The New Zealand Productivity Commission has recently released a draft paper for discussion on the effect of local government regulation on productivity across a number of different New Zealand sectors and industries.

The draft report, which is part of the Government's "Better Local Government" reform programme, has been prepared after substantive consultation with local government bodies and over 1500 businesses from a range of industries. The report in its final version may be used by the Government for future reforms to local government legislation.

The Report focuses on the tension between local and central government, largely due to the fact that local government functions are largely dictated by central government through prescriptive legislation. The Commission considers that this has resulted in an unwillingness and inability of local government to self-regulate and make "fresh tracks" into new regulatory areas.

While the Report criticises the constraints on local government, it does recognise that, in some instances, restraint by local government and deference to central government is justified, for example where:

  • matters subject to regulation are inter-jurisdictional in nature;
  • issues are common to multiple regions or districts, and it is more cost effective for a central government body to deal with the issue;
  • duplication is justified by regions' similar regulatory preferences and demands; and
  • necessary resources are only available from central government.

However, despite these exceptions, the report considers the true value of local government is that it is closely connected to the community within which it is carrying out its regulatory functions, and as such, local government should be given sufficient autonomy to regulate matters which fall within the "local" domain.

The Report also focuses on the inconsistency of approaches being taken by individual councils. Whilst national environmental standards and other forms of national regulation, have been created to encourage a nationally consistent approach to environmental regulation, these standards have applied differently at a local government level. The Report recommends that communication between local authorities, and between local and central government authorities, is improved in order to ensure consistent regulatory approaches.

The Report proposes a variety of ways forward, including:

  • increasing dialogue and collaboration between local and central government;
  • ensuring that local government bodies have the capacity to execute functions delegated to them by central government;
  • central government assistance in transitioning local government into new regulatory regimes; and
  • developing methods to assess the performance of local government.

The Commission is currently calling for submissions on its draft report, with the closing date set for 6 March 2013. A copy of the Report can be accessed here. The Commission is due to release a final report on 1 May 2013.