by Anna Wilson, General Manager at Delos Delta
‘Roads, rates and rubbish’ is the classic trope to describe Council services, but in reality, local governments play a much larger role in supporting their communities and strengthening democratic principles.
Across NSW and Victoria there have been calls to abolish and amalgamate local government for the past 30 years. Recent polling conducted by Redbridge Group in Victoria towards the end of 2022 suggested that, 57% of those polled were supportive of wholesale council mergers, while 45% supported scrapping local governments altogether.
As the frontline face of government in Australia, Councils cop a lot of criticism. However, there are three key points that this criticism fails to consider:
- The changing role and expectations of local governments
- The funding challenges and inequalities
- The flawed premise that fewer levels of government automatically equals greater efficiency.
The role of local government has changed.
Globally speaking, as accelerated by the COVID-19 pandemic, governments are trending towards de-centralisation – the transfer of funding and responsibilities from a national government to sub-national governments. This shift is motivated generally by a desire to promote democratic accountability, and to better address the requirements of specific suburban areas demographically distinct from others (OECD, 2019).
COVID-19 demonstrated this shift in responsibilities which saw local governments delivering economic support programs, digital literacy training, and other activities that are far from ‘traditional’. This gap in local service delivery left by other levels of government is not only essential but can also target the individual needs of the community.
The changes in our expectations around the role of local governments was demonstrated in a recent representative study conducted by Australian Catholic University. Despite 7 in 10 Australians suggesting that Councils should only focus on delivering basic services, 8 in 10 Australians suggested Councils should also be involved in shaping their region beyond roads, rates and rubbish. This ‘shaping’ role included promoting the development of local identities and culture and providing forums to discuss national issues. There was also a focus on services that support planning for the future, health, and community development (Chou, Busbridge & Rutledge-Prior, 2023).
So, despite having the foundational belief that local government should only deliver basic services, communities are increasingly relying on, and expecting services that cover wider social, economic and environmental issues.
Current funding structures do not set local government up for success.
Put simply, councils are under-resourced. However, the broadening scope of Council responsibilities and inadequate levels of support from state and federal governments is leading to misconceptions of inefficiency or inability.
Local government spending is heavily scrutinised at a local level, and rightfully requires demonstrated value for money and public accountability. However, unlike state and federal governments, local government functions and services (e.g., asset management and maintenance) have limited scope for revenue raising. There are only two local governments across all of the UK, Canada, Australia and New Zealand that exceed 5% of total revenue through these ‘alternative’ (non-rate, non-fine, non-grant) streams (SGS Economics, 2023).
Current funding arrangements mean Councils must maintain approximately 33% of all public assets, while collecting only 3.5% of Australia’s total tax revenue (SGS Economics, 2023). Additionally, only 14% of total local government funding is provided by state and federal government support (Australian Local Government Association, 2021).
So, while the expectations of Council service delivery are expanding, the funding afforded to their delivery is decreasing. This puts local governments in a situation where they need to deliver more with the same funding support as previous service requirements, and little opportunity to seek alternative revenue options.
Mergers and abolitions lack efficiency
Most commonly, those who support merging or abolishing local governments argue that these measures will achieve ‘economies of scale’ through a more effective distribution of resources over a larger area.
This argument has little (if any) basis in practice. Merging and/or abolishing local governments is not a silver bullet for savings. Evidence suggests the size of a public jurisdiction has no systematic effect on the cost effectiveness of that jurisdiction (Blom-Hansen, Houlberg and Serritzlew, 2021). In practice, savings generated by up-scaling are likely to be offset by increased costs associated with losing the benefits of a small jurisdiction, including (per Blom-Hansen et al, 2016):
- Ease of local monitoring
- More efficient democratic accountability, and
- Greater competition for residents between LGAs, compelling each to provide optimal services.
Ultimately, abolition of local government in favour of state governments risk the creation of large, pseudo-local governments with limited democratic representation of the community and thus decreased sensitivity to local needs.
As such, local governments are best placed to deliver local services. This was confirmed by the ACU research which found that 67% of Australians believe that local government is best able to make decisions about the local area. Within Councils there is also a strong desire to deliver benefits and value to their communities. In the past five engagements conducted by Delos Delta with Council staff, increasing efficiencies and the delivery of enhanced benefits to local communities were identified as top objectives for Council activities.
Having discussed the unique capacities of local government and the risks inherent in abolishing them, this article concludes with a series of practical steps councils can take (in partnership with state and federal governments) to build residential support for their operations and to maximise their performance quality.
1. Ongoing engagement with communities
Councils should take advantage of their close connection to the community by regularly engaging with residents to determine key spending priorities and promote the value and benefits of projects, range of services, and local opportunities available.
2. Advocate for funding reform
State and federal decision-makers should be reminded of the importance of supplying local governments with adequate resourcing to enable the delivery of their expansive range of responsibilities.
3. Seek financially productive partnerships
In lieu of sufficient funding from higher levels of government, councils should act proactively in procuring innovative, alternative revenue streams through appropriate private sector partnerships and collaborations.
ALGA, Background on Local Government Funding ALGA, 2019: https://alga.com.au/policy-centre/financial-sustainability/background-on-local-government-funding/
Blom-Hansen, Houlberg and Serritzlew, Jurisdiction size and local government effectiveness: Assessing the effects of municipal amalgamations on performance, 2020: https://ejpr.onlinelibrary.wiley.com/doi/epdf/10.1111/1475-6765.12394?saml_referrer
Blom-Hansen et al, Jurisdiction Size and Local Government Policy Expenditure: Assessing the Effect of Municipal Amalgamation, 2016: https://typeset.io/pdf/jurisdiction-size-and-local-government-policy-expenditure-3geht7mkw1.pdf
Chou, Busbridge, and Rutledge-Prior, The Changing Role of Local Government in Australia: National Survey Findings. ACU Research Centre for Social and Political Change, 2023: https://apo.org.au/sites/default/files/resource-files/2023-02/apo-nid321483.pdf
SGS Economics, Alternative Sources of Funding, 2022: https://media.ruralcouncilsvictoria.org.au/wp-content/uploads/2022/12/13085030/20220153-RCV-own-source-income-Updated-Final-report-221212.pdf
OECD, Making Decentralisation Work; A Handbook for Policy-Makers: https://www.oecd.org/cfe/Policy%20highlights_decentralisation-Final.pdf