152 – Rate capping – an inconvenient fact.

Posted by Whistler                                                                          220 words

ESC table 2.3 forecast rate cap

Image source

Lancing Farrell has made some good points in her post about rate capping. I think the ESC has been optimistic. The impact of application of the CPI and WPI and the Efficiency Factor is likely to be more significant for many councils, particularly large urban councils.

The main reason I say this is that the average of 40 % of expenditure on labour costs doesn’t reflect the reality of many councils. For many it is 55 to 60%. This means that a significant part of their labour costs will be adjusted for CPI, not the higher WPI. I have reproduced the table from Lancing Farrell’s post above.

I have produced my own table comparing a council that has 60% labour costs. The red numbers are mine and the bold numbers at the bottom of the table show the difference with the Essential Services Commission.

rate cap comparison

Over the three year outlook, councils with 60% labour costs will be 0.55% worse off. For a large council this could equate to $500,000. In the scheme of things this might seem like a small number, but remember, it has to come on top of other expenditure reductions required. It is enough funding for about 6 staff (including overheads) for most councils.

Is it the road maintenance team, the conservation crew, the recreation unit, or some other council service that will no longer be required?