate to end co‑governance and race‑based policies, must now make it clear that none of those existing iwi–council agreements will be carried forward into larger, more powerful merged councils, where they would further erode public control over local democracy. In other words, just as the Coalition has ruled out Mana Whakahono a Rohe agreements from the new planning framework, so too they must now rule out all special arrangements between councils and iwi from the amalgamation process. Anything less would entrench the very co‑governance structures they promised to dismantle.

As the Coalition’s first term in Government comes to a close, their focus must be on strengthening democracy, not weakening it. They also need to be clear: pausing their local government reforms until after the election to enable ratepayers to have the final say on any proposed council merger is not a delay — it’s democracy in action, and the only legitimate way to reshape local government.

This article was first published at NZCPR. Dr Muriel Newman established NZCPR as a public policy think tank in 2005 after nine years as a Member of Parliament. A former Chamber of Commerce President, her background is in business and education.