Income Redistribution Not a Local Government Role

A new report argues that income redistribution policies should continue to be the responsibility of central government, not councils.

The report, Income and Wealth Redistribution: Should it be a Role of Local Government?, was released today by the Local Government Forum.

The report on income redistribution follows the Forum’s earlier reports Democracy and Performance: A Manifesto for Local Government (2007) and Local Government and the Provision of Public Goods (2008). These explained why councils’ basic role should be the provision of local public goods, that is, goods and services that cannot readily be supplied by the private sector (unless through contracts).

The Forum’s latest study confirms the findings of a 1988 report by central government officials which concluded that councils should focus on public goods provision and that the explicit redistribution of income and wealth should remain the responsibility of central government.

The study explains that councils do not generally have the information necessary to implement income distribution policies; that such actions might clash with national income distribution goals; and that council programmes such as housing may impose costs on ratepayers that would otherwise fall on taxpayers.

It concludes that explicit income redistribution policies, including business rate differentials above the general rate and the rates rebate scheme, should be abolished.

Releasing the report, Local Government Forum chairman Charles Finny said that its findings were consistent with longstanding disciplines on council activities, which had been weakened by the 2002 Local Government Act.

“We hope that this report and other Forum studies will encourage the government to review that Act and to look critically at any income redistribution proposals arising out of the report of the Royal Commission on Auckland Governance.”