Increases to council rates (the cost of local government) are capped by the NSW State Government. I don’t fully understand the details of how this works but from what I can infer it basically means that councils can’t increase their income from rates and charges by more than a certain percentage above the previous year. That percentage being proscribed by the NSW Government and typically being a little above inflation. The following document discusses the situation from the perspective of local government:-
An extract from page 3 of the document follows:-
Sections 498, 499, 506 and 507 provide the Minister for Local Government the ability to control the income of NSW Councils. The limit on general rates is set by percentage increase and Councils are notified by advice in a Circular distributed by the Department of Local Government. The policy is described in Circular 01-29 issued by the Department of Local Government on 9 April 2001.
Rate pegging or limiting the growth in revenue from rates has had a long history in New South Wales originally operating in a limited form between 1901 and 1952. It was then reintroduced under the Premiership of The Honourable Neville Wran MLA in 1977. Its introduction was seen as a response to the economic conditions of the time including spiralling cost-push inflation. However, its history of use in New South Wales has no parallel in any other State.
Page 19 includes the full text of the current legislation which I won’t quote here. Whilst one can no doubt argue over the details it seems pretty clear that councils have managed to survive and even thrive in NSW in spite of income restrictions being in place for 83 of the last 108 years.
In this context it is amusing to hear the howls coming from councilors in New Zealand where the New Zealand Local Government Minister (Rodney Hide from the ACT Party) is seeking to install similar constraints. Although in fact the constraints proposed by Rodney Hide are far more democratic because they will involve automatic increases in line with inflation and unlimited increases if approved in a local referendum. I wish New Zealand well in taming the ambitions of local government councilors via a democratic straight jacket.
Of course this is all small beer compared to the possiblity of similar constraints being imposed on central government. Colorado in the USA has similar such income constraits imposed on their state government by constitutional means in what are refered to as TABOR laws. Past form suggests that Rodney Hide and the ACT Party see imposition of this type of straight jacket on the income of the New Zealand national government as part of their end game strategy. If they succeed then I’ll seriously reflect on the merits of moving to New Zealand.