Bills

Local Government (Rate Oversight) Amendment Bill

Second Reading

Adjourned debate on second reading.

(Continued from 20 June 2018.)

The Hon. A. PICCOLO (Light) (11:02): I indicate that I am the lead speaker for the opposition on this matter. Having said that, I will not go on for hours and hours, but will make a brief contribution to this bill. In making this contribution, I am of the understanding the government has given the LGA an undertaking that this matter will not be debated in the upper house until after the winter break. It is on that basis that we are proceeding with this matter.

I would like to indicate that, given the matter will be debated in the upper house after the winter break, the opposition has not formulated its final position on this matter and is still in the process of engaging with local government and others within the sector in order to reach a position that we believe is best for the community at large. In addressing this bill, in part, the role of the opposition is also to provide a critique of the bill and to reflect the views that have been expressed, both in support of the bill and also against the bill, and I will be doing so in my second reading contribution.

I indicate that a lot of the issues will be fleshed out in the committee stage of the bill. There are a number of questions that need to be addressed and matters to be clarified, and this will be done by myself and my colleagues throughout the committee stage. But, as I said, my contribution will be brief. The first thing I would like to touch upon is the engagement processes undertaken in arriving at this bill as it is before us in this chamber today.

In a news report in a local paper, the minister is quoted as saying that he would be seeing feedback from the state's councils and engaging with local government extensively both before the bill is prepared and also after it is tabled. It will be interesting to see, through the committee stage, what that engagement has been, because the feedback I have received is clearly of mixed views.

Also, I have taken into account that the minister has given this house an assurance on a number of occasions that in his approach to matters before him, both in transport and local government and across his portfolios, he will deal with these matters in a very mature, adult way. I am sure we have been told that on a number of occasions and I suppose this is an occasion where we could put that to the test, because the way he has engaged with local government would indicate how adult and mature he is in his approach to getting these matters in parliament.

I think, in trying to pass that test, it is best to quote the individuals themselves. I think there is nothing better than what people actually say and do rather than what they profess to say and do. I quote from the second reading speech on 20 June when the minister tabled the bill and spoke to it. These are the comments he made:

I can think of no other sphere of government that can increase its main tax to this level in disregard of the views of their communities. Clearly, more oversight is needed, and this is exactly what this bill will deliver. The bill will cap the amount of revenue that councils can gain through their primary rating tool: general rates. This will require councils to carefully consider the decisions they make around their own operations and seek efficiencies ahead of greater revenue.

The bit I wish to emphasise and highlight here, because I think it goes to the core of this minister's view of local government generally, is the following:

I can think of no other sphere of government that can increase its main tax to this level in disregard of the views of their communities.

What the minister is alleging here quite strongly is that, as far as he is concerned, year in year out those people in those local councils, elected members and mayors who are embedded in those communities across the state, have a complete disregard for their communities and go about their business without any regard for their communities.

From my point of view, that is quite an insulting comment to make and quite an arrogant comment to make. It also disregards some of those elected members who have served their communities, in particular some of the members in those rural areas who have served for many years and many decades, and this is what this minister thinks of them. He thinks that when they turn up to a council meeting, they have complete disregard—and I am using his language—for the views of their communities.

Again, we will see if the minister meets the test he has set for himself that he will act and deal with this in a very mature and adult way in his portfolio. This involves dealing with local government on this bill. He made this comment in response to a Dorothy Dixer in a question from the member for Davenport, Mr Murray, on 19 June when the member for Davenport asked:

My question is to the Minister for Local Government. Will the minister update the house on the government's progress towards capping council rate rises?

Again, I will quote the minister's response from Hansard. Apart from other things, the minister said the following about the progress:

What is interesting about the discussions that we have had—

and I assume he means with local government—

and this goes to the central crux of why we need this legislation, is that the nature of the conversation is changing. This cap will be put in place once the legislation passes this parliament. It will, over time, curb the increases that local governments will punish their ratepayers with. It will accumulate, but in the first year it will save tens of millions of dollars, but year on year it will deliver savings year after year to the ratepayers of South Australia.

He went on to say:

For the first time in any discussions that we have had—

I want to emphasise that—'in any discussions'—because it is very important. Again, this reflects the minister's view of local government and all those hundreds of local elected members in our communities right across the state, elected members who members opposite will deal with on a regular basis, and this is what this minister thinks of them. He said:

For the first time in any discussions that we have had, the local government sector is talking about ways to do more with what they've got.

I emphasise that he said 'for the first time'. He said:

For the first time, instead of just going back to ratepayers and asking for more money—and for evidence of that you need only look at the fact that we have had 6 per cent average increases…

What the minister is saying is that, until he was minister, every councillor and mayor in local government that people across the chamber have known for most of their lives has basically said, 'We just go in there and jack up the rates. We don't care about the community.' That is what the minister is saying. That is exactly what this response is to that question. He has complete disregard for elected members and councillors in this state.

These are people who day in, day out serve their local communities. I am one them; I have done that in the past. I am not trying to defend myself, but certainly those opposite would know many hardworking local elected members in their community, and I am sure from time to time they have praised them. It is interesting that their own minister thinks that, until our minister delivered his sermon on the mount to the people of South Australia, local councils were actually doing nothing about efficiencies and nothing about delivering services as effectively as possible to the communities. They just went along and had a few tea parties and just jacked up the rates to reflect that.

Personally, I think that is quite an insulting view of local government. It is quite a condescending view of local government and one that is quite wrong. In my time in public life, I have met some really excellent elected members who I actually hold high regard for. This is just a reflection of what this minister believes of local government. He talks about engaging local government. It is interesting, because he tends to give the impression in some of his public comments that essentially local governments are on board. In fact, in one reference he says he has spoken to between 20 and 30 councils, indicating they actually understand why this is important—that is, basically to stop the waste in local government.

I went through the local papers to see what the mayors and councillors and CEOs have said, particularly in the rural areas of South Australia. One thing I do have a high regard for is the rural press in our state. I think the rural press do a wonderful job. People would know my views about that. I have expressed strong views about our rural press and how they do reflect the opinions of their communities and work really hard for their communities.

These are some of the quotes that we have been able to find in the local papers right across the state. In Mount Barker's TheCourier, which is an excellent paper and an award-winning paper, Adelaide Hills Mayor Bill Spragg said:

I think the capping is blunt instrument. If they want to show we’re overspending in certain areas, I’m quite happy for them to go through a process of vetting our budgets.

We put them out for the community to comment and the community can tell us whether or not they think we’re over-spending.

If the community says ‘we think you’re spending too much money’ and councils ignore it, then I think, yes, the Government should step in.

Clearly, that is not an endorsement of this bill. Mayor Keith Parkes of the Alexandrina Council in Victor Harbor's The Times newspaper said:

We, like many other councils, work very hard to keep our rates as low as possible and when there’s bigger projects to fund, we consult with the community.

He goes on to say:

The state government have to realise that the road networks and other major infrastructure are things we really need to do…

What the mayor says there is contrary to what the minister said. They actually do turn their mind to trying to contain their budgets. They do try to maintain control of their expenditure and they actually are ultimately responsible to the people in the areas. The CEO of the District Council of Barunga West was quoted in one of the leading regional papers in the state, the Yorke Peninsula Country Times. He said:

Council will need to keep any rate rise as small as possible and this will be a challenge, especially with the ongoing pressure to increase the level of maintenance of council's unsealed road network.

Again, what this CEO is saying is that they actually give a lot of consideration to those important priorities in our community. They need to maintain, particularly in the rural areas, a whole road network of unsealed roads.

Eyre Peninsula is not exactly a bastion of socialism the last time I looked. I think that would be a fair comment. This is what Mr Peter Arnold, the CEO of the District Council of Cleve, is reported as saying in the Eyre Peninsula Tribune:

It has been proven that rate capping does not work. It is not providing any ratepayer benefit and would mean we would not be able to keep up with our maintenance.

Mr Peter Harder, CEO of the Copper Coast Council, said in the Yorke Peninsula Country Times:

I've told staff we're putting all recruiting on hold this year so that's a loss of jobs in our area already. We might have to cut some programs as well.

What this particular rural council is doing is very important because clearly the opinion is, amongst the Local Government Association and amongst the community, that rate capping would have a much more negative effect on rural councils than on the metropolitan councils. Mayor Dean Johnson of the District Council of Kimba, again reported in the Eyre PeninsulaTribune, says:

We are opposed in principle to the concept because it will inhibit the ability of communities, in collaboration with their elected representatives, to determine how future local projects contributing to liveability and sustainability will be funded.

Rod Pearson, the CEO of the District Council of Lower Eyre Peninsula was quoted in the Port LincolnTimes as saying:

The local government sector has consistently been opposed to rate capping on the basis that council rates make up just four per cent of taxes paid by households, while managing significant local infrastructure used daily by local people.

The Mid Murray Council Mayor, Dave Burgess, was reported in The Advertiser—not quite a country paper—as saying:

It's more time and staff time doing things that could be better spent doing other stuff in the organisation.

Mayor Ann Ferguson of the Mount Barker District Council was reported in The Courier as saying:

Rate capping is fine for the residents as long as they realise that it will be service capping as well.

It is interesting to note that one thing the minister has not talked about in this whole debate is the potential impact of rate capping. Mayor Andrew Lee of Mount Gambier says in The Border Watch:

There are some councils in Victoria where they have rate capping where they cannot have a long-term asset management to repair the road. I do not want to see that happen in our community.

The new CEO of the Wakefield Regional Council, Jason Kuchel, again in the Yorke PeninsulaCountry Times—and I think that would cover some of the member for Narungga's patch—says:

The irony of rate capping is it will cost each community significant dollars just to meet the anticipated reporting requirements.

One of the other things this minister prides himself on when he is talking in this chamber, apart from acting in a very mature and adult way and dealing with people in a mature and adult manner, as we have seen today, is radical deregulation. How is he going to implement this program of radical deregulation? By increasing regulation on local councils and by creating a huge bureaucracy for ESCOSA to have more regulations.

This is a classic Yes Minister episode. You actually have less regulation by having more regulation. It is interesting, when you apply some of the basic tests the minister himself has set up, in terms of both radical deregulation—and the only one he has tried is trading hours, and that has not gone too far. Even his dad thinks it is a bad idea. What better commentary than your dad's feedback? And secondly, when he talks about councils and what he thinks of our local government, and I will come back to that.

I could go on and on and quote quite a few councils, but just to be fair, and I said I would not try to critique, there are some people who actually said some things that might not be so equivocal at best—not necessarily supportive, but equivocal. I quote Mayor Bob Sloane, from the Barossa Council, who says in relation to rate capping:

I don't oppose it, if rate capping came in last year, we would have been half a per cent under the cap…It's frustrating but we will work with it…

'We will work with it.' That is interesting. The other issue is that, despite what this minister has said, when you look at most councils in more recent times, over the last five years—which gives a better picture of where local government is at—those rate increases that he has suggested are quite misleading. An interesting by-product of this is that some of the mayors are starting to think, 'If we are going to be under the rate cap, we have cover now. We might increase our rates right to the rate cap because the minister and ESCOSA have given us the tick to increase our rates further.' That could be a rather interesting repercussion of rate capping.

Again, when we look at those views, the question arises: how much engagement has the minister undertaken with the local government sector not only in the preparation of this bill but also since the bill? I have been to a couple of events where he has spoken, and they were more a case of lecturing local government than trying to engage them. A more recent example was at the LGA seminar just a few weeks ago when he came in and read 'the gospel according to minister Knoll' and laid out the law. When this whole debate first started, it was in the context of keeping major costs down for householders, which is an excellent thing to do. I think that all governments—it does not matter which level they are at—should try to minimise the cost burden to people in the community.

On the day of the conference, he gave The Advertiser an exclusive, which is fine. They gave him a front page. He is quoted as saying, 'Rate capping is about restoring faith in local councils.' With this one wand of having rate capping, it will forever be that every person in this state will have the utmost confidence in their local council. It begs the question: when we have surveys, are people generally quite comfortable with their councils? There are examples of councils whose behaviour and performance are poor, and that needs to be addressed—that certainly needs to be addressed—but does rate capping deal with those issues? I will come to that a bit later.

Some of the things that have been said about this are, I think, quite misleading. As I said, I am going to provide a critique of this bill, so I will provide both the arguments for and the arguments against. I will now quote from the 'Inquiry into local government rate capping policies', an inquiry undertaken by this parliament last year. This committee took extensive evidence from a range of people in local government. I will quote some of the concerns expressed by the Local Government Association in their evidence to that inquiry, which was back in February 2016, very recently. In that report, the LGA lists the key disadvantages of rate capping:

contrary to principles of democracy, accountability and independence of local government;

there are already mechanisms in place under legislation (long term community and financial plans, annual reporting) to inform the community and provide transparency and accountability in budgeting;

limits councils' ability to provide local services and respond to specific community needs;

locally based decision making on revenue and expenditure priorities is more transparent;

can reduce council accountability for rating decisions, allowing the regulator to be blamed for unpopular outcomes;

increases infrastructure maintenance backlogs;

restricts provision of new infrastructure required to meet growth needs;

excessive rate increases unlikely without capping, and community can judge performance at election time;

does not recognise different needs and requirements of individual councils or different cost pressures;

does not recognise the impact on council revenue of externally imposed decisions of other spheres of government eg cost shifting, non-indexation of grants to cover population growth and inflation, additional regulatory requirements;

administratively complex and costly in applying for exemptions;

Certainly, that is the experience of interstate councils. Additionally, it:

could result in higher uncapped user pays fees/charges which could result in pricing inequities;

However, the report also quotes some of the people who support rate capping. I must confess that not a huge number of people gave evidence to support rate capping. I think the former mayor of Unley gave evidence to support rate capping. I am also aware that he ran for state parliament but I do not think he quite made it.

Some of the key advantages of rate capping according to that report are that it:

protects rate payers from excessive rate rises;

achieves the objective of constraining rate increases;

processes for variations beyond the cap allow councils to increase rates to meet local needs and circumstances;

provides an independent 'watchdog' function for ratepayers;

prevents the misuse of monopoly power in the supply of some basic community services;

helps to restrict council provision of non-core services and infrastructure that might be unsustainable;

imposes financial discipline on councils;

manages the risk of poor governance in the local government sector;

forces councils to become more efficient;

improves accountability as a result of public scrutiny of applications for increases beyond the cap.

These are some of the things that were said in evidence. These are not the findings of the report; this is the evidence given to the committee, and the majority of the committee's recommendations were quite clearly against rate capping. There was a minority report, and I think the current Speaker was part of that minority report, if my memory serves me correctly, and so was the minister. It is interesting that the minority report talks about all the things that are wrong with local government, which is appropriate, but it says all these things will be fixed by rate capping, yet there is no evidence in that minority report to suggest a link between the two.

In mentioning some concerns, and one concern expressed to me by a number of councils, I think it is very important that I quote the minister from a report posted by him on 28 May:

'It does mean we are looking at a gentler cap because we're very clear that we don't want to retard economic growth in any way.'

The government felt keeping growth on local government's 'side of the aisle' would incentivise and encourage growth within council areas rather than discourage it.

'We're very keen for that to happen and to give that flexibility to council, especially those higher growth ones,'…

That view expressed by the minister is interesting because the view expressed to me quite publicly by those high-growth councils, particularly those peri-urban councils, is that this bill, despite what it says, actually punishes high-growth councils. It punishes those councils who invest in infrastructure as a way of attracting private sector investment, these things that create jobs in local communities. In fact, my own council, councils to my immediate south and certainly councils to my north have expressed views about this. One of the gravest concerns about this bill is its ability to punish them for growing, particularly in the areas of industrial and commercial land growth, those areas that actually grow jobs.

The minister goes on to say that the growth factor is taken into account because the provision allows for taking into account new assessments. If the minister had engaged with local councils, as he promised he would and as he says he has done, he would understand that, in terms of new allotments, that is only one part of growth. The other part of growth is where on one allotment you attract new investment, and you attract factories and shops etc., which are capital growth, but still there is no change in the assessment so you do not take it into account.

Those councils which have quite a strong growth factor—and that is certainly the councils in my region, such as Salisbury, Playford, Light Regional Council and Gawler—and which are trying to attract new private sector investment to boost jobs in these areas, will be punished by this scheme if it is passed. I notice that some members are giving me strange looks: 'How does that work?' Well, that is exactly how it works. If you read the assessments which have undertaken by the various councils and which are in their reports to council, it makes it very clear that this bill will punish those councils for growth. It would be disastrous, particularly in my region, to have something that is a barrier to growing jobs in the area, and this bill will do that.

I think that is a very important issue, which needs to be addressed by the minister and the government, which he needs to communicate. Certainly, we can do this in the committee stage, when he needs to very clearly communicate the link between rate capping and incentivising growth. I have read the bill on a number of occasions, and I certainly cannot see it. A number of council staff, quite senior people in finance and economics, have read the bill, and they certainly cannot see it. For some reason, the minister believes he has greater wisdom than the collective wisdom of all these other people. I suppose that is a very mature, adult way to treat the local government, by saying, 'I actually know more than you people collectively know.'

This bill has some concerns. I have expressed them publicly. As I said, we are still going through the phase of engagement. Our engagement process, as the opposition, is quite genuine. We are engaging with a whole range of people, including researchers and local government, to make sure that we get a full picture and understand the impact of rate capping before we declare our hand. However, I will give an undertaking that we will be in a position to declare our position by the time the bill hits the upper house for debate.

In closing, I would like to reiterate a couple of very important things. Relationships between governments are very important. In fact, the minister has made a virtue of his relationship with the federal government—the special relationship he has with the federal government. He goes on to say that to have that special relationship with the federal government you need to have a very adult and mature approach to the relationship between governments. I do not disagree with that.

However, I then come back to what he said publicly about local government. I think this is very important because it underpins his view of local governments in this state. It underpins his view of elected members in the 68 councils across our state, those mayors and elected members who give their time to serve their communities, who are embedded in their communities. This is what he thinks of them, and it is important. He says:

I can think of no other sphere of government that can increase its main tax to this level in disregard of the views of their communities.

This is what this minister thinks of local members of councils. He believes that, to a tee, they go out there and disregard what their communities want and do their own thing. That is what he is saying. This is his mature, adult approach to building relationships with local government. The other telling factor, which I will finish on, is interesting because what he is now saying is that local government is quite lucky to have a saviour like him. We are actually quite lucky. In this place, he said:

What is interesting about the discussions that we have had, and this goes to the central crux of why we need this legislation, is that the nature of the conversation is changing.

Since he has come to save local government, the nature of the conversation between the state and local government is changing. He states:

This cap will be put in place once the legislation passes this parliament. It will, over time, curb the increases…

For the first time in any discussions that we have had, the local government sector is talking about ways to do more with what they've got.

'For the first time'. So, for the last 170 years since we have had local government in the state, this is the first time that local government has bothered to engage with their communities, have regard to community views and talk about how they can do their business better and serve the community. So, we should be thankful that we have a minister who has come to save us and to save local governments from themselves and deliver this rate capping.

I think that the minister has made very clear what he thinks of local government in this state. He has made very clear his disregard for local government in this state, yet at the same time he talks about how he wants to work with local government—by insulting them, demeaning them and being condescending towards them. If that is a mature, adult approach, perhaps we should look at an alternative.

Mr ELLIS (Narungga) (11:34): I rise today to support this bill to introduce rate capping into South Australia—a measure necessary to ease the cost-of-living pressure that households are feeling across the state at this time. This legislation will deliver more oversight, transparency and accountability for the local government sector. We believe that this rate capping policy strikes the right balance between keeping cost pressures down for South Australian households and businesses and also facilitating growth in the local government sector. This state government's priority is to keep cost pressures down, but we do not want to get in the way of growth or the delivery of productive infrastructure and necessary services.

I am sorry to say that this is a policy that has not necessarily been well received by those within the local government sector. We heard some evidence from the member from Light to that effect with a nice wide cross-section of mayors who all oppose rate capping, surprisingly. However, I have to admit that it has been widely well received with absolutely overwhelming support from within the community. Those who pay their rates are very fond of this policy and looking forward to its full implementation so that they can finally have some relief from the spiralling cost of living.

This act will create three key elements that will go toward the capping of council rates in South Australia. The first is the primary rate cap determination, or the base standard rate, which will be applied to all rateable revenue on an annual basis. ESCOSA will set that rate by 31 December each year. It will apply to all general rates within the council region and will be used by councils in their long-term business plans. The second element will be for variation applications whereby councils can make applications to ESCOSA if they can prove that they are worthy of an extraordinary rate rise to fund a special project or a special need within their council region so that councils with that justifiable need are not left out in the cold and without means to fund vital community infrastructure.

The third and final element, as important as the other two, is the monitoring and reporting of the rate oversight system to ensure both compliance and understanding of the effect of rate oversight on councils. ESCOSA will report annually on compliance to the minister and every two years on the outcomes of the system. In short, ESCOSA will be the independent regulator that will be responsible for making rate cap determinations, receiving and assessing applications from councils for variations on the rate cap, and for reporting on compliance and the outcomes of the system to the minister on a regular basis.

As I said previously, this is a policy that has been received with overwhelming support within the community by the absolute vast majority of the population. I was inundated with support for our rate capping policy throughout the election campaign, and now that the Marshall Liberal government is in power it is delivering it in accordance with what people want from their government. It is my belief that this legislation should not be feared or seen as a tool that will stifle growth or cost community services. Many councils are in fact good at balancing their books and not in the habit of implementing irresponsible and unwarranted huge rate rises and, as such, it will be business as usual for these councils.

Regrettably, the measure is necessary to stem the flow of irresponsible spending shown by a few councils that have tarred the brush for the whole sector, creating an unfair impost for ratepayers with huge rate rises. It is those councils that habitually pass annual rate rises of 7 per cent, 8 per cent, 9 per cent or even 10 per cent that have necessitated this legislation. It is a practice that is unsustainable for household budgets and we believe that it is this government's responsibility to protect constituents in this way.

It is a reality that councils that have kept in the vicinity of CPI rises will not be impacted by this rate capping legislation should it pass—and hopefully it does. I stress that rate capping is not about not allowing any increases at all. As I alluded to earlier, ESCOSA will declare an allowable, realistic figure based on a number of indicators, and what we believe to be more than the consumer price index, and look at the past year and projections ahead to determine the base standard rate. There will also be provisions for councils that show a need for a higher percentage rise within their long-term financial plan and demonstrate community support for that additional rise for it to be allowable, and ESCOSA will be charged with delivering that extraordinary rise.

This motion is about ensuring that the local government sector is efficient in what it does and that it takes a good look at its expenses column as much as at its revenue column. This is a means of rate justification as much as it is a means of rate capping council rates. A mere 1 per cent drop from the overall $1 billion total council rates' bucket means that $10 million is placed back into household and business budgets, and that is $10 million that remains in the pockets of property owners to spend how they wish in other areas, providing growth opportunities for South Australia.

I have seen firsthand the concerns that local councils have around the perception of being told what to do, but this is not about an us and them attitude. It is about reducing the cost of living for the people who have to pay the bills: the people of South Australia. Rates cannot just continue to go up and up when wages remain stagnant. The household sums just cannot add up if that continues to happen.

Over the last decade, council rates have increased at a rate that is three times the level of inflation and it is simply unacceptable. South Australian households and businesses have been smashed with council rate increases over double the rate of the local government price index. Over the last 10 years, local government rate revenue has increased by 67 per cent, with a 31 per cent increase in the local LGPI over that same period.

Local government is unique, in that the system allows councils to decide their spending before adjusting their income, whereas state governments, or any other institution to my knowledge, are not afforded that particular luxury. It is forced to cut its cloth to meet its available income. This is legislation that is in line with this government's pledge to deliver savings and reduce cost-of-living pressures across many areas—ESL bills, NRM levies and payroll tax. This also means that we are having to do more with the revenue available to this tier of government, so we are all in this together for the overall good of the people of this state.

The other point I make is that there is a clause to review the positives and negatives of rate capping after four years, and that is included to protect councils. We understand the financial pressures they face in delivering myriads of services, and unexpected considerations do occur, such as the recent announcement from China to no longer accept recycled materials that can blow council budgets out quickly.

Cost shifting across tiers of government must also be a consideration, in recognition that we are all in the same business of service delivery to the people of our state. Regional and rural councils must also be considered in all this because generally, with the geographic tyranny of distance, roads, jetties and ports to upkeep, and beaches and expanses of coast to protect, etc., they do more with less, but that cannot mean that rates keep going up and up. It is not sustainable, particularly with wages not going up and higher percentages of residents as retirees and pensioners on fixed incomes.

There is unrest within the community, as demonstrated by the number of ratepayer protest groups that have formed in the last couple of years. In my patch, there is a very active Adelaide Plains Ratepayers and Residents Association, led by president, John Lush, and a Copper Coast Residents and Ratepayers Association in the council of the Copper Coast.

I have seen firsthand and experienced the barrage of concern that some elected members and council administrators have with this legislation. In attending a recent Yorke Peninsula Council meeting where rate setting for the new year was on the agenda, I found myself amid a vocal and packed gallery and then later standing to speak against a proposed rate rise of 11.8 per cent for primary production landowners because it was put to me that 'landowners in the YP council pay considerably lower rates than those in neighbouring council regions' and that 'we have to do this in case rate capping comes in'.

That high rate rise was narrowly lost in the council chamber, to the relief of the gallery, but then the following week the motion was rescinded and a special meeting was called for further discussions. Ultimately, the total general rate increase was set at 4.8 per cent, with average residential rates up 4.05 per cent and primary production rates up 5.77 per cent. All discussions caused considerable community divide and unrest, which is unfortunate. In defence of not voting for the rate increase, local media quoted one councillor as stating:

One farmer explained to me how his rates were more than $15,000 last year, and when he heard his rates would increase by a proposed 11.8 per cent he was horrified. This farmer pays for his council rates each year with borrowings, which means he will also pay interest on his rates. I do not support the gouging of ratepayers and will therefore be voting against the annual business plan in its current form.

On the for side, a councillor argued:

Agri-business earn an income off their property and she's fighting for residential ratepayers who shouldn't be carrying the rest.

Thankfully, that motion was voted down from an 11.8 per cent rate rise as, in conjunction with the skyrocketing value of property prices within the YP Council, it is a significant impost on the owners of that primary production land. Their rates are already rising so quickly that the balance between residential rates and primary production rates as a piece of the pie is evening up, regardless of how quickly they try to artificially bring them together.

There are five councils within the electorate of Narungga. Of the other four, Copper Coast Council voted to raise its rates by 3.8 per cent, in line with its long-term financial plan, stating:

This budget allows us to provide our community of about 14,000 with a standard equal to what they currently have.

It is also a very pleasing show of community engagement and participation that the Copper Coast Council extended its annual business plan and budget consultation period and received 51 submissions in the process. Councillor Pope was quoted in the local media as saying:

This budget is all about consolidating and finishing existing community projects, with a focus on road sustainability and the budget breaking even in two to three years.

I congratulate the Copper Coast on these measures. It is noteworthy that this council has enjoyed 23½ per cent population growth between 2006 and 2016. In the last financial year alone, 120 new dwellings were approved. In 2016-17, the council approved 33 land divisions, creating 54 new allotments. Their rates revenue has steadily increased since 2015: approximately $19 million in 2015-16, $26 million in 2016-17 and up to $28 million in 2017-18. That is not the complete story. As we are all aware, plenty of infrastructure costs come with such growth. However, it is worth noting that the rate revenue from the Copper Coast Council has increased by almost $10 million in five years.

Unfortunately, the story of population growth is very different for the other councils in my area. Barunga West Council broke even over the 10 years between 2006 and 2016, neither gaining nor losing any people. Yorke Peninsula Council dropped 1.1 per cent in population. Worst off, although it is outside my electorate, the District Council of Peterborough recorded an 11.9 per cent reduction in population between 2006 and 2016. Considerations are different for each council, and that needs to be taken into account when decisions are made.

Returning to the electorate of Narungga, Barunga West Council has adopted a 4.75 per cent average rate rise for the new year, with a focus on roads and similar plans for an imminent break-even budget, and Wakefield Regional Council plans for a 5.5 per cent increase. In its annual business plan, Adelaide Plains Council, the final council within the electorate of Narungga, described having adopted 'a zero based budgeting approach where each item, line by line, has been critically analysed for relevance and necessity'. I congratulate the Adelaide Plains Council on this approach, which will inevitably reduce costs and make it a more efficient institution, and it is a good practice for all councils to get into, I would suggest.

It was interesting, too, to read of examples of cost-saving collaborations across fellow councils, which is becoming more and more prevalent and is a common-sense approach. In one example, Adelaide Plains Council reported that in the 2014-15 financial year Barossa Council, Town of Gawler, Adelaide Plains Council and Mid Murray Council commenced working in partnership to form the Barossa Regional Procurement Group (BRPG). The focus of this group is to capitalise on opportunities for collaborative procurement to generate cost savings and to process efficiencies and economic benefits to the region by growing local business capacity.

Similarly, in 2018-19 the Adelaide Plains Council is expected to deliver significant savings in a kerbside waste collection program due to a joint tender managed through the BRPG procurement group, which is a great outcome. In Barunga West, Mayor Cynthia Axford in her annual business plan described improved efficiencies showcased by collaboration with neighbouring councils during 2017-18. They share services such as planning, building, environmental health and governance with the Copper Coast Council.

They also work with the other Yorke Peninsula councils on joint projects and strategic plans such as regional health plans and open space strategies. The alliance between those councils is called the Yorke Peninsula Alliance, and they have been wonderfully productive in lobbying me, in my short time as a member, and the previous member, Steven Griffiths, and do a great job of advocating for their patch. So much good work is being done by many local councils around ensuring efficiencies in all they do, but this is not so for all local councils.

I wholeheartedly support this legislation, which I believe will reduce cost-of-living pressures for many people who are struggling to make ends meet, and I believe that in doing so the faith of ratepayers in their local council will be restored and those who are doing the great job they are doing with what they have will be justifiably recognised.

In concluding, I note it is disappointing that those opposite are yet to reach a decision on this proposition after having had a great deal of time to do so. On this side we support the bill for the tremendous benefit it will provide ratepayers and people around the state struggling to make ends meet. I encourage those opposite to jump on the bandwagon, support this bill and encourage a speedy passage through this house and the other one so that we can start to lower cost-of-living pressures that people in this state are feeling. After many years of rising pressures, it will be some good news to come through finally. With that, I commend the bill to house.

Mr TEAGUE (Heysen) (11:51): I also rise to support the bill. As we know, the government has a comprehensive reform agenda to ease cost-of-living pressures for all South Australians, and council rate capping is a key part of that reform agenda.

The government has been partnering and continues to partner with local government in these reforms. Since we announced the policy, some councils have already responded positively. The government is committed to continuing to partner with councils proactively engaged on the path towards better efficiency and better value for money for local ratepayers with a view to the long-term easing of cost-of-living pressures for all South Australians.

I have listened carefully to the debate so far, and I have heard from those opposite about how it may be a stretch to impose on councils this form of accountability in terms of a rate cap. I say to those opposite that the figures do not lie. The figures speak loudly for themselves. As has already been referred to in this house—and it bears repeating—we have seen over the course of the last decade that the average statewide council rate revenue rise has been at 67 per cent. That is as compared with a 31 per cent rise in the local government price index. Over the last decade, we have seen that rates have risen at more than double the rate of the local government price index, and indeed over that last decade rates have risen at three times the level of inflation.

Tellingly, in this place, when one compares the rise in the CPI (consumer price index) against state government tax revenue over the same period, one sees that the consumer price index has risen by 26 per cent and state government tax revenue has risen less than that, at 24 per cent. We in this place are accountable for the revenues that we raise and the responsible expenditure of those revenues. It perhaps speaks to the questions that have been raised on the other side about the need for oversight at a local government level when we see, over an extended period of time, such significant rises in rate revenue over and above both the local government price index and, more startlingly, the CPI.

This is not only a commitment by this new government to do something about day-to-day cost-of-living pressures for all South Australians but it is also one that stacks up on the basis of the figures over the long term. It is remarkable that those opposite would take the view that this is anything other than reasonable oversight in circumstances where there has been such an explosion in costs imposed by local councils upon everyday South Australians.

I have four councils within the boundaries of my seat of Heysen, including the City of Onkaparinga. Much has been said in recent times about the City of Onkaparinga council. I simply reiterate that, whilst not the worst offender when it comes to rate increases over the past period, it is, at 74 per cent, in the group of the highest rate increases, compared with the average of 67 per cent. When one considers that the City of Onkaparinga is amongst the worst offenders in terms of the level of its rate increases, it is telling that the City of Onkaparinga nonetheless has encountered the travails it has over recent times in terms of accountability for spending and confidence in the council processes.

It is important that we have these reforms to ensure that ratepayers are not being charged any more than they reasonably ought to be and that the state government takes on a responsible role in ensuring that it is a partner with local government in delivering greater efficiency and greater value for money for ratepayers. My family lives within the council boundaries of the Adelaide Hills Council. We recently received our rates notice for the new year, and I can tell you that it has not come down. It continues to rise. It is a hefty impost on our day-to-day costs—a heavy cost indeed.

I am regularly engaged by my constituents, most recently, I am pleased to say, at my newly established mobile office at Strathalbyn. These residents present to me a rates notice and ask me how they are possibly going to go about budgeting to pay for those rates for the coming year. It has been something that has punctuated the early days of my community engagement. As the member for Narungga who addressed this topic just now has also said, it is clearly a reform that is welcomed by members of the community to see these hefty costs that are brought about by council rates being brought into a framework of both control and accountability.

It is very important in making these reforms that we move from an environment in which local government has been approaching the question of budgeting annual expenditure on the basis of, 'How much can we spend?' to one in which local government looks to functioning more and more efficiently with what resources are available. That is what the new regime will go about delivering by way of these reforms.

The bill is structured so as to introduce something quite new into the Local Government Act, adding an amendment to chapter 10 by the insertion of new part 1A. The new part 1A will set out the reform agenda, which will include the primary rate capping determinations and the rest of the program, under 'Rate oversight'.

By way of context, I would refer honourable members to what we find in chapter 10 as it presently stands, where we have statements of principles and a regime around the basis for setting rates, primarily against the value of land. In this context, it perhaps bears reflection on section 150 of the Local Government Act. It sets out general principles, and provides as follows:

A council should, when making and adopting policies and determinations concerning rates under this Act, take into account the following principles:

(a) rates constitute a system of taxation for local government purposes (generally based on the value of land);

(b) rating policies should make reasonable provision with respect to strategies to provide relief from rates…

(c) the council should, in making any decision, take into account the financial effects of the decision on future generations,

It further notes:

(but a challenge to a rate cannot be based on the extent to which a council has (or has not) applied these principles).

In section 150 of the act as it stands, we have a statement of general principles about the way in which local government should go about setting rates. It makes explicit that that is effectively no more than a guide and that a challenge to a rate will not be upheld for failure to apply the principles. It is the most general of general regimes that really leaves control of the rate setting entirely within the hands of council.

I come back to my earlier remarks about what we have seen over the sustained period of the past. Compared with state revenue rises, council revenue rises have been extraordinarily high. It is simply not good enough to say, 'Well, there are good, hardworking people on councils who are devoted to the best interests of their communities and therefore we shouldn't have anything to say about the level of rates that they would choose to impose year to year on residents.'

That is, with respect, a bogus argument. One needs to look at the data. One needs to look at the level of accountability. If serious about reducing cost-of-living pressures, a responsible government will step up and do something about it. That means setting out a framework within which councils will need to operate and, secondly, engaging in a real process of reform so that local governments are encouraged to do things that can achieve more with current resources.

As others have addressed, the bill goes to three broad purposes. Firstly, it sets the primary rate cap determination. Secondly, it provides a process for councils to make variation applications. The central role of the Essential Services Commission of South Australia has been referred to. ESCOSA has an important central role in administering the scheme across the board, but particularly in relation to variation applications it is its job to determine how to dispose of those applications. Thirdly, the new part 1A provides for monitoring and reporting.

In the short time still available to me, I would refer to the second part of the new provisions, that is, those that go to the process for applying and determining variation applications. Again, I want to squarely address the contribution so far from the other side. I, too, look forward to the other side of the house coming to a view in support of this legislation, but it is important to dwell on the regime for dealing with variations, because it is an important part of the process in circumstances where a general rate cap is otherwise imposed.

I refer specifically to new section 187G and the criteria for application that are set out at section 187G(2). It sets out that if a council determines that it is necessary to seek the imposition of a level of rates higher than the cap, it may apply to do so, and it must then fulfil the criteria that are set out in subsection (2). Firstly, it must specify for how long it wishes to apply for the variation. It can apply for a period of up to five years. It must set out the proposed varied rate cap for each specified financial year and, unsurprisingly, it must set out its reasons for seeking that varied rate cap.

It must also set out the nature and extent of community engagement it has undertaken, as well as the likely impact of the proposed varied rate, and the extent to which consideration has been given to other steps, such as reprioritising proposed spending measures, as well as how the varied rate cap would represent value for money for both the council and ratepayers, and how such a variation would be consistent with the long-term financial plan for council, as well as any other information that may be required by ESCOSA.

I highlight those provisions because it speaks to the nature of the reforms that are the subject of the bill. It requires a dialogue based on accountability if there is to be a rate rise above a cap. I raise it also because councils within Heysen, with whom I am in regular dialogue, have raised concerns about the sorts of unexpected events that occur in our environment. We had particularly dramatic storms, for example, in the spring of 2016 that caused a great deal of damage in the Adelaide Hills, and there may well be circumstances arising where local councils may seek the variation. So it is a new system of accountability. It is called for, plainly, on the face of the rises that we have seen occurring dramatically over the last decade. I commend the bill to the house.

Ms BEDFORD (Florey) (12:11): The merits or otherwise of the concept of rate capping have, I believe, not been really well explained to the community. What on the surface seems to be a really obvious move on the third tier of government might well prove to be, in the end, only a cost-shifting exercise. I am told that this bill is more like the Victorian model, where all bar seven, that is, 72 of 79, councils have introduced service charges. In New South Wales, I am told their rate capping model has proved to be problematic.

We really need to ask ourselves: will this bill truly reduce the cost-of-living pressures we are all keen to curb? Is there a better way to work with local government to achieve this end? Will councils need to reduce their all-important community services, implemented to ensure that people have access to vital services not provided elsewhere? How will councils cope with the additional costs in dealing with waste collection, disposal and recycling?

The proposal could be referred to the newly established Productivity Commission, providing extra scrutiny and an opportunity for better public understanding and awareness and enable them to make a well-informed decision.

After consultation within my electorate, most recently at a public meeting last night, I am not inclined to support the bill. I will listen closely to debate in the committee stage, bearing in mind that this house will not be where the final decision truly can be influenced. The government has the numbers here, but not so in the Legislative Council, and it will be there that this bill will either succeed or fail and where any other amendments are likely to be agreed to.

Ms LUETHEN (King) (12:13): I rise to support the Local Government (Rate Oversight) Amendment Bill 2018, which introduces a rate oversight scheme into the Local Government Act, 1999. The bill chiefly amends chapter 10 of the act to insert part 1A, rate oversight, that provides for the establishment, operation and reporting of a system to cap annual increases in councils' general rates. Why do I support this? There are three main reasons I believe this bill is in the best interests of people living in King and, in fact, across South Australia:

Reason 1: there have been too many examples across the state of council spending ratepayers' money recklessly on behalf of ratepayers in King. I support measures to encourage councils to deliver maximum return for every single dollar of ratepayers' money.

Reason 2: rate capping will deliver cost relief for families and businesses where councils are being irresponsible with ratepayers' money. Just as every household needs to budget and live within its means, so should every council.

Reason 3: our rate capping approach will encourage a better, more effective community engagement process to take place for all proposed projects that would take the council above the rate cap. Councils will need to clearly demonstrate what the council has undertaken to inform and engage its community on the proposed variation. It must be clear that the council has made every effort to explain to its community the necessity for a variation and must demonstrate there is a wide understanding of these reasons.

The state Liberal Party took a policy to the 2018 state election to introduce a council rate cap to ease cost pressures for South Australian households and businesses. The introduction of the rate capping legislation on 20 June 2018 delivered on a key election commitment within the Marshall government's first 100 days. This legislation will deliver more oversight, transparency and accountability for the local government sector.

This government will work constructively with the local government sector in South Australia to have the best rate capping policy in the country. Whereas the Labor Party are focused on reasons why this will not work, our government will take the time to consult with ratepayers, industry groups and councils to agree on a framework to make this work and benefit ratepayers across South Australia. This bill, and commitment, is one of the deliverables of our promise to lower costs. First, we slashed the emergency services levy bill, and now we propose to cap council rates and natural resources management levies. Each deliverable is focused on providing relief to families and businesses.

The state Liberal government has a comprehensive reform agenda to ease cost-of-living pressures for South Australians, and capping council rates is a key part of our plan. Over the past decade, council rates have increased at a rate that is three times the level of inflation, and this is simply not acceptable. This is what my community has told me. When I was doorknocking in Hillbank one day, I asked an elderly gentleman what was most important to him, and he told me, 'Councils getting back to basics like fixing kerbs.' From his house on a beautiful rise in Hillbank, we could see across to the very large tennis centre in the distance, which has been delivered by the City of Playford and is reported to have cost $8.9 million.

This man told me that he will never use these tennis courts and that he has not seen many people on these courts since they were built. What makes him really upset is that his kerbs have crumbled, and when he contacted the council to get them fixed he said that the council staff told him they had no budget available to fix them, so he and his elderly neighbour cemented the kerbs themselves. He took me to the area beside his driveway to show me the new kerbing he and his neighbour had constructed—two elderly gentlemen fixing their own kerbs. He said it was necessary as they were afraid that people walking down their road would trip over these broken kerbs.

Last year, I attended a community forum at One Tree Hill, which approximately 400 residents attended to discuss their concerns over a proposed rate increase. This had followed a meeting, I believe, at Angle Vale, which over 500 residents attended with the same concerns about rising council rates. The outcome of these community meetings was a collaboration of residents who voted against, and spoke against, what so many residents believed was an unjustified hike in council rates.

Since that time, ratepayers in rural King have created a ratepayers' committee as a sub-committee of the One Tree Hill Progress Association, and they are focused on fair rates and council efficiency. Last week, I provided this group with a copy of the bill and asked them to consider the provision of feedback to our minister. This volunteer group is collaborating on how to keep rates affordable and make their council more accountable to ratepayers. Today, we are saying enough is enough. We are asking for support to cap council rates to protect households and businesses from more unjustified rate hikes which are used to pay for necessary expenses and projects which the majority of residents might not agree to.

The bill provides a rate oversight framework that establishes three key elements. Firstly, primary rate cap determinations: the establishment of rate cap provisions enabling a cap to be set, determining that the cap applies to council revenue recoverable from general rates and providing for its calculation on an annual basis for all councils, classes of councils or particular councils. Secondly, variation applications: setting out provisions that enable councils to apply for a variation of the rate cap by demonstrating engagement with their community on a variation and that a variation is necessary within the context of the council's operations and long-term financial planning. Thirdly, monitoring and reporting: setting out provisions that enable monitoring and reporting on the rate oversight system to ensure compliance and understanding of the effect of rate oversight on councils.

In accordance with the government's policy that the rate oversight system will be managed by an independent regulator, the bill appoints the Essential Services Commission of South Australia as the body responsible for (1) making rate cap determinations, (2) receiving and assessing applications from councils for variations on the rate cap and (3) reporting on compliance and the outcomes of the system to the minister on a regular basis. I emphasise that the new process will require councils to make very clear to ratepayers the reasons for any variation application where they propose to increase rates above the cap.

Councils will be asked to outline the community engagement process that the council has undertaken to inform and engage its community on the proposed variation. It must be clear in the variation applications that the council has made every effort to explain to its community the necessity for the variation. The council must provide views of the likely impact of the proposed variation on ratepayers which may be informed by the community engagement process. The council must demonstrate how the council has considered alternatives to the variation which might be a reprioritisation of spending or the use of alternative funding mechanisms, including the appropriate use of debt or council reserves.

The councils will need to demonstrate how the variation represents value for money for its council and its ratepayers. Importantly, rate capping promotes the efficient use of council resources. Rate capping will ensure the elected members and staff look to make efficiencies across their operations before seeking a variation. Rate capping will ask for the council to demonstrate the proposal is consistent with the council's long-term financial plan and infrastructure and asset management plans. All South Australian councils are required to have these plans in place today, and they will be a critical component of an application for a variation as clear demonstration of the council's need for additional revenue. For transparency, councils will also be required to publish their application for variation on their website.

We can see that since the Liberal Party announced our rate capping policy, some councils have already tightened their belts and kept rate increases to a minimum which is great news for our ratepayers across South Australia. Rate capping will make councils more accountable to the people they represent and also ensure that councils have to look for efficiencies and are not able to arbitrarily increase general rates or make them a bit lower when it comes to election time.

This legislation will deliver more oversight, transparency and accountability for the local government sector. The state government's priority is to keep cost pressures down, but we do not want to get in the way of growth or the delivery of productive infrastructure and necessary services. That is why, through consultation with the local government sector, we have devised a rate capping scheme that will enable councils to still increase their rates if they can convince ratepayers and the independent regulator that the increase is necessary.

I look forward to this government working side by side with local government to ensure South Australia has the best rate capping scheme in Australia. We have been consulting and taking on board feedback from South Australian councils and reviewing the lessons of interstate approaches so that the model we adopt is the best approach here in South Australia. Our new government is leading by example to deliver tax cuts and savings to South Australia. We are going to take a cut in relation to payroll tax, the emergency services levy and land tax, so I think we are demonstrating already that we are committed to tightening our belts and delivering savings to South Australians. We are putting ourselves under the same sort of pressure that we expect councils to be under.

It has been disappointing to watch local government use ratepayers' money to launch a campaign to fight the rate capping proposal. I feel it would have been a fairer approach to provide ratepayers with unbiased information of how the current system works, how the act works today and the rate capping alternative proposal, and let ratepayers decide.

However, I must say from my 10 months of doorknocking, ratepayers are telling me they want rates reduced. It has been my experience that elected members will fight very hard sometimes to protect the status quo. I encourage all ratepayers to get involved in having a say and choosing their elected members carefully in the upcoming council elections. Your elected members represent you at council, and they should always be focused on spending your rate money carefully and on the services and projects that are most important to you.

Importantly, your elected members should have the skills and experience to assess proposals, budgets and recommendations, with a focus on efficiency, sustainability and return on investment. At a council function I attended recently, an elected member who had served several terms said to me that they were running again in the 2018 elections and that they thought rates were just such a non-issue.

An honourable member: Shame!

Ms LUETHEN: Shame, yes. This contradicts what hundreds of ratepayers told me in their own council area. A few council staff members have told me they oppose rate capping because they believe it will result in service reduction. This is just not true. It feels to me at times that there is a culture in some councils of 'rate capping is bad' instead of, 'How can we make this work in the best way to benefit ratepayers?'

Rate capping is about running councils efficiently. Elected members and council staff should be continuously assessing whether services are needed, valued, operating most effectively and delivering quality outcomes for ratepayers. This is about spending every dollar of ratepayers' money carefully. This is about negotiating hard every time for the best outcomes for ratepayers. This is about listening to ratepayers who are doing it tough in South Australia.

As a councillor previously, I took the time to read every verbatim comment our ratepayers made when they had their say on the proposed annual business plans. Year after year, the feedback reminded our council that it should be living within its means. Rate capping is one way we can make councils more accountable. In future, we also need greater transparency of the debates in council chambers on all matters related to spending ratepayers' money. We need more long-term thinking and sustainable approaches.

I am so pleased that a number of people have told me they will be running for the next council election because they wish to be involved in the decision-making, they want to see that ratepayers are receiving maximum value for rate money, they want to see responsible spending and they want to see councils getting back to basics. Placing a cap on council rates will ease cost-of-living pressures for South Australians, delivering a fairer system of council rates.

The cap delivers on a key election promise to ensure fair and effective policies and processes for South Australian ratepayers. This rate capping policy strikes the right balance between keeping cost pressures down for South Australian households and businesses and facilitating growth in the local government sector. Through consultation with local government, we have devised a rate capping scheme that will enable councils to still increase their rates if they can convince ratepayers and the independent regulator that the increase is necessary.

Finally, I share a message that was sent through to me this morning from one of my electors on the topic of rate capping:

Got my rates notice today. Gone up again. As a pensioner, you know the first thing that will make me have to sell my home is not old age, it is the cost of my rates. When I moved here the rates were $284 a year. Now I pay $2,192. Tell me that that is fair.

In summary, I commend rate capping to the house so that we can deliver lower costs and better services to South Australians and make South Australia the best place to live.

Dr HARVEY (Newland) (12:31): I rise today in support of the Local Government (Rate Oversight) Amendment Bill 2018. The Marshall Liberal government is committed to reducing the cost of living for South Australians and households. Cost of living was a major issue raised in the lead-up to the last election. Of course, that is unsurprising. Under the previous government, South Australian households and businesses were being pounded by skyrocketing costs for energy; taxes, such as the emergency services levy; the NRM levy; and so on. Capping council rates was a key commitment from the Liberal Party in the lead-up to the election. As I knocked on doors, attended street-corner meetings, shopping centres and all the other activities you do in the lead-up to an election, there was really no doubt that there was tremendous support from the community for our policy.

It is a little disappointing, though, that the Labor Party are still yet to find a position on this. We have been talking about this policy for quite a long time now. It was a clear commitment in the lead-up to the election and nobody should be surprised by it, yet the Labor opposition seem to still be faffing about trying to work out what they believe in. I have my fingers crossed that they will support reducing the cost of living for South Australian families and businesses.

Council rates are a significant impost on households and businesses. In fact, over the last decade council rates have increased at a rate three times that of inflation and over double the rate of the local government price index. Over the last decade, rate revenue has increased by 67 per cent overall compared with the local government price index of 31 per cent over the same period. This is simply not sustainable for households and businesses as incomes are not increasing at the same rate.

There is no doubt that councils provide many important local services like rubbish collection, local libraries, local parks and playgrounds and popular local sporting facilities, some of which we have been working in partnership with, particularly in our local area. However, some councils have seemingly become distracted, straying into areas that are well beyond the expectations of their constituents and delving into areas that most people would not see as being the responsibility of local government. Of course, some of the more recent examples that have occupied much of the media are where there have been quite outrageous examples of council spending, particularly in one, but not one within my borders. Nevertheless, these examples certainly point to the need for additional oversight of council rates.

Specifically, the bill seeks to amend the Local Government Act 1999 to provide for the establishment, operation and reporting of a system to cap annual increases in councils' general rates. The rate oversight framework consists of three key elements: the rate cap determination, assessing applications for a variation on that cap, and monitoring and reporting. The oversight system will be overseen by the Essential Services Commission of South Australia (ESCOSA). This cap will be set by ESCOSA on 31 December annually.

Importantly, the rate capping mechanism does not simply place a cap on total annualised rate revenue; such a mechanism would penalise growth. Instead, the cap will be applied to something called the base standard rate. This base standard rate is a nominal single rate calculated each year as the total annualised general rate revenue collected by a council per rateable property, which then determines the capped standard rate for 1 July. The mechanism will allow councils to capture all new rateable properties each year on an annualised basis of capping rates and thus will not penalise council growth.

ESCOSA will also have flexibility to apply a single rate cap to all councils; a class of councils, for example, country councils or metropolitan councils; or to individual councils. This will enable different caps to be applied to reflect circumstances that may be different between different locations. This cap will only apply to general rate revenue and not the separate rates and charges that exist for specific purposes, but of course these other revenue streams are in effect already capped as they are required by the act to serve only as cost recovery measures.

Importantly, this legislation will allow councils to apply for variations to this cap. The government acknowledges that there are occasions when councils should be allowed to increase rates beyond the cap; however, what the government is asking is that such increases should be justified. In the bill, applications are assessed by ESCOSA. Applications will need to demonstrate community engagement on the variation to show that the community understands why the variation is being sought.

Councils will also be required to demonstrate the need for a variation within the context of their operations and long-term financial planning, showing that they have made efficiencies within their organisation, have fully considered spending priorities and have explored alternative funding options before the variation. Applications will be made by 31 March and can be made for up to five years. The intention of this process in applying for a variation is not to be onerous. In fact, ideally the process would capture work that has already been performed by councils looking at long-term planning rather than creating an enormous additional body of work.

There will also be a system of monitoring on the rate oversight system that will ensure compliance and understanding of the effect of the rate oversight on councils. ESCOSA will report annually on compliance to the minister, and ESCOSA will also report every two years on the outcomes of the system.

The bill is ultimately about greater oversight, transparency and accountability for the local government sector. The bill is about justifying rates. If a rate increase can be justified, then all well and good, but if it cannot then it should not occur. It is about flipping the starting point from, 'What do we want to do?' and an increase in rate simply to match that, to, 'What revenue do we have?' and then providing those services to ensure that taxpayers are given the best value for their money.

The bill requires councils to more carefully consider their operations and to seek to gain efficiencies wherever possible. This will also provide councils with greater transparency, which will work in councils' favour by avoiding cost shifting to councils, as has often happened in the past. If potentially a future state government—obviously not a Liberal government—attempts to cost shift to local councils, then the councils would be well within their rights to apply for a variation on that basis, and that is the kind of transparency that works in both directions.

When any level of government considers collecting tax, it is important to remember that, at the end of the day, it is not the government's money: it is taxpayers' money. As a government, we should always seek to take only as much of people's money as is necessary to spend on their behalf. At the end of the day, on this side we believe that individuals are ultimately best placed to decide for themselves how their own money should be spent.

I am having difficulty understanding, though, why those opposed to this bill believe that councils should be able to set large rate increases without good reason. Why shouldn't such increases need to be justified? How can they justify increasing rates well beyond the income growth of ratepayers? I cannot understand how this can possibly be justified. You cannot get blood out of a stone and continue to squeeze households more and more. It is just not fair and it is simply not sustainable. At the very least, there should be a requirement to make a case for an increase, and to make that case each year and not necessarily just in the lead-up to a local government election.

On this side, we are committed to transparency and accountability, to reducing the cost of living for households and businesses in order to ultimately improve the standard of living for families and to creating more jobs and opportunities for South Australians. I commend the bill to the house.

Mr PEDERICK (Hammond) (12:41): I rise to support the Local Government (Rate Oversight) Amendment Bill 2018. Before I go into the bulk of my speech, I am amazed, as members on this side are, that the Labor opposition do not have a position on the bill. Are they worried about whether the LGA will form a position on 3 August and that that will dictate what they say, or is there some infighting between the member for Lee and the Leader of the Opposition, the member for Croydon? What other tensions are going on across the other side of the chamber? Who would know?

At 16 weeks into government, and certainly many months before that, we made it perfectly clear that we would be introducing rate capping legislation within the first 100 days, which is exactly what has happened. This is about our party easing cost pressures for South Australian households and businesses. This legislation delivers more oversight, transparency and accountability for the local government sector. This rate capping policy strikes the right balance between keeping cost pressures down for South Australian households and businesses and facilitating the growth that we need in the local government sector.

This Liberal state government's priority is to keep cost pressures down, but we do not want it to get in the way of growth or the delivery of productive infrastructure and necessary services. That is why we have consulted with the local government sector and devised a rate capping scheme that will enable councils to still increase their rates if they can convince ratepayers and the independent regulator, which in this case will be ESCOSA, that the increase is necessary. Our government has a comprehensive reform agenda to ease cost-of-living pressures for South Australians, and capping council rates is a key part of that plan.

This is the first step of a significant reform journey for both state and local governments over the next four years. In a Marshall Liberal government, local government has a party in reform. We need to work together, and I have not yet seen a lot of that coming from sections of the Local Government Association.

Since we announced our rate capping policy, some councils have already tightened their belts and kept rate increases to a minimum, which is great news for their ratepayers. Rate capping will make councils more accountable to the people they represent and also ensure that councils look within for efficiencies and are not able to increase general rates on a whim. Over the last decade, council rates have increased at a rate three times the level of inflation, and it is simply unacceptable. With regard to my own farm property at Coomandook in the Coorong council, the amount I pay in council rates has doubled over the last decade, and I have been getting far fewer services.

South Australian households and businesses have been smashed with council rate increases over double the rate of the local government price index. Over the last 10 years, local government rate revenue has increased by 67 per cent compared with a 31 per cent increase in the local government price index over the same period. Their own price index is out of step with rate rises that have been put in place.

The City of Onkaparinga is one of the worst offenders when it comes to misuse of ratepayers' money. Their rate revenue has increased by a significant 74 per cent over the last 10 years. Treasury analysis shows that, over the same 10-year period, state government revenue increased by only 24 per cent. What a disparity.

The local government sector should accept rate capping to restore faith amongst their ratepayers. As I indicated, local councils are now holding meetings to determine their position on the legislation by 3 August. From there, it will go to the LGA Board for a sector-wide position. The rate capping process should give confidence to ratepayers that their councils are spending their money more wisely. We need to change the conversation from how much we can spend to how much more we can do with what we have.

In regard to some of the spending, I mentioned the City of Onkaparinga. Between 1 June 2014 and 31 January 2016, Mayor Rosenberg and Mr Mark Dowd, the chief executive officer, spent $69,643 on ratepayer-funded credit cards. Mark Dowd had a Kooyonga Golf Club membership worth $6,818. He has since paid that back but has since received a $7,000 pay rise. The Kooyonga Golf Club is nowhere near Onkaparinga.

The Hon. D.J. Speirs: It's disgraceful. There are golf courses in Onkaparinga.

Mr PEDERICK: Absolutely. If you are going to play golf with anyone, visitors from overseas or locals, why aren't you proud of your own local golf course? There are plenty in the Onkaparinga area.

The Hon. D.J. Speirs: Thaxted Park, Flagstaff Hill.

Mr PEDERICK: There we go—Flagstaff Hill, and there would be one at Willunga. The City of Onkaparinga paid $22,000 in legal fees to keep this membership fee a secret. Lavish spending included overnight accommodation in city hotels after functions, $18,000 on flowers and thousands more on Apple products, including an Apple watch for Onkaparinga chief executive Mark Dowd. They also spent $1,631 on an Adelaide Oval skywalk. How is this helping the ratepayers of Onkaparinga?

We just want to reiterate that the Local Government Association at a statewide level, in their campaign against rate capping prior to the 2018 state election, spent $174,338 on activities related to opposing the policy of rate capping. They also spent $37,462 campaigning against Labor's cost-shifting measures. The total spend was $211,800. Later, I will go into some of the spending habits of councils more local to me.

This bill also introduces a rate oversight scheme into the Local Government Act 1999. The bill amends chapter 10 of the act to insert part 1A, 'Rate oversight', which provides for the establishment, operation and reporting of a system to cap annual increases in councils' general rates. The bill provides a rate oversight framework that establishes three key elements: primary rate cap determinations, so you get the establishment of a rate cap; provisions enabling the cap to be set, determining that the cap applies to council revenue recoverable from general rates; and providing for its calculation on an annual basis for all councils.

ESCOSA will set the cap by 31 December and it could apply to all councils as a single cap, a class of councils or a single council. It will apply to general rates and will be a proposal to cap the base standard rate. The base standard rate is the total general rate revenue divided by the number of rateable properties on 30 June. The rate cap then applies to BSR to create cap standard rate on 1 July. The BSR also calculates total annualised rate revenue. Councils can capture all new rateable properties each year on an annualised basis.

Variation applications: setting out provisions to enable councils to apply for a variation of the rate cap by demonstrating engagement with their community on a variation, and that a variation is necessary within the context of the council's operations and long-term financial planning. ESCOSA will receive and assess the applications. Applications must be made by 31 March and variations can be requested for up to five years.

Monitoring and reporting: setting out provisions that enable monitoring and reporting on the rate oversight system to ensure both compliance and understanding of the effect of rate oversight on councils. ESCOSA will report annually on the compliance to the minister and ESCOSA will also report every two years on outcomes of the system. The rate oversight system will be managed by an independent regulator, ESCOSA as previously mentioned, and it will be responsible for making the rate cap determinations, receiving and assessing applications from councils for variations on the rate cap, and reporting on compliance and the outcomes of the system to the minister on a regular basis.

There has certainly been some pushback from a significant part of the local government sector on the proposed rate capping. They campaigned quite heavily during the election against Liberal members of parliament. They certainly campaigned against me. I know one of my local councillors was happy to be seen having coffee and dining with a previous leader, I guess you could say, of a party who did not win a seat in the house where it counts, whereas we won 25 and so we won the majority and we are here to govern.

It is quite interesting that in side comments I have heard over time I could see the process, especially on an individual basis. There was even a forum held in the Coorong council chambers in Tailem Bend with the same party involved. I thought, 'Well, that's a good look,' because basically they are saying, 'We don't want anything to do with the local member. We want to go this way because we are worried about rate capping.' As I said, I am here, we are here and we won the election.

It was interesting how blatant this was across the border. I know in other seats there was the same campaigning by people in the local government sector against sitting Liberals and Liberals who were candidates. We are not here to have a war with local government but if people want to take this adversarial attitude, I find it an interesting way to find a better outcome for the people, the ratepayers and taxpayers of this state, and that is certainly who we are here to look after. We are certainly here to pull back those cost-of-living pressures with our reductions in the emergency services levy of $360 million over four years.

Local government got caught up in this great excitement that they had power over the people to push back on rate capping. Most of them were in a frenzy of supporting either Labor or some other non-effective third party that did not get a seat in this place. They actually went out of their way, as I said, entertaining these people and colluding with them at times.

Mr Patterson interjecting:

Mr PEDERICK: Yes, exactly. We are here to get the right outcomes, and I do not think the adversarial approach works at all. I was at a function involving the Murray-Darling Association in the Riverland at one stage. Certainly, most of my area of Hammond comes under the Murraylands and Riverland Local Government Association area. We were at a function after hours and some of the local mayors said to me, 'With rate capping, you will get fewer services.' I said, 'Fewer than I get now?'

I pay double the rates I did 10 years ago, and in the Coorong the roads are so bad that some of them have hollowed out to just sand. You have to slow down to 50 or 60 km/h to go on them. I have just fixed up my old two-wheel drive ute, and I told the Coorong council that I will not drive it on their unmade roads because I did it once—I drove from Yumali to Meningie and back—and I thought I had spent too much on that vehicle to put it through that. When you hear stories about trucks going off the road because they have hit a great hole, or Toyota Prados suffering major damage, you have to wonder what the priorities are of local government.

Sadly, as has been said already here today, their priorities are on other things, such as art exhibitions, with too much focus on the towns. The CEO of the Coorong said to me in a meeting, 'Well, most of the ratepayers are in the towns.' I said, 'So how do the farmers get their supplies in and their produce out?' That seemed far from his mind, as someone who lives far from the community anyway, who does not use the local service provider for vehicles for the council anymore and who obviously, I believe, does not travel very far south of Tailem Bend too often.

The problem I have is when you raise these issues about what happened to the good old days of roads, rates and rubbish. Certainly, in the Coorong, my home council, the rubbish is paid for: you pay a fee. I am fortunate enough to have the rubbish run go on Parkin Hall Road behind my property, so I pay the fee and it gets picked up. That is separate to the rating issue. A couple of years ago, I rang the mayor about Parkin Hall Road and said, 'Parkin Hall Road is the worst I have seen it in my 54 years.' It took a couple of weeks to fix and it needs fixing again. If the Coorong council is taking any notice of this speech today, they might want to have a look at Parkin Hall Road again.

The sad thing is that you have people with city-centric views and people who are caught up on the local government bandwagon of trying to improve their own position, such as being on the chief executive officer run and looking to be promoted to another position. They are quite lucrative positions, depending on where you are in the local government sector.

But we also need local government members and mayors to take notice of their whole community, and I certainly do not see that in the main in my own community. I have been urging people, wherever they are in their council area, to put up their hands in November if they are not getting appropriate outcomes. We are certainly not getting it in the Coorong. They need to stand up. We need wholesale change. We need a clean-out, and we need a clean-out in the bureaucracy from the top down as well. That may sound harsh, but why do I go to meetings—

The DEPUTY SPEAKER: Member for Hammond, you have three minutes—

Mr PEDERICK: I seek leave to continue my remarks; I have a little bit more to say, Deputy Speaker.

Leave granted; debate adjourned.

Sitting suspended from 13:00 to 14:00.