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RPV Calls for CPI Rate Rise Limit

Ratepayers Victoria has urged the Essential Services Commission to limit Council revenue increases to the Consumer Price Index because the Commission has admitted rate-capping isn’t working.

The Commission’s own report into rate-capping outcomes in May 2021 notes that 60% of ratepayers are paying higher rates than when the Cap was introduced in 2016.

44% of ratepayers face annual increases higher than the rate cap.

The Commission has hired Grosvenor consultants to conduct a four-year mandatory Review of the Rate-Capping system and Ratepayers Victoria’s submission to the Review is forthright about the failures of both the Rate Cap and the Review.

In its submission, Ratepayers Victoria (RPV) says the Review scope indicates the State Government and the Essential Services Commission have no idea that rate capping they’ve only rolled out one third of the project since 2016.

The original intention for Rate Capping was that it would be a three-phase project to limit rate rises, drive efficiencies in Councils and finally, add service performance benchmarks.

The Review and the consultation from the consultants only queries issues surrouding the rate cap figure, such as the Legislation, and the advice from the Essential Services Commission, and the policy design.

There is nothing in the Scope of the review, nor the review itself, to indicate the Essential Services Commnission or the State govenrment is preparing to implement the next phases for Council efficiencies or service improvements.

The submission from Ratepayers Victoria states..

“If the rate cap mechanism is not revised to include some efficiency factors, then the review is a deliberate and misleading ‘carpet sweeper’ to ignore fulfilling the original policy objectives of improving councils’ efficiency and service performance.

“This also implies that the original policy’s objectives and planned change management scope have been hijacked to allow councils to continue performing inefficiently. If this is the intention it is easier to simply align the rate cap with CPI and reduce the administrative effort and cost.”

In answering the 14 questions in the Consultant’s consultation document, Ratepayers Victoria notes the absence of any detail about the rate setting process, or the advice the Essential Services Commission provides to the Minister. For example, there appears to be no methodology for how or when the Commission prepares its advice for the Minister, no indication of what type of data is presented or where the information comes from.

RPV says …“as there is currently no evidence of work on the efficiency factors, we recommend that rate capping should be CPI indexed, to protect the integrity and fairness of Ministerial decision making, as we anticipate the ESC is likely to have no additional information to better inform the Minister’s decision…”

Ratepayers Victoria also made it clear throughout their submission that the original rate capping project encountered fierce opposition from Councils and the Councils’ peak bodies because of the original objectives for greater efficiency and better service delivery.

Ratepayers Victoria urges the Essential Services Commission to ensure proper implementation of the original project.

“If there is resolve to fulfil the policy’s original objectives, especially the efficiency and service performance goals, then we recommend a simple short term approach that begins with capping rates at the prevailing CPI, as the CPI indexation is already in the current rate cap formula.

“We expect a medium-term revised calculation method that incrementally introduces and improves efficiency factors and in the longer term, calculations for service performance factors.

“We anticipate the introduction of efficiency factors will focus on areas of change in financial, assets and workforce management and possibly the sharing of resources and provisioning.”

Now it just remains to be seen whether the review is a merely a rubber-stamp, or whether the Government will introduce Council efficiency measures that we were promised five years ago.

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