Victoria hounds councils over rate capping

By April, 2015 October 29th, 2015 Local, State

rate capping

Victorian Minister for Local Government Natalie Hutchins has firmly warned the state’s local government sector against using the new ‘fair go rate cap’ as an excuse to cut vital staff and services.

In a pre-emptive strike against a potential backlash from the local government sector towards the Andrews government’s ‘fair go rate cap’, Ms Hutchins gave a strongly worded message to councils about their spending habits.

Ms Hutchins said rate capping would not come into effect until 2016-17 and that any council attempting to blame rate capping for staff or service cuts was failing to be honest with its local community.

She said rather than trying to blame their own budgeting decisions on the cap, councils should instead consider community needs and engage with the Labor Government’s consultation process.

Her stern words of caution didn’t end there.

“This is not about cutting staff and services. It’s about encouraging councils to get back to the things that matter to their communities,” Ms Hutchins said.

She said councils need to “put a stop to over-the-top executive pay rises and needless waste”.

The Victorian government introduced the policy in February 2015, where it appointed the Essential Services Network (ESC) to provide advice on the framework.

It was introduced under the justification that it would address the rising cost of living for Victorians and would make “council rates fair and balanced”.

Although the ESC will consult with the local government sector on how to adapt to this new policy before it’s formally implemented in 2016-17, councils are standing their ground.

It’s a big issue for councils that’s been simmering prior to the previous Victorian election, where the then Labor Opposition campaigned to introduce rate capping to the local government sector.

The electorally popular rate capping policy has also been enabled in New South Wales since the enactment of the Local Government Act of 1993, which has been a significant pain point for councils requiring crucial funding for asset maintenance and staff remuneration.

Other Opposition parties have taken the populist stand in rate capping in other states like Western Australia where the Labor Opposition promised to introduce rate capping to be in line with the Consumer Price Index (CPI) after the March 2013 state election.

Councils cried foul and the Barnett government was subsequently re-elected.

And councils in Victoria made their unanimous opposition to rate capping clear prior to the election, but now their focus is working with the government to achieve a sustainable outcome for communities that rely on local services and infrastructure.

Municipal Association of Victoria (MAV) President Bill McArthur said if you haven’t got the money, you can’t maintain or build infrastructure to service your communities.

Mr McArthur also made it clear that that councils are in disagreement with the state government about using CPI to measure local government costs because it’s an inaccurate system.

“CPI relates to the cost of a basket of household goods. It doesn’t relate to a basket of council services and the cost of maintaining and providing new infrastructure,” Mr McArthur said.

He said councils would like to see a more appropriate benchmark for measuring council costs rather than CPI, such as the Local Government Cost Index, developed by MAV.

Rate capping isn’t the only pain point for councils at the moment – its introduction couldn’t come at a more awkward time for the sector which has been fighting the federal government’s 2014-15 Budget decision to put a freeze on Financial Assistance Grants (FAG).

According to Mr McArthur, the freeze in FAGs has put enormous pressure on rural councils because they don’t have other revenue streams such as parking or industrial estates.

He hit back at Ms Hutchins’ comment on the high salaries of senior staff, saying that the heavy costing for local government is at the lower level, not the executive level.

“Even if you cut out all your executive salaries and employ monkeys to run your business, you’re not going to achieve the massive savings that are apparently out there,” Mr McArthur said.

According to Mr McArthur, asset sales aren’t a clear option because of the massive sell-offs during the Kennett era, so councils have worked to become more innovative in their procurement practices and using shared services.

“Procurement is one of the areas where we can save significant sums of money if we get it right,” Mr McArthur said.

He said Victoria has also introduced a financial bond, which enables councils to borrow at better than Treasury rates, therefore delivering major savings to the sector and to rate payers over a period of time.

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One Comment

  • Greg Scott says:

    Capping Council rates is good but what about the others? Water, Gas, Electricity, Car registration, the various fees the government charges (ie: Land Titles, Stamp Duty), etc! What is the government doing to keep all charges capped at CPI?

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