Article 7: Local Authorities (Members' Interests) Act 1968

We included a comprehensive discussion about the Local Authorities (Members’ Interests) Act (the Members’ Interests Act) in a report to Parliament in June 2010.¹² In that report, we noted that our 2009 investigation into four councillors from Environment Canterbury¹³ had generated considerable interest and concern in the sector.

The main issue in the Environment Canterbury investigation was whether the interests of the councillors could be regarded as interests in common with the public. The type of user charges being proposed and that the subset of the population to whom they would apply was so small and readily identified were both significant.

We are aware that our decision in this case has caused some concern in the sector. Since then, we have received many requests for advice and guidance about how to apply the "interest in common" test in the Members’ Interests Act. These requests have been about matters such as particular targeted rates that affect some groups of ratepayers and even fees that affect large numbers of people, such as dog registration fees. We consider that this was partly because the financial interests of two of the councillors in the Environment Canterbury case were quite small, and this made people take a very cautious approach.

In most of the requests received, we concluded that targeted rates or user pays charges that affected councillors as part of a group were not problematic. The group represented a reasonable proportion of the relevant population and was defined in general terms. We considered that the interests of the councillors concerned were "in common with the public" and they could therefore participate.

By contrast, in the decision about Environment Canterbury, the affected groups were quite specifically identified and were a small subset of the general population, and the effect of the charge on them was different in kind and extent from the effect on others.

Our general approach with the Members’ Interests Act is a strong focus on providing guidance and assistance to help councillors and council staff to do the right thing, rather than investigate potential breaches after the event. We updated our guide to the Members’ Interests Act in time for the 2010 local authority elections,¹⁴ and took part in training sessions for new councillors around the country organised by Local Government New Zealand (LGNZ) and the Auckland Council. Our revised guide is clear on the principles and factors to apply when working out whether there is a financial interest that might prohibit a councillor from participating in council decisions. It also makes clear, for those who wish to apply to us for approvals to participate, what information we need to process the application promptly.

We are now of the view that it would be better to review the Members’ Interests Act as a whole, from a first principles perspective. Its basic approach is out of step with other public sector legislation, and the practical difficulties and compliance costs of the current regulatory approach are becoming more acute.

With the president of LGNZ, we wrote to the Minister of Local Government in May this year, seeking his support for a first principles review of the Members’ Interests Act. We would appreciate the sector’s support for this.

Non-financial conflicts of interest

Although we do not have the same formal role with non-financial conflicts of interest, we are regularly asked for guidance and comment on good practice for managing these issues. Our updated guide to the Members’ Interests Act contains a chapter on more general conflicts of interest and bias questions that arise regularly in the local government sector.

The suggestion of a non-financial conflict of interest can arise for a number of reasons, including because the councillor:

• is involved in another organisation that has an interest in a matter before the council (and so may have a conflict of roles);
• has a close family member who is involved in a council matter, such as a submitter on a plan; or
• has strong political views on the issue (suggesting bias or predetermination).

Members of the public, local authority staff , and other councillors regularly raise concerns of this kind with us.

In our experience, most council staff are able to provide informed and practical advice to councillors on these issues. If staff have major concerns about a particular current or potential issue, we encourage them to get specific legal advice rather than to seek general guidance from us. That said, we understand that, at times, staff find it helpful to talk an issue through in general terms. In such cases, we are happy to act as a sounding board, and to provide general comments on the approach being developed.

12: "How the Local Authorities (Members’ Interests) Act 1968 operates", in Local government: Results of the 2008/09 audits (June 2010).

13: Investigation into conflicts of interest of four councillors at Environment Canterbury (December 2009).

14: A Guide to the Local Authorities (Members’ Interests) Act (October 2010).