Localism *Q&A*

Localism is broad term and while definitions may differ they all share common focus on locality, or area, and the idea that the unique characteristics of localities and areas matter. For example, the Cambridge dictionary describes it as ‘the idea that people should have control over what happens in their local area, that local businesses should be supported, and that differences between places should be respected’. Localism is also used in many contexts from “buy local” campaigns to local food movements.

In the context of public governance localism describes those arrangements where citizens are involved in making decisions about their own areas and localities – either directly through local forums of one kind or another or indirectly, through their local municipality.

Localism must also be inclusive. As the Commission on the Future of Localism states “Localism must be about giving voice, choice and control to communities who are seldom heard by our political and economic institutions. Localism should enable local solutions through partnership and collaboration around place, and provide the conditions for social action to thrive” (Locality.org.uk).

Where centralism involves the concentration of power and authority within a central agency localism represents the de-concentration or distribution of power across multiple sites to better reflect the plurality and diversity of views found within a society. From one perspective it is a protection against the arbitrary use of state power while from the other it enables nuanced and multi-faceted responses to the complex challenges that we face. In practice it means:

• unlocking the power of communities and strengthening our local institutions;
• devolving tangible power, resources (funding) and control of local matters to local governments and community organisations, including Iwi/Māori organisations and not for profits;
• incentivising councils to make investment decisions that will have positive returns for local businesses and citizens;
• strengthening opportunities for citizen participation in local decisions through empowering neighbourhood type bodies and mechanisms for direct participation; delivering the culture change necessary for local innovation to thrive.

Localism involves a new approach to governing New Zealand, one in which citizens and communities, working independently and alongside their local governments, play a more active and meaningful role.

Decentralisation has a number of dimensions - administrative, political and fiscal. Levels of decentralisation vary according to the dimension, see below:

• Political decentralisation involves the re-distribution of powers and responsibilities through, for example, delegation or devolution, often in accordance with the subsidiarity principle.  New Zealand councils have small range of responsibilities compared to most other local government systems.  However our councils have a reasonably high level of political autonomy compared to many and this is reflected in the ability of councils to engage in discretionary activities;
• Administrative decentralisation is concerned with the degree to which local authorities have the authority to manage their own administration and staff within the law, including the freedom to enter into contracts. One way it is measured is by the ability to establish by-laws to regulate local matters without seeking permission from higher-level authorities.  New Zealand has a high level of administrative autonomy;
• Fiscal decentralisation concerns the share of public expenditure for which local government is responsible compared to the share allocated by central government.  In New Zealand central government controls approximately 90 per cent of public expenditure compared to local government’s 10 per cent (see OECD 2016).

With central government responsible for approximately 90 per cent of all public expenditure New Zealand stands as one of the most fiscally centralised countries in the OECD, see table 1:

Table 1 fiscal centralisation in the OECD

LGNZ’s localism programme is designed to address New Zealand’s high level of fiscal centralisation and the problems that stem from our comparatively week local governments. We are seeking:

• The right of councils to govern and administer their responsibilities within a clear and stable set of rules and without arbitrary intervention from central government
• A transfer of political functions and responsibilities from central to local government accompanied by an authority for councils to set levels of services appropriate to the needs of communities;
• A fiscal re- balancing so that taxes and other forms of public revenue are allocated commensurate to the revenue needs of each sphere of government.

While New Zealand councils have a relatively high level of administrative decentralisation and political autonomy to represent and act on behalf of their citizens (although this has been declining) the share of public expenditure that they can influence is small and shows no sign of diminishing.

Centralisation deadens every feeling of generous emulation; destroys every incentive to effort at improvement; and damps every ardour for the progressive development of resources. Instead of a stimulus being given to enterprise and talent … the theories and the crochets of one or two individuals are imposed as compulsory law; and every suggestion, however excellent, which does not conform to such theories and crochets, is absolutely forbidden (Smith 1851, p. 60, quoted in Chandler 2008).

Some public decisions need to be taken by central government because they concern the welfare of the nation as a whole, such as decisions about defence and foreign affairs.  There are also classes of decisions which involve policy areas where there is national agreement on service levels or values, such as basic human rights and access to services like health and education. 

There are, however, many decisions that don’t need to be made by Ministers and Cabinet.  We don’t need the Government to micro-manage the day to day life of our communities, yet that is occurring at an increasing rate, as local discretion in some policy areas declines. 

New Zealand’s dependence on a single government to make decisions about the allocation of our public revenue (our taxes), exposes this country to a series of vulnerabilities – the classic case of putting all your eggs in a single basket.  Distributing power, public responsibilities, and they right to raise and allocate taxes allows for new ideas and policies to be tried and implemented and is the essence of a sustainable approach.  It also creates a competitive tension that incentives communities to take responsibility for their own situation and seek to improve. 

Localism is a political system that brings “government” closer to citizens and their communities.  That is, by decentralising decision-making policies and programmes will be better informed by the people they are designed to assist and thus be more effective.  The arguments in support of bringing government closer to people are extensive but some of the major ones concern strengthening our democracy; improving the efficiency of government by taking a place-based approach and addressing complexity.

As a general rule, countries that are centralised tend to be less wealthy and have lower standards of living than countries which are decentralised.  There are certainly exceptions due to unique factors, but localist approaches to governing incentivise local politicians and their communities to take a more proactive approaches to economic and social development opportunities.  Centralised governments tend to be paternalist (we know what is best for you) which has the perverse effect of encouraging citizens to assume that the government will “fix things”.

The increasing complexity of our society poses major problems for centralised approaches as they lack information on local differences and are not well placed to design policies that work in different situations.  Localism offers a more effective response for the scope it gives for local capacity building and the development of local solutions, recognising that these will take place within the context of a national framework.  Self-government works best when important and significant matters work to inspire civic participation at a level where it can actually matter.  A summary of the problems associated with “extreme” centralisation are set out in table 2 below.

Table 2 The problems of “over” centralisation

Highlighting their reasons for promoting decentralisation an a recent report described the objective as one of rebuilding confidence in democracy, not by insisting on a singular national answer to each problem, but by celebrating the ability of that country’s varied communities to find solutions that work best for them.  Their view reflects the way that localism permits diverse opinions and actions to flourish without undermining belief in a nation’s common democratic values and defining processes. 

Central to the idea of localism is the economic concept of incentives. At the moment local governments lack a full range of incentives to invest for social and economic benefit and explore innovative approaches to the way in which public resources are allocated.  Very few, actually. Because local governments have little ability to collect tax revenue on different goods and services, they can’t change what they offer in order to gain more money to deliver better public services. The basic economic idea of incentives isn’t working at the moment.

Responsibility is also a good incentive – when local governments are actually responsible for delivering more they will have to up their game otherwise citizens will remove them from office. When there are incentives for local governments to perform, and they have greater responsibility, to ensure they perform well – this includes employing people with the capability and putting place systems for managing performance.

Because of the current position and relative importance of local government, it doesn’t necessarily attract our strongest and most motivated leaders.  This reflects what we describe as local government’s lack of “salience” which is the main reason why voter turnout is less than in countries where local government plays a bigger role.  By creating incentives and enhancing local government’s role and responsibilities more people will want to work in their local councils and more people will compete to be elected – as a result talent will begin to spread between the central and local government, particularly as decentralisation changes the role of central government changes.

Localism does not change the Crown’s commitments under the Treaty of Waitangi, regardless of whether functions are delivered directly by central government or by a third party, such as local government.

The reasons for this are that the Treaty of Waitangi is a compact negotiated between Māori and the Crown and that local governments is not part of the Crown.  However, the Crown cannot contract out of its Treaty of Waitangi responsibilities, therefore Treaty commitments will apply to any services that are delegated or devolved to local government, as is the case presently.  For example, implementation of the Resource Management Act 1991 is devolved to local government along with duties set by the Crown’s treaty commitments.

Councils, when exercising responsibilities delegated or devolved by central government must be mindful that they are acting as if they are the Treaty partner (which is not the same as when they are exercising their general powers, where the requirements to engage with Māori are prescribed in the LGA 2002). A localist form of government will give local authorities responsibility for a broader range of public services and, because of proximity, allow Iwi/Maori greater influence on the degree to which those services reflect Treaty commitments and respond to the needs of Māori communities.

While governments exist to promote the public interest, whether national or local, there is always a risk, despite rules and regulations designed to combat it, that sectional interests of some form will come to dominate and run government in the interests of a minority of citizens.  Under our legislation this is unlikely to occur in local government, but one of reducing the risk further is to give local authorities greater responsibilities and thus increase interest and competition for seats.

Increasing the salience of local government will create greater interest by citizens to stand for and participate in their local councils.  An increased role creates greater competition for seats and, as a result, the likelihood that local affairs will be followed more closely by local media.

Localism is not just about giving more money and power to the local government. It’s also about shifting this power away from representatives, and giving it to citizens. With localism comes a greater participation in the democratic process to enable more people to have their say on more issues, and actually influence the eventual outcomes. In Switzerland for example, power legally lies with the people. Referenda are held with only 50,000 signatures submitted to parliament, and all parliamentary decisions can be overturned by the people (if enough of them agree, of course).

There are a number of measures that both protect the “public good” (such as judicial review) and also allow citizens to hold governments that lose sight of the public interest to account. For example, some countries give their citizens a right to initiate “recall” elections that can be used to hold a politician, or group of politicians, to account between elections. Triggered by a petition recall elections allow citizens to force an elected member to stand down and require that a new election be held.

The argument is sometimes made that localising services will be more costly as some functions will be duplicated, such as back office functions, and the benefit of national buying power will be lost.  In fact the opposite is probably true, as if we apply the principle of subsidiarity thoroughly those functions which benefit from economies of scale and coordinated procurement would be either left with central government or placed at a regional level. 

Indeed, the only rigorous study of the effects of the 1989 reform of local government, which saw the consolidation of more than 850 local bodies into 76 local authorities, found, in relation to the procurement of roading maintenance contracts in Auckland, no change to the cost of procurement contracts (Rouse and Putterill 2005).  For many types of services “small is beautiful” as it enables both officials and governors to closely scrutinise contract bids.

The economic benefit of localism comes from the efficiencies achieved by ensuring the supply of public services is allocatively efficient, that is supply matches local demands and preferences.  Providing or commissioning services from a national or regional position cannot easily address local differences resulting in either over or under provision – both of which are a poor use of public resources. 

As far as back office functions are concerned, because councils are multi-functional organisations they achieve what are known as economies of scope, that is, overheads are shared between multiple services.  Where efficiencies can still be realised councils are able to establish “shared services” for activities like IT or human resources.  The advantage of the shared service model is that it is flexible and can be easily changed as new technologies create new and more efficient ways of providing services – the same is not true of institutional arrangements.

One of the common concerns raised when governments consider transferring responsibilities and funding to local government is what is known as the “post code lottery” problem.  That is, peoples’ welfare and well-being will depend on where they live – their post code.  Post code lotteries become a risk should some communities be unable to afford to provide the devolved services at level sufficient to maintain well-being.

In his major report on the future of local government in the United Kingdom, published in 2007, Sir Michael Lyons considered this issue in detail and concluded that that fears of postcode lotteries actually over-simplified what are complex issues.  He took the view that if the people of one area collectively choose to use the public resources at their disposal in a different way to the people of another area, it is hard to argue that is unfair.  He also concluded, however, that for many services there should be a “base line” below which service levels should not fall. 

His answer was to recommend that there be a balance struck between an appropriate set of national or minimum service standards and the variety of choices that different communities can make. In his view this was a positive part of a healthy and sophisticated system of governance which he called his approach “managed difference”  involving the use of equalisation grants to guarantee an agreed baseline level of services for citizens in low socio economic communities.

A further problem with fears of “post code lotteries” is the implied assumption that centralisation ensure that public resources are shared equally across regions and that all citizens have access to services of similar levels.  In fact the opposite is true. New Zealand, as one of the most fiscally centralised country in the OECD is characterised by serious levels of spatial inequality.  For example, the average per capita GDP of New Zealand’s three poorest regions is $41,000; the equivalent figure for the three most prosperous regions, in contrast, is $67,500.  The difference is significant and, given that the poorest regions also have the lowest rates of educational achievement and the highest rates of young people not in employment, education or training, represents a serious failure of our centralised decision-making model. 

This concern is sometimes referred to as being a “race to the bottom”.  It describes the fear that councils, wishing to lower taxes to attract residents and investment, may choose to reduce the range and quality of local services.  This is also an issue that Sir Michael Lyons investigated.  He found that not only did people wanted an assurance that key services would be delivered to similar (generally minimum) standards across the country they also wanted the ability to influence the shape and delivery of services and take decisions locally, recommending as a result the concept of managed difference, see above.

This question has been investigated in recent years by the UK thinktank the Institute for Public Policy Research (Turner and Rowe 2015) which studies the devolution of prisons and elder care from the German federal government to that country’s Lander or provinces.  The research showed that there was neither a “race to the bottom” nor a “race to the top” (gold plating).

First and foremost, there was no ubiquitous ‘race to the bottom’, or lowering of standards, as a consequence of decentralisation. If anything, there was stronger evidence of a ‘race to the top’, notably in the case of care home regulation. There also appeared to be a strong normative attachment among policymakers (especially civil servants) for common policies across the country, which led to collaboration in drafting legislation, and tempering the extent of variation (Turner and Rowe 2015)

In relation to elder care, the requirement by the Federal Government that Lander produce a catalogue of their service quality standards not only enabled consumers to hold councils accountable for levels of service but also assisted local politicians to better monitor the performance of their staff. 

Ministries believed that they needed to develop steering mechanisms that both rewarded those Lander that were front runners and also encouraged the laggards.  Examples included legal instruments to impose new institutions, incentives and discursive instruments to provide advice (see Turner and Rowe 2015).

The case for localism and re-balancing government between centre and regions/localities, is designed to provide more scope for local decision making.  A strong rationale is the idea that involving people in the hard, rationing choices of politics will build a civic culture and deliver a more mature and sustainable democracy.

Because it brings public-decision making to those spheres of government that are close to citizens localism increases opportunities for people to become directly involved in the process of government and governing.  It addresses the tyranny of distance between government and citizens that currently exists in New Zealand and increases the accountability of government, as it easier to identify the sphere of government responsible for delivering services, whether local, regional or national.

This does of course require that councils also take a localist approach to the way in which they work, such as by increasing the role of community boards, decentralising to Iwi/Maori and not for profits and providing new ways for citizens to be involved in decision-making and budget setting.

The argument was reinforced by David Cameron, the former PM of the United Kingdom, who argued that giving people more power and control over the services delivered in their areas will inspire a new spirit of civic pride in our communities.  The passage of the Localism Act in 2011 was a step towards creating this environment.  It is a reasonable assumption that people will be more motivated to get involved in civic affairs when they know their actions can make a real difference.

By providing councils with a share of income tax or GST raised in their districts they will be more incentivised to invest and build on their natural to foster social and economic development.  As a result we are likely to see more inclusive growth that will begin to address the spatial inequality within New Zealand. 

Localism will also have an effect on how central government works.  Where localism is rigorously applied, as in Switzerland, the number of parliamentarians and their officials is much smaller than in centralised countries as their range of responsibilities is smaller.  Put simply, government at the local level will be more important and visible because it will be responsible for a bigger range of responsibilities and have real authority to shape policies and services to meet the needs and circumstances of local areas.

There is no single template for localism as every country is different and within countries themselves there is considerable variation.  What matters is the principle, often called subsidiarity, that public services should be the responsibility of the sphere of government that is closest to the community unless there are practical reasons why that shouldn’t happen, such as the need for economies of scale or nationally consistent standards and processes, for example immunisation and border protection.

A simple rule of thumb is that a service should be local if the benefits of that service are contained within the jurisdiction of the local authority/government responsible for its provision.  This principle is qualified, however, by matters like capability, resourcing and the degree to which benefits might “spill over” into neighbouring jurisdictions. In such situations the answer might be to create larger local authorities or some form of shared authority. International practice tends to involve three types– local, intermediate and regional.[1]  The three orders are:

Local – this level of government is described as having a wide range of responsibilities, general competence powers and additional allocations by the law

Intermediary – this level consists of specialised and more limited responsibilities of supra-municipal interest, such as providing assistance to small municipalities and the exercise of responsibilities delegated by the regions and central government;

Regional – this level of government is concerned with heterogeneous (responsibilities that vary from place to place) and more or less extensive responsibilities depending on countries (in particular whether federal or unitary

A common distribution of functions found internationally is detailed below in Table 3.

Table 3: Common distribution of sub-national responsibilities

Source OECD UCLG 2016

[1] “Sub-national governments around the world – structure and finance” (2016), is published jointly by the OECD (Organisation of Economic Cooperation and Development) and the UCLG (United Cities and Local Governments).

The answer is yes.  Councils are already the most trusted level of government and giving them more responsibility is likely to increase that level of trust.

The Values survey, a global survey which traces changes in attitudes across countries, regularly measures trust in government.  The 1998 survey, which also involved New Zealand, included a number of questions about local government (unfortunately they were not included in the follow up 2004/5 version). The results were:

• 69 per cent of respondents stated they had little control over what local government politicians do in office; this compared, however, to 86 per cent who stated they had little control over what central government politicians did;
• 25 per cent of respondents said the average citizen had considerable influence on their local government, the equivalent figure for central government was 13 per cent;
• 39 per cent of respondents believed that local government was generally responsive to public opinion while for central government the figure was 35 per cent.

Since 2016 the Institute for Governance and Policy Studies has commissioned a regular “Public Trust Survey”.  The 2018 survey showed that the percentage of people who had full or some trust in local government was 63 percent, marginally higher than the 62 per cent of respondents who had full or some trust in central government ministers.  [1]

Internationally, possibly indicating the impact of devolution, trust in local governments is significantly greater than trust in central governments or federal governments.

The Pew Research Centre, which regularly surveys the views of citizens in the United States of America, reported in 2018 that 67 per cent of Americans had a favourable view of local government compared to 35 per cent who had a favourable view of the federal government.[2]  Citizens also had a higher regard for the quality of candidates standing for local government compared to those standing for Congress.

Similar results have been identified in England. A regular survey carried out by the Local Government Association found 67 per cent of citizens had either a great or fair amount of trust in their local council.  In response to the question “who do you trust to make decisions about how services are provided in your local area” 71 per cent of respondents answered local government (the share answering central government was 15 per cent).

Paradoxically citizens’ trust in national governments tends to increase in direct proportion to the degree that national governments transfer power and authority to local governments, see figure 1.

Figure 1: Relationship between trust and decentralisation

Source OECD, UCLG

The prescription to declining trust in democracy is not to make it harder for citizens to have a say by centralising government further but to encourage more democracy by embracing localism. Involving citizens in the process of government by transferring responsibilities to local governments increases their general understanding of and trust in public institutions and how they work. 

Although citizens already hold their local governments in higher esteem than central government figure 1 indicates that localisation, that is the transfer of responsibilities and resources to local governments and citizens will further increase that trust.

[1] https://www.victoria.ac.nz/__data/assets/pdf_file/0007/1616380/IGPS-Trust-Presentation-June2018.pdf#download%20the%20Public%20Trust%20PDF

[2] (http://www.people-press.org/2018/04/26/the-public-the-political-system-and-american-democracy/)