House of Assembly Fifty-Fourth Parliament, First Session (54-1) 54 1 Parliament of South Australia House of Assembly published Bills Bills Local Government (Rate Oversight) Amendment Bill Local Government (Rate Oversight) Amendment Bill Local Government (Rate Oversight) Amendment Bill Committee Stage Committee Stage In committee (resumed on motion). Clause 4. Ms COOK House of Assembly Ms COOK: In regard to the clause and the appropriate contributions by ratepayers, has it been determined what ESCOSA deems as the appropriate contribution? The Hon. S.K. KNOLL House of Assembly The Hon. S.K. KNOLL: I suppose the point of this object is to have regard to appropriate financial contributions. That is something we are seeking to insert that does not exist beforehand. Member for Hurtle Vale, to take the question on its merits, you are asking what is ESCOSA's opinion, and the answer is that at the moment they need to have regard to the things that we are asking them to have regard to. I think that is something we give them some direction on later in the bill. We will get to the clause later on but, in relation to the variation process and the cap setting process, the things they have to have regard to, that is where we are essentially providing them direction from this parliament about what we believe they should have regard to. It is quite an interesting debate that we have had about how much political oversight this process needs to have. ESCOSA are pretty good at setting prices; they do this for a living every day of the week. Essentially, we want to provide them with the independence to be able to do their work unencumbered by political considerations. However, I do accept that we are providing them with broad direction in this act. There will be direction through the regulations that will become a lot more specific. What is going to happen, and the X factor here, is to ask: what determination is ESCOSA going to make? I think that quite self-evidently we cannot provide that answer until we see what it looks like in practice. The effect of rate capping is not instant and it is not really the first year that is going to have the biggest impact upon councils. It is a cumulative, compound effect and happens over time. I am very keen to make sure that we provide strong direction to ESCOSA through this legislation, and I believe that we have the right balance. The regulations will form another part of the direction that this parliament and the executive give to ESCOSA, but we are going to go through, subject to the passage of this bill, a first rate capping process. We will have one cap, one variation process, one budget setting process from councils, and then we will be able to review what the outcome is. I am committed to making sure that, after we have done one full cycle, if there are lessons that have been learned, we fix them straightaway. I am also very keen to the greatest extent possible to provide some surety to the local government sector about how this is going to operate. However, what we cannot do is presuppose a definitive decision that ESCOSA may come to because they need to go through that process first. We are asking them to look at a whole heap of factors and come up with a decision. It is impossible for us to presuppose the final decision they may come to. I think what is important for us here is to provide them with appropriate and broad direction. That is why this objective says what it says: the objects of the act form one of the things that we think they need to have regard to. Ms COOK House of Assembly Ms COOK: Ostensibly, in summing up my last two questions, we do not have any real specificity around the rises and what is appropriate and where that might land. Given that, has the minister had any discussions, and can he enlighten us with any thoughts about what might happen if the rises then mean that the ratepayers are paying more for their council rates because it is deemed appropriate, as per the act, and that rates will now be higher under ESCOSA's guidelines because now we have a group of people—ESCOSA and not elected members—determining the price? The Hon. S.K. KNOLL House of Assembly The Hon. S.K. KNOLL: There is a difficulty that we will go through. We have a historical context for understanding what councils have done in the past. We have talked about the average increases that councils have undertaken over the past decade. I think we have made our position clear, that it is too high, so we think it needs to come down rather than go up. If ESCOSA were to come back with a determination that the cap increase for councils should be set at 7 per cent or 8 per cent, I think we would be coming back to this place pretty quickly. That said, this legislation is not about determining a specific outcome. If we wanted to do that, we would say it is a CPI rise only, and that would provide a very firm direction about where we think it needs to head. We believe that the decision-making process needs to be more complex than that. It needs to have regard to growth, and we have certainly talked about that quite a bit. We think it needs to have regard to costs as they are imposed upon councils. We think it needs to have regard to the broader and economic environment that sits within it. We are asking ESCOSA to take into account all those factors and everything that is in the act and regulations as they make this determination. However, you are right: sitting here right now we are not giving a level of specificity, but what we are doing is asking ESCOSA to make the best and most balanced decision they can. We are asking them to get to the truth—and I am sure we will get to it in the later part—through the setting of the cap and the variation process, and the truth of this is: what is an appropriate increase? That will be different for different councils. A council with a very strong balance sheet may be able to do more with that rather than go back to their ratepayers. For a council that has a specific set of extenuating circumstances, it means that it has cost pressures that other councils do not have and it will be different than it will be for a council that is providing a broader range of services. For example, there are a number of regional councils that provide services that metropolitan councils do not have to provide. We need to have regard to that. It is why we have set up this process. There is a cap setting process, but essentially we will leave it up to councils to decide whether they need a variation. The cap that we are setting is the upper limit. Councils can do anything below that. The member for Light talked about averages and the difficulty with them. Well, we are going to set a cap. All the councils that have modest increases and sit below that cap will not be impacted whatsoever. It is basically saying that here is an upper limit. This is again like Robert Frost's path not travelled. We will be going forward into the future asking councils to take different path from the one they hypothetically otherwise would have. Mr Mullighan House of Assembly Mr Mullighan: That wasn't in the poem. The Hon. S.K. KNOLL House of Assembly The Hon. S.K. KNOLL: It is the road not travelled. Mr Mullighan House of Assembly Mr Mullighan: And that has not made all the difference. The Hon. S.K. KNOLL House of Assembly The Hon. S.K. KNOLL: Either way, essentially, it is difficult to say that this is where councils were going and this is where they are now going because that is too simplistic. The legislation is not all-encompassing enough to provide that broad framework in order to get to that answer. I think what ratepayers want to know is—and I think the member for Light alluded to this—that ESCOSA will provide some assurance and essentially be a check in the process that will give comfort to ratepayers and that somebody has had an in-depth, independent look at what councils have sought to do. The Hon. A. Piccolo interjecting: The Hon. S.K. KNOLL House of Assembly The Hon. S.K. KNOLL: I am giving you a compliment, Tony; just take it. It is a check that essentially what council has done is appropriate. We need to set the broad framework. However, if you are saying that we should not do this unless we can provide everybody with a predetermined outcome of what the cap might look like, then this is all a waste of time and we should just set a cap. I do not think we want to go down that path because we know and understand that we are seeking to get towards the truth—that is, what is an appropriate increase that council needs to be able to maintain and deliver services? But have they actually looked at the cost side of the equation and are they doing things or prioritising the service delivery as efficiently as possible? That is why we have headed down this path, not with a predetermined outcome in mind but trying to make sure that ESCOSA is asking the right questions and that, as councils answer them, we get to the answer, which is: what is an appropriate increase that a council should be allowed to undertake? Ms HILDYARD House of Assembly Ms HILDYARD: Minister, also in relation to clause 4, the member for Davenport spoke earlier this afternoon about a number of issues that the City of Onkaparinga has had, as you know, relating to their use of funds. How will this legislation absolutely ensure that council rates collected are appropriately spent? The Hon. S.K. KNOLL House of Assembly The Hon. S.K. KNOLL: This piece of legislation cannot fix every problem within local government, and we have not pretended that it can. The Hon. A. Piccolo interjecting: The Hon. S.K. KNOLL House of Assembly The Hon. S.K. KNOLL: It will restore faith in councils. It is a first step along a journey. To answer the insinuation in the member for Reynell's question is to say, 'How can state government intervene and make sure that local government is doing their job properly every single time?' local government is sovereign in its own sphere. This legislation seeks to provide broad impetus, but I think, as the former minister for local government will understand, the power of a minister to intervene in local government matters is quite limited. That is appropriate. Unless South Australians want the state Minister for Local Government to essentially be the referee for councils on individual decision-making, then we need these bodies to be able to make the decisions. There need to be appropriate balances. The answer to your question, 'How can we make sure councils spend their money appropriately?' we need to make sure that appropriate safeguards, checks and balances are in place. The ICAC, the Ombudsman and the Auditor-General already have the ability to look into the processes of local government and, where it is deemed appropriate, they can investigate certain matters to ensure probity. For instance, in relation to Onkaparinga, the Ombudsman is now looking into credit card matters and those kinds of things. That is the most appropriate way to deal with that. This idea that the state government should just take over local government is not correct. What we are doing through this is providing broad impetus and broad direction, but local government is a sovereign sphere in its own right and should be free with the appropriate checks and balances to make its own decisions. Ms HILDYARD House of Assembly Ms HILDYARD: I do really want to ask the minister how many steps he envisages being on the journey that he has spoken about— Mr TEAGUE House of Assembly Mr TEAGUE: Point of order, sir. Ms HILDYARD House of Assembly Ms HILDYARD: —but I will not ask that question. The Chair House of Assembly The CHAIR: Member for Reynell, there is a point of order. Mr TEAGUE House of Assembly Mr TEAGUE: I have not followed every moment of the debate, but I wonder whether the member has declared a conflict of interest. I understand the member is a member of the Australian Services Union that has a declared position against rate capping. The Chair House of Assembly The CHAIR: Does the member for Reynell feel that she has a conflict? If she does not, she does not need to declare it. If she does, she needs to declare. Ms HILDYARD House of Assembly Ms HILDYARD: That membership is listed on my Register of Members' Interests. The Hon. D.G. Pisoni House of Assembly The Hon. D.G. Pisoni: So what have they told you to do? The Chair House of Assembly The CHAIR: Member for Unley! Members interjecting: The Chair House of Assembly The CHAIR: Order! Ms HILDYARD House of Assembly Ms HILDYARD: I do not think you heard what I said. The Chair House of Assembly The CHAIR: I did not hear what you said. Ms HILDYARD House of Assembly Ms HILDYARD: I said that all my memberships are appropriately listed on my Register of Members' Interests. The Chair House of Assembly The CHAIR: Suitably declared. Thank you. The member for Reynell. Ms HILDYARD House of Assembly Ms HILDYARD: Minister, in relation— Members interjecting: The Chair House of Assembly The CHAIR: Order! Member for Reynell, ask your question, please. Ms HILDYARD House of Assembly Ms HILDYARD: Thank you, Chair. Minister, how would these objects outlined in clause 4 be utilised to ensure that rates collected are directed to services and facilities that benefit community members? The Hon. S.K. KNOLL House of Assembly The Hon. S.K. KNOLL: The object is the object—and a neat little tautology answers the question. Genuinely, it is an object within an act. It provides a broad statement of the way local government should operate. You are asking essentially how will ESCOSA in this case, because they are the ones making the decisions, determine whether or not councils are spending their money appropriately? ESCOSA in this instance is not a proactive body. What will happen is that a cap will be set, a council will apply for a variation process, and it will be through that variation process that ESCOSA will make determinations about whether or not councils are providing an appropriate level of service. Essentially, it is through that back and forth that ESCOSA will make that decision, but ESCOSA is not here to tell councils what they can and cannot do. What ESCOSA is here to do is to approve a variation process. As you will see, and I do not want to spoil the ending on future clauses, through this legislation we tell ESCOSA through the variation process that they have to have regard to a number of things. If councils can tick off and show that they have met those thresholds, then they will get their variation. But again, we Liberals on this side of the house try to be light-touch regulatory legislators wherever we can. We are attempting for this legislation to just breeze over the top. Genuinely, we are not here to become the referee on every single decision that local government and councils seek to make. What will happen is that the only time that ESCOSA will make a decision is where a council seeks to make a variation application to the cap. In that instance, there is a set of thresholds at that point ESCOSA will make a determination. With regard to the object in clause 4—'appropriate financial contributions by ratepayers to those services and facilities'—it is a broad object that will form part of the decision-making process that ESCOSA will go through, but it will be a lot more nuanced than that, as we will see as we get closer towards the final chapter of the book.