No evidence that bigger councils are better, says expert

Experts have clashed over whether Wellington should emulate Auckland and amalgamate its local councils, in a public seminar jointly hosted by Victoria University’s Institute for Governance and Policy Studies and the Centre for Accounting, Governance and Taxation Research.

Introducing the debate, Graham Sansom, an adjunct professor at the University of Technology, Sydney, noted that the chances did not look good for super city proponents. Communities “usually vote against mergers when they get the chance”.

He also said there was no “straight-line relationship between the size of a council and its efficiency, and that mergers “usually fail to deliver the projected savings”. That said, the benefits of amalgamation – including enhanced strategic capacity – tended to “emerge over time”, and communities often were happy with the new structures, once change had settled down.

Shared services and joint planning arrangements – a popular alternative to amalgamation – were “often fragile … and fail to deliver solid results”.

Speaking against the super city, Philip Barry, a director of consultants TDB Advisory, said plans for full-scale amalgamation were “asking ourselves the wrong question”. The right question, he suggested, was “what should we amalgamate and not amalgamate in terms of the different functions that local government does?”

Despite claims that Wellington was doing badly, the city sat at the top of quality-of-life rankings, and in terms of regional GDP per person had outperformed Auckland over the last six years.

The three key criteria for any local government reorganisation, Barry said, were cost effectiveness, promoting local democracy and promoting improved economic performance.

When it came to cost effectiveness, the Local Government Commission’s analysis showed that the super city – which would produce $58 million in net present value benefits while incurring $210 million in transition costs – was greatly inferior to “stronger regional delivery”, which would incur benefits of $199 million and costs of just $129 million.

There was little evidence to suggest that larger councils were more efficient, Barry said. In the international research, 29% of studies found that middle-sized councils (of around 50,000-100,000 people) were most efficient. 39% found no relationship, 24% found councils became less efficient as they got larger, and just 8% found larger councils were more efficient.

When it came to promoting democracy, Barry said he was “very sceptical” that the proposed local boards would have any significant powers. “They can’t own property… they can’t raise debt, they don’t have power to regulate. They really are more a lobby group.”

In terms of improved economic performance, he said there was no evidence that the size of local councils affected the strength of the local economy.

Ultimately, Barry said, there were “smarter ways” to achieve improved regional cooperation where it was needed, on issues such as roading, the three waters and public transport.

Speaking in support of the super city, John Shewan, a former PwC chairman and current spokesperson for the Better Wellington lobby group, said the debate was about “what structural change allows the region to act in a more efficient and coordinated way”.

The current model didn’t deliver that, and would struggle even further with oncoming challenges around infrastructure, changing demographics, the environment and social pressures.

Amalgamation would give “far greater scope for improved economic performance”, and create the right incentives for local politicians to plan and execute and deliver on core services. It would also force the region to plan on a coordinated basis for natural hazards and disasters.

The proposed local boards would enhance local democracy significantly, with “more teeth and power” than their counterparts in Auckland.

“Although there is a risk with any model, this model is well grounded in theory and practice,” Shewan said, pointing to the way it drew on the experience of Auckland’s reform. “If you talk to the Auckland business community, and citizens, people are now coming around to saying, actually, this is delivering.”

A super city would allow quicker progress on projects such as Transmission Gully and the airport extension, and avoid local authorities “paddling their own canoe” on where to locate new housing.

The super city would also eliminate inconsistencies in the application of regulations across the region, and greater size would give Wellington “a much stronger hand in negotiations with government agencies”.

While others might hope that benefits could be gained by encouraging local councils to “play nicely together”, Shewan said he had seen too many promising ideas founder on councils’ inability to work collaboratively.