The Local Government Bill - Time for a Reality Check

David McGregor, Senior Partner and Michelle Smith, Solicitor | May 2002

Introduction

Much of the debate on the Local Government Bill has centred on the so-called power of general competence, which may extend the authority of local authorities to act on their own behalf. As usual, what the legislature gives with one hand, they take away with the other. While the broad scope of power to act may be extended, the devil is in the detail.

The reality is that in relation to its every activity, local government will have to scrutinise its own activities to an extent never before required.

Fettered power of general competence

To begin with, the power of general competence may only be exercised "for the purpose of performing its purpose".

Local authorities have a defined purpose, which is:

to enable local decision making, by, and on behalf of, individuals and their communities, to democratically promote and action their social, economic, environmental, and cultural well being in the present and for the future.

Those powers may be exercised only to the extent mandated in accordance with the decision making processes set out in Part 5. These include the principles of decision making, consultation and financial management. These principles are illustrated on the diagram which may serve as a check-list.

But before a local authority gets off the block, so to speak, it must comply with principles relating to local authorities set out in clause 12 of the Bill. In performing its purpose and exercising its powers, a local authority must endeavour to comply with eight separate principles in that clause. These range from making decisions that most effectively contribute to the advancement of the Council's priorities and achievement of its desired outcomes, to ensuring prudent stewardship in the efficient and effective use of resources in the interests of the district.

In between, there is:

• transparency and accountability;
  
• recognition of diversity;
• community involvement in decision making;
• opportunities for Maori to contribute;
• co-operation with other relevant bodies; and
• the need to make commercial transactions in accordance with sound business practices.

In addition to these general principles, there are six governance principles, and a set of management principles in clauses 24 and 25. The governance principles are aimed at the performance of elected members and the relationship between elected members and staff. For example, a local authority must endeavour to ensure "the governance role and expected conduct of elected members is clear and understood by elected members and the community." That is a major task in itself.

The management principles require that the management role is clearly understood, and that the management structure is adequate and reflects the separation of regulatory responsibilities and decision making processes from other responsibilities and decision making processes.

The eight decision making principles require the promotion of community outcomes, and openness and clarity in decision making processes and records. The benefits of a significant decision must also be assessed to determine whether they are sustainable. When making significant decisions, the local authority must take into account community views and the relationship of Maori with their taonga and ancestral areas.

Processes must be established that provide opportunities for Maori to contribute to decision making. Activities that might foster the development of Maori capacity to contribute are also to be considered. Relevant information must be provided to Maori for the purposes of contributing or fostering contribution.

The principles of financial management are provided to guide a local authority in its financial dealings. The subpart of the Bill on financial management is intended to promote prudent, effective and efficient financial management. Adequate and effective provision for expenditure needs must be made in the local authority's annual plan and long-term community plan. For decisions with significant financial implications and for strategies to be included in community plans, a cost-benefit analysis must be undertaken. Meeting revenue and financing needs is to be accomplished by mechanisms the local authority considers appropriate. In determining those mechanisms, consideration must be had to specified matters. These include community outcomes for the activities to be funded, current revenue and financing policies and the distribution of benefits in relation to the activities being funded.

Implications

The Bill will lead to a significant increase in formal consultation. Local authorities are empowered to determine their own consultation procedures, to the extent that a procedure is not prescribed by the Bill. Not surprisingly, the Bill does prescribe principles of consultation. These require a local authority to deliver appropriate information, using the appropriate means of delivery to particular communities of interest, so as to ensure the consultation is meaningful. The consultation undertaken must be in proportion to the significance of the proposal concerned, and provide a reasonable opportunity to make submissions and reasons for its decisions. Appropriate processes for consulting Maori must be in place.

There is also a defined "special consultative procedure" which applies before adopting a long-term council community plan, an annual plan, or making a decision on a "significant proposal". There are two separate sections to determine whether a proposal is "significant". In addition the local authority is required to adopt a policy setting out its general approach to determining which decisions are "significant".

The increased consultation requirements may prove to be a procedural straitjacket, impeding timely progress on any potential development contemplated by a local authority.

The risk of failing to make decisions or exercise powers in accordance with these principles is significant. The exercise of statutory powers including decision-making by a local authority can be challenged in the High Court by judicial review. This discretionary remedy can be sought where it is alleged that the decision of the local authority is ultra vires, unreasonable, or did not take into account proper considerations. Judicial review is also available if the rules of procedural fairness are not observed. The requirements for adherence to the principles of the Bill, and for defined consultation and decision-making processes provide a raft of opportunities for judicial review. Community groups, special interest groups, or even aspiring local government politicians may find these provisions in the Bill offer a chance to delay or overturn decisions they oppose.

Conclusion

It has been anticipated that the enactment of a general power of competence would encourage local authorities to take a greater role in developments within their territorial jurisdiction. What may not have been anticipated is the quagmire of detail that must be traversed in order to exercise that power. Local authorities must now develop procedures that prevent them becoming bogged down in that detail, and give real substance to the power of general competence.

While it is tempting to conclude that process may render the power of general competence nugatory, equally it can be claimed that these processes are already an integral part of local government decision-making by those adhering to best practice.