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Part 5: Local Authorities (Members' Interests) Act 1968

Local government: Results of the 2004-05 audits.

5.1 Issues and options for reform

In 2005, we published a report entitled The Local Authorities (Members’ Interests) Act 1968: Issues and options for reform.1 The report was a discussion paper that highlighted the difficulties we see with the current Local Authorities (Members’ Interests) Act 1968 (the Act) and suggested options for improving it.

The Act provides rules about members participating in matters in which they have a pecuniary interest that come before the governing body or a committee of the local authority, and about contracts between members and the local authority.2

The Office of the Auditor-General carries out the primary statutory functions under the Act. This 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.

What did we say about the Act?

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 previously in recent years, we have expressed our view to Parliament that a modern restatement of the law is desirable.3

The purpose of our 2005 report was to outline the main problems we have encountered with the Act over the years, and to promote consideration of how they might be remedied. The report described the issues that we consider will need to be addressed if the Act is to be redrafted, and offered 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 was intended to stimulate discussion amongst stakeholders and policy makers about the future of the Act, and to help focus that discussion on what we see as the most important issues. We did not attempt to present a ready-made solution.

Our report discussed many matters of detail. Some of the more significant views we advanced were:

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

What happens now?

In our report, we provided some thoughts on areas of the Act that could be enhanced. It is not appropriate for us to draft the provisions of any new Act. Decisions on policy questions are for others to make.

The Department of Internal Affairs has included the topic on its policy work programme for 2005-06. It plans to undertake some policy work and consultation with the sector about whether or not to promote a revision of the Act. We expect to provide the Department with ongoing assistance in its work.

One of the areas of greatest uncertainty surrounds the eligibility of candidates for election.4A candidate who has existing contractual relations with their local authority can find it very difficult to confidently determine whether or not they are eligible to stand for election. Therefore, if new legislation is to be enacted in this area, we consider it desirable for such legislation to be in place by the time of the next local elections (which are due to be held in October 2007).5 We urge the Department to give priority to its policy work so that this objective can be achieved.

1: ISBN 0-478-18138-8.

2: For more information about the Act generally, see our 2004 publication Conflicts of interest – A guide to the Local Authorities (Members’ Interests) Act 1968 and non-pecuniarys conflicts of interest, ISBN 0-478-18121-3.

3: 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.

4: See paragraphs 3.23-3.26 of the report.

5: It may also be desirable for any legislative changes to come into force on the date of those elections, because of the potential for them to affect the position of existing members.

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CoverLocal government: Results of the 2004/05 audits

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