21 August 2020
New Productivity report calls rate pegging into question
A high-level NSW productivity paper released this week has joined the chorus of expert voices calling for the relaxing of crippling rate pegging, which is creating increasing financial hardship for councils and their communities.
Local Government NSW (LGNSW) President Linda Scott said the NSW Productivity Commission’s Green Paper on Productivity Reform, Continuing the Productivity Conversation, recognised a flexible rating system was the most efficient way of helping councils meet the risings costs of serving their communities.
“The paper is simply the latest in a long line of reports identifying the glaring problems with Government rate pegging” Cr Scott said.
“Communities expect councils to take on increasing financial responsibilities resulting from population growth, increased infrastructure requirements and more than 100 service demands.
“Added to this is the issue of cost shifting – where State and Federal governments make councils carry the can for costs previously borne by them.”
This week’s NSW Productivity Commission’s Green Paper endorsed LGNSW’s long-held position that rate capping greatly hampers councils’ ability to deliver local services and infrastructure such as parks, libraries, bridges, cycleways and sports centres.
The 300-page report echoes findings from previous ones such as the Henry Review of Taxation, the NSW Treasury Corporation’s assessment of the financial sustainability of NSW councils and the NSW Independent Local Government Review Panel’s Final Report.
Business lobby groups, the Committee for Sydney and the Sydney and Western Sydney business chambers have also called for abolishing the pegging system.
Last month’s Productivity Commission Review of Infrastructure Contributions in NSW issues paper suggested rate pegging had contributed to the State’s complex infrastructure contribution system.
“While LGNSW doesn’t agree with the Productivity Commission’s views on the pathway to abolishing rate pegging, we welcome the start of the conversation,” Cr Scott said.
“Increased rate flexibility must not come at the cost of other vital funding streams councils rely on, such as infrastructure contributions from developers to support development and growth of local communities.”
Cr Scott said LGNSW had been calling on the NSW Government to abolish rate pegging on behalf of councils for decades.
“Increasing numbers of reports back our call. Surely the writing is on the wall,” she said.
“NSW and Victoria are the only States with rate pegging. It’s a blunt instrument hangover from the 1970s, when government was dealing with wild inflation and a global oil crisis,” Cr Scott said.
“The fear is if the peg was removed, rates would skyrocket and ratepayers would be slugged. But there is a powerful protection in place to ensure that doesn’t happen: democracy.
“Every four years councillors who determine the rates come up for election and if the community is unhappy with them, they can be voted out.”
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