Local Government's Democratic Deficit

The recent council rate increases show that all is not well in Victoria's local government.

While, as result of mandatory voting, most ratepayers vote in local government elections in Victoria, few ratepayers closely follow the decisions of local councils.  Importantly most people assume that the State government oversees the councils.  But State governments, with exception of the Kennett Government, have not done so.  They do not scrutinised local government budgets.  They do not enforce efficiency measures.  They only step in when a crisis happens.  As result, local governments are open to capture by narrow interest groups pursuing tax-and-spend policies.

Kennett put in place a range of efficiency and oversight measures including amalgamations, rate caps (removed in 1999), and compulsory tendering.  The Bracks Government replaced these with its Better Value Victoria policy.  This policy shifted the focus from state oversight to "better democracy".  While it will force local governments to provide more information and to communicate with the "community", it is unlikely to solve the democratic deficit.  Few rate payers will troll through councils' often useless and misleading material and the consultation process will remain dominated by the views of interested parties.

Experience bares this out.  Local governments recently increased their rates on average by 6.4 per cent or twice the rate of inflation.  Some councils put in place massive rate increases, such as Glen Eira (up by 16 per cent) and Boroondara (up by 15 per cent).  The justification given was the need to fund cut-backs in Commonwealth and State grants and a "$400 million infrastructure deficit" supposedly identified by a 1999 Department of Infrastructure (DOI) Report and a recent Auditor General Report.

The facts, however, paint a starkly different picture.

There have been no cut-backs in Commonwealth or State grants to local governments.  Indeed both types of grants have increased as planned and are above the rate of inflation.

While the DOI Report did find that many councils have infrastructure backlogs, most -- 76 out of 78 councils -- needed only minor (10 per cent or less) increases in capital spending to rectify this.  The Report argued that the backlogs could be met in most cases from greater efficiencies and planning rather than rate rises.  It also found that some council, such as Boroondara, had no infrastructure backlog and that other councils, such as, Glena Eira, only had a minor backlog.

The Auditor General was concerned, not so much with the infrastructure backlog, but rather with the local governments sector's inadequate knowledge of its infrastructure assets and requirements.

In short, the recent rate increases, contrary to the council public utterances, have not generally been required to meet a claimed infrastructure backlog.  And the State Government has done nothing, but falsely blame the Commonwealth.

The solution to spending excesses however lies not in going back to Kennett's top down approach, but rather in move further in the direction taken by the Bracks Government.  The way to solve the democratic deficits is more direct democracy that is giving ratepayers veto power over rate increases through a referendum process.

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