Local Government (Rate Increases) Amendment Bill

Second Reading

Adjourned debate on second reading.

(Continued from 26 May 2016.)

The Hon. G.G. BROCK (Frome—Minister for Regional Development, Minister for Local Government) (10:50): I would like to speak on the Local Government (Rate Increases) Amendment Bill that is before the house at the moment. I rise to make a contribution to the debate on this bill as the member for Frome. I have made my position very clear on the issue of rate capping, and, as part of my agreement with the Premier to form a stable government, a commitment was given not to introduce rate capping in this term of government.

I am aware that the member for Goyder blatantly made a number of appearances at various local government meetings to talk about his rate capping bill. But, of course, as the member for Giles pointed out in his speech when he read out some of the letter written by the Mayor of Kimba, that type of consultation was after he had introduced the bill. The member for Goyder was telling them what he had done, not generally consulting on the issue, and certainly not waiting for the findings from the Economic and Finance Committee's inquiry, which the opposition had urged.

There is no doubt rate capping arouses a level of popular support, particularly if the debate is pitched merely at the question of whether or not the public might like council rates to be low. I share the concerns of other members in this place about cost-of-living pressures, and I welcome the government's introduction of the $200 per year cost-of-living concession, which was increased above the former council rates concession of $190. I also commend those councils that offer further support and concessions to vulnerable individuals, groups, and those doing it tough. However, when the consequences for communities of such a policy are fully considered, it will be seen by many as a less desirable approach to ensuring an appropriate balance is struck between council revenue raising and expenditure.

In terms of assisting communities to better understand the need for that balance, councils themselves have a large role to play. I will say more on this aspect shortly, but I would like to outline some of the key concerns that I have with rate capping generally, and with this bill more specifically. It is my view that councils, as a tier of government, should be held accountable to their electors, and not to an unelected external administrative body like ESCOSA. Councils need to have open conversations with their communities about how they will address the needs and the interests of the community through their council's rating policy.

As the member for Goyder is aware, councils adopt their annual business plans, budgets and rating strategies between 1 June and 31 August each year. Since 2007, each council has been required to go through a process of producing a draft business plan and consulting its community on the proposed spending and revenue requirements of the draft plan. Each council must take into account the views expressed by its residents and ratepayers before finalising its annual business plan and setting rates.

The Local Government Act 1999 also requires councils to make reasonable provision for rate relief where appropriate, consider setting a maximum increase in rates for principal places of residence, and offer the holder of a state Seniors Card the opportunity to defer a prescribed proportion of rates. Ultimately, council budgets and rates need to be set in the context of the council's strategic management plan, long-term financial plan, and decisions around the level of services and revenue required for the coming year, together with community consultation outcomes.

Section 123 of the act includes specific requirements for public consultation by councils about their draft annual business plans. This includes notification to the public via a newspaper and on the website about the preparation of these draft plans, and an invitation to attend either a public meeting or a meeting of the council at which the public can ask questions and make submissions regarding the draft annual business plan.

While the act sets minimum requirements for consultation on these matters, I am aware that some councils do more to engage with their communities. However, I think it is evident that many councils need to engage more effectively with their communities about budget and rate setting. That is why I have written to the president of the Local Government Association reiterating my opposition to rate capping but also urging that the LGA take a strong leadership role to have all councils implement more effective means of consulting with their communities. That includes making use of more contemporary methods of direct engagement with individual households and organisations.

Mr Griffiths: That's what I'm talking about.

The DEPUTY SPEAKER: Order!

The Hon. G.G. BROCK: As the Minister for Local Government, I have been pleased with the enthusiasm of the sector to adopt some reforms that will ultimately serve our communities better, especially around improving council boundary change processes, and I am hopeful of getting the same kind of response on this issue. I am always cautious when looking at other jurisdictions for inspiration in tackling issues on our home front.

For a start, I think South Australia leads the way in many respects in local government, and direct comparisons are not always easily made. There is the usual problem of trying to compare apples with pears. There is a wide range of responsibilities and activities that councils across our nation are involved in and there is the usual problem of trying to compare apples with pears. I am aware that the inquiry into rate capping being conducted by the Economic and Finance Committee has been taking evidence from a number of sources, some of whom have drawn attention to the New South Wales experience of rate capping—the jurisdiction with the most extensive history of using that approach.

I acknowledge the significant experience of the member for Goyder as a senior officer in various local government areas, including a stint in New South Wales, but I also note the concerns raised by a respected South Australian chief executive who appeared before the committee on 28 August last year. He had also been a CE in a New South Wales council previously and, in his view, the ultimate revenue decisions remained in the hands of the elected members and, in his experience of councils here, they were responsive to community feedback.

In terms of his New South Wales experience, he expressed the view that, with rate capping, the focus of the council was very much on struggling year to year to maintain existing infrastructure and not on taking up new opportunities or introducing new services. Regarding the New South Wales council he had worked for, he concluded the following:

It was working, if anything, simply on a simplistic year-to-year costcutting process. You can do that for a little while, but you end up cutting into services and genuine capacity.

Of course, a reduction in services to communities and backlogs in maintenance and new infrastructure are one possible set of consequences that could arise from council rate capping. Another consequence could be that councils look to raise what is considered to be necessary revenue by increasing various fees and charges for other services. This would be a particularly blunt approach and would tend to impact the more vulnerable in the community who draw more heavily on those council services.

New South Wales has a process something akin to what the member for Goyder is proposing here, whereby councils that want to set rates above a cap need to make a submission to the Independent Pricing and Regulatory Tribunal. While not setting out to denigrate a process used in another jurisdiction, I note that according to the advice that I have received for 2015-16, 22 councils applied for special variations, with 21 being fully approved and the other partially approved.

I am not sure why we would be seeking to set another layer of red tape for councils and divert precious resources to that process, from both the state and councils, particularly if we followed the New South Wales pattern where it seems to be 'ask and you will receive'. I would very much prefer to have councils engaging in a mature and direct fashion with their communities and getting the right mix in terms of how revenue is raised, how much is raised and how it should be expended. Indeed, I think the member for Goyder and I seem to share similar views on this point. In his report as CE in the 2002 annual report, a year that saw rates increase by something like 15 per cent, he wrote:

While our budget approaches the $17 million mark, thus creating the capacity to undertake large projects, the need for improved infrastructure across so much of our community makes the budget setting process a fine balancing act of determining priorities.

I commend the member for Goyder, when he was the CEO, for at least trying to be open with the community and having a genuine conversation about how his council made budget and rating decisions. Quoting a little more from the CE's report from the same document under the title Challenges Ahead, the now member for Goyder went on to write:

The Elected Members recognise that the majority of Council income, and as such the ability to provide services, is dependent upon the willingness and the ability of property owners to pay the rates based upon their valuations.

The challenge of finding a 'middle ground' in which sufficient income is received to provide the range of services required, while being at a level of cost that is acceptable to the property owner, is always foremost in the thoughts of Elected Members when considering and adopting budgets.

I have to say that I tend to agree with the member for Goyder's assertions. It does not sound to me like the language of rate capping. This leads me to believe that this bill is more about playing popular politics than developing sound local government policy. At a time when local government is showing a willingness to step forward and play a significant role in helping to transform our economy and create jobs, I do not understand why we would be sitting here seeking to tie up councils in a bureaucratic rate capping process. I cannot support this bill.

The Hon. J.M. RANKINE (Wright) (11:01): The Liberal Party went to the last election with rate capping as one of their policies. We now know that they did not win and are still reeling—

Members interjecting:

The DEPUTY SPEAKER: Order!

The Hon. J.M. RANKINE: —from that defeat.

Members interjecting:

The DEPUTY SPEAKER: Order!

The Hon. J.M. RANKINE: In fact, they are still reeling from not winning in 2010 or 2006—

Mr Pengilly interjecting:

The DEPUTY SPEAKER: No!

The Hon. J.M. RANKINE: —or 2002; 14 years of reeling rather than getting on with the job of being an effective opposition.

Dr McFetridge interjecting:

The DEPUTY SPEAKER: Member for Morphett!

The Hon. J.M. RANKINE: So, the electorate rejected the state Liberals and their policies, this being one of them but that does not mean that they should not have a go and bring a bill into this place in an attempt at winning something. That is fine.

Mr Pengilly interjecting:

The DEPUTY SPEAKER: Order, member for Finniss!

The Hon. J.M. RANKINE: They of course commenced their move by having this matter examined in the Economic and Finance Committee, an opportunity also for the member for Bright to get out a story or two or maybe even send some direct mail to his constituents. I know the member for Hartley has been doing just that. He told us he surveyed his electorate—

Members interjecting:

The DEPUTY SPEAKER: Order!

The Hon. J.M. RANKINE: —asking in-depth questions—

Members interjecting:

The DEPUTY SPEAKER: Order!

The Hon. J.M. RANKINE: —like, 'Do you think council rates should be capped?' Surprise, surprise! He got responses back saying yes; but I bet he did not ask the question—

Members interjecting:

The DEPUTY SPEAKER: Order!

The Hon. J.M. RANKINE: —'Are you happy to have your rates capped but pay more for council services?' I bet he did not ask, 'Are you happy to have rates capped but charged for services that are currently free to use?' I did ask him whether he had asked whether they would support capping his pay.

Members interjecting:

The DEPUTY SPEAKER: Order!

The Hon. J.M. RANKINE: I venture to say he would get bigger response to that question. No-one likes paying tax. We hate receiving our rates bill in the post, but we do understand the rates we pay bear a direct correlation to the services provided by council and the amenity of our areas.

Our rates reflect the services provided to older people in our local communities. Our rates reflect the sporting facilities councils provide to engage and develop young citizens. Our rates reflect and support services provided for new arrivals and refugees in our community. Our rates reflect the quality of our parks and gardens, our street plantings, verge maintenance, all of this, except of course, for the Tea Tree Gully council where the Golden Grove councillors gave all theirs away to other areas. In general, that is what we expect from our council rates.

We are dealing with this bill because the economic and finance inquiry the Liberals asked for is not delivering what they expected. By the time we had finished taking evidence only one council person had come in and supported rate capping, a councillor from the Onkaparinga council whose view was that his fellow elected members, including former Liberal MP and now mayor, Lorraine Rosenberg, were being led around by the nose by the staff.

Mayor Rosenberg was very strong both times she appeared in opposing rate capping to the committee. She made the point that rate capping carried significant risk of pushing intergenerational costs on to those who follow, and I quote:

I think it would be catastrophic quite frankly, and double that with recent decisions by the federal government—

That is, the Liberal federal government—

to cap and hold financial assistance grants at a certain level so that they're not indexed any more. We have lost our supplementary road funding, which was $18 million, which we were entitled to…

She made the point that councils need to maintain their autonomy and flexibility to provide for the different needs of different communities. She said, in fact, that she would let communities know why and who was responsible for not delivering the facilities they were looking for. Again I quote her:

…if we are in a position where another level of government determines what services a local council can provide, then it's a pointless issue having a locally elected democracy because we have no flexibility to respond to our community plan. We are basically being told that, 'Regardless of what your community have said they want, you can only afford to do these things this year'.

From my personal perspective, I think our local government area would probably put on every rates notice, 'These are the things we are not building this year thanks to rate capping'. I think that's the sort of thing we would do; and with no question in my mind, politically it would be a short-term gain for long-term pain, in my view.

On 24 September, when she came before the committee, she said:

Our council will definitely make sure that our community is absolutely aware of why services are cut or projects are not being done. We will be absolutely clear about that. I will be out there, more than happy to fly the flag, because at the moment local government takes the blame for a lot of things and we wear it.

She said that she would publicly denounce such a move if it were introduced.

The Local Government Association opposes rate capping, councils oppose rate capping, experts who have worked with councils and with governments to implement financial accountability in local government oppose it, the Australian Services Union, which represents the administration staff oppose it, so it was not going all that well.

Then, after we had closed off taking evidence we had a request for the member for Unley and political aspirant, Lachlan Clyne, to give oral evidence. We are an amenable group, so we agreed. We all agree that he is a pleasant fellow; in fact, I offered to support him in any preselection for the seat of Unley. Interestingly, he gave evidence, he says, as the Mayor of Unley, but made it clear he was not representing the Unley council. I do not quite know how you can claim both, but he did.

Lo and behold, the member for Goyder appeared to hear his evidence. I do not think it would be too much of a stretch to suggest that this was both an attempt to claw back lost ground and at the same time audition for preselection. He was an articulate person in front of the committee, but a strong proponent of rate capping, despite his council not supporting it. What became evident, however, during questioning was his confirmation that rates could be capped but not the cost of services, not service charges. So, rates could be held, and charges spiral. Net benefit to the community: no benefit.

Mr Griffiths: And ESCOSA considers that as part of its determination.

The DEPUTY SPEAKER: Order!

The Hon. J.M. RANKINE: No benefit to residents, particularly those most in need of the services that councils provide. It is interesting that a former Liberal MP and current mayor would be so strongly opposed to this legislation, and that a Liberal Party aspirant and current mayor is so supportive of the legislation. I will leave people to make their own conclusions about that. It should also be noted that the two councils they represent are vastly different, both in size and the communities they service.

Also, there is a very strong view that rate capping will hit rural and regional councils the hardest. The member for Goyder, the proponent of this legislation, was chief executive of a small rural council, and I find it hard to believe that, were he still in that position, he would be supporting this legislation. Mr Scales from the ASU gave evidence. He asked the very salient question:

…What's actually the problem? If there's a problem in the community around rates, then our view is, let's articulate that issue and then maybe rate capping is part of that debate, but we are unclear as to what the issue is which would prompt such an inquiry or furthermore prompt the implementation of rate capping.

Rate capping in New South Wales was implemented when rates had been increased by an average of 200 per cent. Rate capping in New South Wales was described by Professor Sansom as a 'dog's breakfast'. Professor Sansom said:

I wanted to highlight the really self-evident fact that is often forgotten in these discussions; that is, local government is part of the state public sector. It's not something separate that's floating off the coast somewhere, it is part of the state public sector and rates are part of the overall revenue available for the state public sector. When governments contemplate something like rate capping, it is absolutely vital that that simple fact be taken into account.

Professor Sansom also said:

…Even more horrific was the fact that we had, on numbers provided for us, I think it was more than 80 New South Wales councils, out of 152, so more than half, were running substantial operating deficits, operating deficits that could only be recovered with rate increases of 10, 20 per cent or more.

Rate capping would be a disaster for communities in South Australia and I am pleased that the government is not supporting this bill.

The DEPUTY SPEAKER: Member for Goyder. If you speak you close debate, is that correct, member for Goyder?

Mr GRIFFITHS (Goyder) (11:11): True, thank you Deputy Speaker. I always knew this would be a rather challenging debate, I must say. I am grateful for the fact that the member for Wright has reaffirmed that it was in February 2014 when the Liberal Party put the policy there because we believe in efficiency of service provision. That is why it was brought about; it is all related to cost-of-living pressures. I find the member for Frome—if I can use that term, given that he chose to make his address as the member for Frome but then referred to his actions as minister, so he cannot have it both ways—

The Hon. P. Caica: Well, he is. He is the member for Frome.

The DEPUTY SPEAKER: Order!

Mr GRIFFITHS: He chooses to vote and answer questions in this place as the member for Frome instead of as the minister. I reflect upon a question I posed to the member, as the minister, in the 2014 estimates (in that five or six months that he had been a minister) about what interest he was pursuing to ensure that rate increases were kept to an absolute minimum. The response that I got back was stuff that occurred five or six years before that. That is what it was, minister. This is one posed from the basic premise that the people of South Australia are challenged significantly when it comes to cost-of-living pressures.

You referred, member for Frome, as part of your response to this bill today, to the $200 cost-of-living concession provided by the state government. I absolutely support the fact that it is there. However, it refers to the key issue—the cost-of-living concerns that people have—and that is targeted towards those who are of the age or income level to receive it. I understand that, but it is all South Australians who are challenged when it comes to the cost of living, be it electricity, water, gas, all consumables, all the basic necessities of our society, and there have been increases regularly in those.

I have posed, via the Liberal Party, for an effort to try to ensure efficiency. Local government receives approximately $1 billion in rate income per year, a significant amount. It is about 6 per cent of what the state's budget is, but it is a significant amount of dollars that is spread across the 68 councils plus the outback communities area. As a responsible shadow minister, I have to make sure that what Liberal Party policies are about is ensuring efficiency. I have done this because it is recognised as a significant sector. The member for Wright referred to it as part of the public sector—

The Hon. P. Caica: You've done it for populist reasons, Steven; yes, you have.

Mr GRIFFITHS: —and I will refer to that too.

The Hon. P. Caica: Yes, you have.

The DEPUTY SPEAKER: Order!

An honourable member: Throw him out, ma'am.

The DEPUTY SPEAKER: Order! No, you have all been really naughty.

Mr GRIFFITHS: If indeed the debate that occurs about this creates efficiencies that are going to be driven from a $1 billion income sector, if it equates to just 1 per cent of what might otherwise be rate revenue, that is $10 million. That is $10 million that stays in people's pockets. I know others out there will attempt to put it down to the fact that it is less than 68¢ per week or $1 per week on individual property owners.

I am looking at the collective thought about it because I am trying to look at the capacity, the needs and the desires and the pressures on people. No matter what dollar figure it is, everything in a cumulative effect impacts upon families. That is why we have done it.

An honourable member: What about service costs?

The DEPUTY SPEAKER: Order!

Mr GRIFFITHS: We have done this to try to create some kind of solution to give to South Australian property owners.

Members interjecting:

The DEPUTY SPEAKER: No, there will be no chucking: there will be naming.

Mr GRIFFITHS: Can I put on the record that the local government does not agree with that. I understand that. Other members have spoken about that. I did not consult with them belatedly, though, member. I went out and had, I believe, eight meetings: two in metropolitan Adelaide, six in regional areas. They have not supported it, but I have used those meetings as an opportunity to explain to them the workings of the legislation and to take feedback from them. From that, I believe there are some efficiency opportunities, absolutely, and some improvement opportunities to the legislation. I want that to be part of the discussion because it will remain as a policy for the Liberal Party through to 2018 because we believe in what South Australians need—and they want all levels of government to be efficient.

I am going to finish on this. The member for Wright referred to the public sector and the fact that local government is linked with that. I have been here over 10 years now. I have heard so many budget presentations that have been made about the fact that there have been full-time equivalent caps; departments have put that upon themselves. You have demanded efficiency dividends; departments have had to put that upon themselves. If local government is to be part of the public sector—and it is—it has to be efficient also.

While councils have complained to me that I am impacting upon their revenue opportunity—and that is what it is—the legislation is going to create an opportunity to review their expenditure. I want their expenditure to be efficient to ensure that the over $1 million they get in rate income per year is used in absolutely best possible way and that the winners from this discussion are the people of South Australia. That is what this chamber exists for, that is what this parliament is here for—to create opportunities for people's lives to be improved. Some might argue that this is not beneficial. I understand that it will be challenging, but it is a win-win opportunity for everybody. That is why I hope that the chamber supports the legislation.

The house divided on the second reading:

Ayes 18

Noes 22

Majority 4