Council slams Government rates cap as ‘unrealistic and unworkable’

Wednesday, 21 January 2026

Christchurch City Council says the Government’s proposed rates cap policy needs “essential design changes”.

Christchurch City Council is taking aim at the Government’s proposed rates cap saying it is “unrealistic and unworkable”.

The policy is not well-considered and does not use the best evidence, the council says in a draft submission to the rates cap proposal.

In December, the Government announced plans to impose a rates cap of between 2% and 4% on local councils to encourage fiscal responsibliity.

At a briefing on Tuesday, staff warned the model could force cuts to essential services, drive up fees and charges, lead to a decay in assets, delay investment in critical infrastructure, and reduce the council’s ability to repay debt.

The council has taken issue with most aspects of the proposal, recommending “essential design changes”.

It has also objected to the Government’s assertion that past rates increases have been due to “frivolous spending”.

Recent increases were largely in response to market pressures, such as inflation, interest rates and insurance, the council said in its 11-page submission.

“Decisions to increase Christchurch’s rates are driven by unavoidable cost pressures and statutory obligations, not discretionary or ‘frivolous spending’.”

The council goes on to say the rates cap might be well-intentioned, but was “unrealistic and unworkable“ in its current form and required significant refinement to ensure it was economically sound, financially sustainable and responsive to local needs.

The Government’s intention to use inflation, based on the Consumer Price Index (CPI), to set the rates cap, was not “supported by evidence” and was based on “flawed analysis”.

The CPI is used to measure average household consumer prices, but the council said this was not relevant to councils and was not causing increases to rates.

Local Government Minister Simon Watts announced a proposed rates cap in December.

“Councils do not purchase a ‘basket of goods’ as the CPI expects. Vegetables, fruit, meat, drinks, cigarettes, alcohol etc are not the focus of council spending.”

Councils undertake activities like construction, laying pipes, repairing roads, building community facilities, maintaining assets, and servicing debt.

If the Government wanted to use inflation as a measure for rates, the council said, it could use a local government inflation index, which took into account price changes for things like land, buildings, roads, bridges, pipes, and machinery.

Research by economic consultancy Infometrics shows between 2021-2023 the CPI increased by 19%, but the cost of building bridges increased by 38%, sewers 30%, roads and water supply 27%.

It was first thought that all water-related rates and charges would be exempt from the cap, but the council has since been told that stormwater would be included, which it opposed.

The council was also concerned about the cost of implementing various new Government policies. It lists water chlorination, the water regulation levy, the cost of upgrading KiwiRail crossings, speed limit changes and implementing housing density rules.

“Unfunded mandates combined with a rates cap are untenable.”

The submission mentioned at least three times that the Government needed to provide additional financial support to help pay for reforms and new policies. The Government also needed to start paying rates on its properties and remove GST from rates or return the GST paid on rates back to councils.

Council chief executive Mary Richardson says she understands why people want rates restraint.

Analysis by The Press has found the city could be gaining about $25m annually if the Crown paid general rates on its properties.

Councillors agreed with the draft submission on Tuesday, saying it encapsulated their concerns.

Council chief executive Mary Richardson said she understood why people wanted rates restraints, but the issue was not the intention, it was the mechanism.

“We need a model that reduces pressure without hollowing out services, stalling development or pushing the bill onto future generations.”

Richardson said the council was keen to work with the Government to find an approach that was both affordable for households and realistic for councils.“

The council has also raised significant concerns about the Government’s new Emergency Management Bill, which it believed would impose new costs on councils and create uncertainty.

A draft submission on the bill said the bill lacked clarity, placed unrealistic expectations on local government and assumed a workforce capacity that did not exist.