Kiwis go to town

New Zealand, new councils. Paul Gosling reports on a local government revolution that Labour could copy here

For such a small country, New Zealand has been making impressive waves in recent years. Just as Britain's privatisation programme has been copied across the world, so New Zealand's public management reforms have been seen by many as a blueprint for the modern state. But while most attention has focused on changes to the way central government operates, a study published today looks at council reforms which might be copied here.

Bob Chilton, head of local government studies at the Audit Commission and author of the report Kiwi Experience, is careful to say that it is not the commission's place to propose further local government reform. That does not prevent him arguing that political parties and local authorities should examine the effects of what is probably the world's most comprehensive overhaul of municipal government.

Change has started at the top, improving the quality of strategic management. The chief executive is the sole employee of a New Zealand council, the only person accountable to elected councillors. All other staff are employed by the chief executive. While this gives chief executives more operational freedom, it also gives them greater responsibilities. In one authority, the director of finance made a major mistake and resigned but the councillors still sacked the chief executive. There was no other way councillors could show electors they had taken action.

New Zealand councils are required to conduct strategic financial planning, incorporating draft budgets for at least 10 years into the future. Projects that are financially unsustainable are flagged up at an early stage. It would not by itself overcome the end-of-year budget insanity that sometimes afflicts British local government, but this can be the result of decisions imposed on councils by central government at late notice.

A partnership approach adopted by the two arms of the state prevents similar conflict arising in New Zealand. "Disciplines imposed by government on local government are also imposed on itself," says Mr Chilton. "The sense that 'we are getting dumped on' is less evident in New Zealand than in the UK. Cabinet ministers step out of cabinet and become local mayors."

Resource accounting, which records assets and their use, has been adopted more fully in New Zealand than here. Mr Chilton describes British councils as having gone just "a first step" towards financial transparency. The current book value of assets is recorded, but accounts ignore the question of how much needs to be spent on them. In New Zealand public accounts show both, with central government accounts stating the value of its navy and its forests, and what expenditure is required for their maintenance.

An internal market for public contracts operates between local authority trading enterprises (Lates). They can bid for work from other councils, also competing against the private sector, even exporting goods and services. A local authority-owned electricity supply company has become a major operator across the Pacific Rim region.

With no system of councillor surcharges, any losses sustained by a Late would have to be met by its local ratepayers. Mr Chilton is worried that some councils have not carried out risk assessment exercises on their commercial operations. But the focus on local authority enterprise helps to keep rate bills down.

Management appraisal systems are also very different. While in Britain there is a reliance on internal auditors to spot fraud and improve management practices, in New Zealand the focus is on annual performance appraisal reports to councillors. These give statistics on service standards, comparing costs and achievements with councils elsewhere in the country, along with user feedback. This is helped by the adoption of computer modelling systems which are common across the country.

Councillors conducting their annual council review, and setting budgets, rely heavily on a user benefit analysis. This identifies who uses services, whether they are rich or poor, residents or visitors. It is also usual in New Zealand to set up peer group assessment. A chief executive who wants to review the operation of leisure centres may ask the council's environmental health and planning officers to produce a report.

The emphasis on strategic planning is clearly improving management standards in New Zealand councils, but it would be wrong to make excessive claims. New Zealand councillors, like their British counterparts, have difficulty in recognising how their role differs from that of officers. In any case, local authorities in New Zealand are so much smaller than those in Britain that there must be reservations about the transferability of some of the lessons.

Yet many, including Bob Chilton, would welcome a greater focus in British local government on what he terms the "visibility and accountability" that is found in New Zealand. And British councils would be keen to see a spirit of partnership instead of confrontation coming from central government.

A Labour Party in office may look closely at the Kiwi experience.

'Kiwi Experience' is available at pounds 8 from Audit Commission Publications (0800 502030).