Friday, 4 September 2009

Tiebout and Auckland: Sir Roger gets it

I've previously complained that nobody else seems to have noticed that Auckland's amalgamation will reduce Tiebout competition. I hadn't seen Sir Roger Douglas's submission.
On the community level, Councils should be designed to allow greater choice and competition between Community Councils, as well as providing for greater community control over expenditure.

Mechanisms that allow individuals to opt out of certain Council functions, and groups of individuals to switch Community Council, create a new Community Council, or amalgamate with an adjacent Community Council will foster greater competition between Councils. Such competition will allow more diversity and experimentation within Local Government.
Only when Government bodies are held responsible for setting and collecting rates and expenditure will there be adequate checks on their capacity to spend. The rates set by Community Councils could be collected on their behalf by the Greater Regional Council, but it is most important that the resident knows which portion of rates goes to the Community Council and which portion goes to the Greater Regional Council.

While the Government’s position on Community Councils – a position which departs from the Royal Commission’s absurd proposal to have only six local Councils beneath the regional authority – is generally sound, it is also important that Community Councils are held accountable for what they spend. This will only occur if they raise their own revenue.

...a group of citizens adjacent to another Community Council should be able to opt-out of their current Council, joining the neighbouring Council, if they think their mode of service delivery is more suitable to their wishes. The capacity to change Council will create competition for ratepayers, which is likely to see value for money being delivered by Local Government. Although this choice would only be able to be used by those at the edges, the capacity for others to change providers drives efficiency and therefore benefits all ratepayers.
Lots of other great suggestions in there, like having line-item council tax bills and allowing residents to opt out of certain items in favour of private providers. Hope the Local Government Minister was paying attention.


  1. Tiebout would surely have minimal effect in NZ. NZ Local Govt does not have the range of functions of its American counterpart and, in fact, has very little discretionary spend. Factors such as climate, housing market, schools, transport etc swamp issues such as perceived value from rates spend when it comes to selecting a place to live.

  2. Is the solution to a cartel problem monopoly or increased competition?

  3. I think my point is the nature of LG in NZ requires something more radical than Tiebout to achieve a major change in performance

  4. I would agree with Donald, and would summarise by paraphrasing a line from your other post: that although greater competition is 'nice' in principle, more accountable and representative local democracy is a more powerful check on local governments' activities.

    Really, is the magnitude of the 'competitive pressure' on council budgets that might be lost through amalgamation the most important problem to worry about here?

    I guess that angle is worth a mention, but I suspect one would be hard pushed to argue that the conditions for Tiebout competition to have a substantial effect are actually satisfied in a metropolitan region as small as Auckland.

    Sorry about the delayed comment.

  5. I'm certainly not saying that nothing should be done. But it worries me when something at least moderately important is largely ignored in the debate.

    Note that Winnipeg, smaller than Auckland, suffered greatly when Tiebout competition was lost through amalgamation.