Rates cap could hollow out local arts funding, Govt warned

Thursday, 22 January 2026

The Government was repeatedly advised that proposed rates capping reforms risk undermining local arts, culture and heritage funding, despite those sectors delivering broad social, economic and resilience benefits.

Newly released emails reveal concerns about weak evidence, limited consultation and the likelihood councils would scale back cultural investment under pressure to keep rates low.

But Local Government Minister Simon Watts says the enduring purpose of local government, is to enable democratic local decision-making.

The Ministry for Culture and Heritage was concerned a rates cap could lead to a reduction in councils’ investment in arts, culture and heritage, according to emails obtained by The Post.

While arts and culture provide significant wellbeing benefits to communities, including reducing the strain on health and social services, cultural venues also play critical supporting roles during natural disasters, a policy adviser wrote to the Department of Internal Affairs in February 2025.

Nationwide, councils invest between $500-$600 million annually into arts, culture and heritage, according to the ministry, money that’s spent on everything from events to venue maintenance.

With the exception of Te Papa, funding for metropolitan and regional museums and galleries comes from local government. Any reduction in investment due to rates capping could exacerbate the existing financial strain on those services, the official wrote.

Rates capping could also lead to increased requests for central government to directly fund local arts, culture and heritage infrastructure and services. The Government could also end up spending more on health and social services, if councils reduce the amount of funding they give to culture.

A dedicated rate or levy, was one option put forward for exploration, however this seems to have been abandoned.

In another released email from June 2025, a ministry official said there appeared to be a low quality of data and evidence that proposed changes would achieve intended outcomes, regarding the Government’s “basics first” bill for councils that’s making its way through Parliament.

Focusing councils on rates would likely come at the expense of services and infrastructure development, they said, and even a regulatory impact statement admitted the proposed changes were unlikely to benefit communities more than the status quo.

The official also raised concerns about a lack of consultation, and the lack of time for Treaty of Waitangi considerations.

The ministry was concerned about the proposal to remove the requirement for councils to consider tikanga Māori knowledge when appointing council-controlled organisation directors, and asked why only some interventions were subject to an impact assessment but not others.

In October 2025, a senior policy official at the ministry told the Department of Internal Affairs, that the ministry was more supportive of a rates band model for councils, versus a strict rates cap.

A rates band model would provide greater flexibility and help protect funding for arts, culture and heritage services. But the ministry remained concerned that even that idea could lead councils to significantly reduce support for cultural initiatives.

The ministry suggested major sporting events, cultural infrastructure projects and climate initiatives that involved assets like museums, heritage buildings, marae or sports facilities should be explicitly listed as a valid reason for exemption.

The Government should also acknowledge and safeguard funding for legislated functions, such as councils’ heritage protection responsibilities, and outline the potential impacts of a rates band on museums, galleries and sport facilities.

Guidance on maintaining investment in cultural institutions, services and infrastructure, particularly where they contributed to disaster recovery, community resilience, and local identity, should be prepared, the official wrote.

The regulator should have reporting metrics that reflect the broader value of council spending, including cultural outcomes, and monitor the impacts on services and flow-on implications, for instance demand for central government support and services.

In a statement, Watts said while the culture ministry recommended a number of changes, ultimately none were adopted.

The Local Government (System Improvements) Amendment Bill would not prohibit local authorities from funding arts and culture, Watts said, but it means councils should only fund those things when they’re satisfied the basics have been or will be taken care of.