Devolved power needs responsibility, accountability

Dr Eric Crampton
The National Business Review
17 February, 2017

Mayors want devolved power to deal with issues facing their communities. If that power comes with responsibility, and accountability, central government should take the request seriously.

Earlier this month, the mayors of Gisborne, Rotorua and the Far North wrote to the Prime Minister asking to take over delivery of some social services. Far North Mayor John Carter wants to try work schemes for the unemployed. Gisborne Mayor Meng Foon wants to encourage job creation with a low-tax special economic zone. Rotorua mayor Steve Chadwick wants local control of central government’s social services spending in the area.

The requests did not come out of nowhere.

In late December last year, the McGuinness Institute suggested the government trial devolution through what they termed "demarcation zones" within which different policy settings could be trialled. Before that, The New Zealand Initiative pointed to Manchester’s city accord model as a promising alternative for devolution. The Initiative also suggested a framework for working with local government to trial policy in special economic zones.

New Zealand has one of the world’s most centralised government structures. As even the UK moves towards greater devolution, New Zealand’s local governments have a difficult problem. The general view in the Wellington bureaucracy, as best I can tell, is that local government cannot be trusted to run anything. But it can be tough to build competence and trust without having the opportunity to grow.

As the Initiative’s Jason Krupp puts it, everyone needs to learn to drive sometime.

Manchester’s example shows a way forward. Councils there demonstrated their readiness to take on devolved responsibility by making a solid case for it to central government.

Need for confidence
Ms Chadwick told RNZ that local communities can do a better job in contracting for particular local social services. She could easily be right. But devolved funding authority needs to come with responsibility and accountability. Central government needs to be confident that local service delivery really does deliver better outcomes – and especially where Rotorua’s proposal skirts current tendering rules.

That kind of outcome evaluation is easier now than it would have been a decade ago. Statistics NZ’s Integrated Data Infrastructure links up back-end administrative data held on each one of us. That makes it much easier to tell whether a programme achieved its objectives.

If a devolved local programme were intended to reduce youth offending or family violence, for example, the data would indicate whether the project were a success. Whether crime rates or recidivism go down for people in the area compared to similar people elsewhere is now pretty easy to test. A credible pitch for devolved authority would build in accountability by setting these kinds of performance indicators at the outset, and by pre-specifying what would happen if the project failed to deliver.

But local government competence and evaluation is not the only challenge. Central government provides its own risks.

Trialling policy at a local level can make a lot of sense. Not only does it let policy be more sensitive to local conditions, it also helps central government figure out what kinds of policies might work in a broader rollout. But it will always be tempting for central government to use local zones as a way of funnelling benefits to electorally sensitive areas instead. Just imagine what could have been in a Northland special economic zone proposal at the time of 2015’s by-election.

We worried about this problem in developing the Initiative’s Special Economic Zones proposal in 2015. The worst thing that can happen with a policy proposal is not that it is ignored but that it turns into a nightmarish hall-of-mirrors distortion of the original vision.

Dangerous temptations
Even leaving aside crass electorally driven measures, being able to regionally target policies could provide other dangerous temptations to a micromanaging central government. Imagine a tax concession zone for a three-block area in downtown Wellington to boost the IT industry. Or a zone with special depreciation rules to help ensure an irrigation project makes it over the line. Good policy provides a general framework that lets winners emerge, rather than picking them at the outset.

But there is a way of telling whether a proposed zone is a policy trial or something less laudable. Policy trials, if they are successful, should be able to be rolled more broadly. But projects that channel benefits to electorally sensitive areas or that try to pick winners cannot be.

And so we argued that policy measures shown to be successful in any area should be available to any other region wanting the same treatment. An inefficient tax concession zone to boost employment in one region would not put that big a dent in the government’s purse. Requiring that the same concession be available to all regions would make the policy too expensive to contemplate – unless it really were potentially to the broader good.

Localist approaches hold a lot of promise. Central government should welcome proposals that have the demonstrated support of local communities, which have taken programme evaluation seriously, and that could be taken up by other towns. Baking this kind of accountability into proposals helps give central government, and the rest of us, confidence that local government is ready to take up the challenge.

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