Murray Sherwin, chairman of the Productivity Commission

THE surprising thing about local government is how diverse it is. For example, the number of employees in our largest local body, Auckland Council, exceeds the entire population of our least populated council. About 65 percent of New Zealand’s 78 councils — including Gisborne District Council — have a population that could fit inside the permanent seating at Eden Park.

Size aside, local authorities also differ in the way they deliver a wide range of regulatory functions and services. Regulations are largely in the background of everyday life, although if you have a dog, noisy neighbours, want to build a deck, sell produce at the local farmers’ market or set up a business, you will probably have come up close and personal with your local body regulations.

As our local government regulation issues paper released last week sets out, the commission will be taking an independent look into what and how local authorities regulate. We have been asked to develop principles to help decide whether a regulatory function is best undertaken at local or central government level, and to suggest where improvements could be made for the benefit of New Zealanders.

Regulation can translate into big money. Any regulatory process that is longer or more complex than strictly needed can add cost.

The Productivity Commission’s affordable housing inquiry found, for example, that the slow pace at which land for housing is planned, zoned and released contributed to the high price of sections and therefore houses. Todd Property Group submitted to the inquiry that consenting delays of six months add over $30,000 to the cost of each apartment in a modest apartment building.

Variation between councils can lead to different requirements for businesses that operate across council boundaries, adding additional cost.

Of course some variation is to be expected because, after all, that’s the point of having locally elected bodies. They represent a community, with its differing issues, location, population and history. The Resource Management Act recognises, for example, that Maori may have a “guardian” role around natural features such as mountains or rivers, and this can and should lead to differences in the way these assets are managed and regulated. The critical question for people to think about is: how much local variation is really required and desirable, and at what cost?

Business owners may face a raft of regulatory requirements, each with its own processes, information requirements, timing and fees. For example, a new restaurant owner may need to get their resource, building, health and liquor consents approved (in the right order) before trading starts.

Unnecessary and expensive regulatory costs can have a big impact on businesses — and individuals, if costs are passed on in the price of goods and services.

Whether regulation should be carried out by central or local government may come down to a trade-off between the efficiency and consistency of operating at national level, and the potential loss of flexibility and local “customisation” and sense of ownership that can come with regulating locally.

Principles for deciding where regulation sits would provide more consistency. Sometimes the decision about “who does what” can seem ad hoc. For example, applications for liquor licences and monitoring compliance is carried out locally, but gambling licences are issued centrally through the Department of Internal Affairs.

The commission is interested to hear New Zealanders’ views on what considerations are most important when thinking about whether a regulatory function should sit with central government or their local body. Our issues paper is available at www.productivity.govt.nz

The due date for initial submissions is August 31, 2012. A draft report, incorporating public response to the first consultation round, will be released in December 2012 for further submission by February 2013. The final report is expected to be with the Government by April 1, 2013.