Part 1: Introduction

1.1
The Office of the Auditor-General carries out the primary statutory functions under the Local Authorities (Members’ Interests) Act 1968.¹ That role gives us a unique perspective on how the Act works, and highlights on a daily basis a number of practical difficulties with the Act.

1.2
For a long time, we have considered that the Act is in need of an overhaul. The Act is 37 years old. Various initiatives to review and reform it were promoted in 1983-84, 1993, and 1996, but without success. Twice in recent years, we have expressed our view to Parliament that a modern restatement of the law is desirable.²

1.3
The purpose of this report is to outline the key problems we have encountered with the Act over the years, and to promote consideration of how they might be remedied. The report describes the issues that we think will need to be addressed if the Act is to be redrafted, and offers a preliminary view about how some of them might be dealt with. Although some of the issues can be described as technical or administrative, others are policy issues that ought to be the subject of debate and decision by others. The report is intended to stimulate discussion amongst stakeholders and policymakers about the future of the Act, and to help focus that discussion on what we see as the key issues. We do not attempt to present a ready-made solution or adopt a firm policy position.

1.4
This report necessarily discusses many matters of detail, so we will not summarise them all in this Introduction. However, some of the more significant views we advance are:

1. The entire Act needs to be rewritten.
2. It is desirable to continue to have legislation that fulfils the function of the discussing and voting rule in section 6 of the Act.
3. We doubt whether the contracting rule in section 3 of the Act needs to be retained.
4. A wholly civil penalty for breach of the rules may be more effective than the current criminal sanction.

1.5
This report has 4 other parts:

1. Part 2 summarises the Act and the Auditor-General’s role in administering it.
2. Part 3 examines current problems with the Act that we have encountered in administering it.
3. Part 4 considers whether the Act should be repealed or retained, and in what form.
4. Part 5 discusses the main issues to be addressed in a new Act, and makes some suggestions as to how a new Act might look.

1: Which we refer to throughout the rest of this report as the Act.

2: Local Government: Results of the 2001-02 Audits, parliamentary paper B.29[03b], 2003, part 2.4; and Second Report for 2000: Local Government Matters; parliamentary paper B.29[00b], 2000, part 7. Local government law practitioners have also commented on the need to reform the Act. See, for example, Sheard, Denis, Conflicts of Interest Involving Members of Local Authorities, unpublished paper presented to the 4th Annual LexisNexis Local Government Legal Forum, April 2005.