Introduction 

Aligning central and local government in the planning and funding of the infrastructure needs of our cities and regions is a priority. This has been highlighted through the conclusions of the Review into the Future of Local Government (established by the Minister of Local Government) and the National Party’s recently announced “five-point plan” for infrastructure.

The Future for Local Government report calls out the opportunity for City Deals and Region Deals through its recommendations on ‘place-based agreements’ as a way for central and local government to work together to agree and deliver on local priorities. National’s “five-point plan” also includes the development of ‘City and Regional Deals’. 

These ideas have been raised before, however in the face of our significant infrastructure deficit, there is no argument that “the time is now” for New Zealand to try a new approach to infrastructure prioritisation and funding. City and Regional Deals and place-based approaches are no doubt a useful tool in dealing with the infrastructure deficit – and in considering how we might do this, there are some key lessons from their implementation overseas.

What is a City or Regional Deal?

First introduced in the United Kingdom in 2011, ‘City Deals’ are long-term, place-based, partnership arrangements (often 10 years or more) between central government and local governments/economic regions. These arrangements focus on creating economic growth by giving local government the power and resources needed to undertake and deliver projects and initiatives in their city/region [1]. 

A City Deal identifies a package of priority projects (commonly relating to transport, housing and/or urban infrastructure) for that region and establishes a growth benchmark (a local GDP). Baseline funding of the projects provides certainty and regions can “earn-back” a share of the windfall tax arising from the additional economic growth.

Drawing from the UK’s experience, City Deals were introduced in Australia, with the first deal agreed in 2016. 

The Future for Local Government report notes that ‘[p]lace-based agreements are part of a broad framework for central and local government strategic alignment, collaboration, and coordination. They are known by a range of names including city deals, town deals, region deals, community agreements, and growth deals’ [2].  The report defines place-based agreements as ‘bespoke packages of funding and decision-making powers negotiated between central and local government and other local bodies as part of the exercise of kāwanatanga. They are designed to drive long-term, large-scale wellbeing improvements at place in a way that shines light on local priorities’.

Important insights from existing City Deals models 

Opportunity to set new, innovative economic priorities 

City Deals provide an opportunity for cities/regions to set new, innovative, and transformational economic priorities. When we consider the challenges and trade-offs New Zealand is committed to addressing – our infrastructure deficit, climate change and the energy transition amongst them – this transformational opportunity is significant and should frame the design and implementation of the City Deal. A key lesson is to ensure that the most is made of this opportunity - it has been argued that some cities in the UK have used the programme to simply “respond to the next pressure point with incremental conventional infrastructure” [3].  Similarly, it has been noted that cities in Australia have often adopted a shopping list of projects that were already in the pipeline. 

To get the most out of a City Deal, cities and regions should take a bold long-term vision (rather than being responsive or reactive) and develop new plans and solutions that are right for them. Economic and social priorities should be tailored to the particular area and based on genuine local needs and strengths. 

Trusted relationship between central and local government 
Critical to City Deals is a trusted relationship between central and local government. Local government needs to have a clear plan of priorities and demonstrate not only its understanding of local needs and strengths, but its ability to deliver on its commitments. On the other hand, central government needs to be willing to devolve power and resources. This has been identified as an issue in both the UK and Australia [4]. New Zealand is in a good place to implement these deals due to the existing arrangements between central and local government – we can point to large programmes where central and local government have worked together to deliver outcomes for regions including the Canterbury rebuild after the quakes, and Auckland transport initiatives (including City Rail Link).

Long term agreements provide certainty

Equally critical to City Deals’ success is their term, which is typically at least 10 years. This provides greater certainty over projects and funding as the deals endure multiple political cycles at both central and local levels. It provides the pipeline certainty needed for people and business to invest their resources and capability in delivering a long-term infrastructure pipeline, and for social outcomes such as workforce engagement and development programmes to be successfully entrenched.

Private sector involvement 

City Deals have been most successful when they involve the private sector (and private capital) from the start. This generates credibility for local government with their local business base, improves the quality and strength of a proposal, and makes it harder for central government to reject it [5]. 

Risk of growth in inequality within and between regions

There is potential for unsustainable social and economic outcomes resulting from City Deals’ focus on economic growth. This has been identified as a key flaw in the UK approach [6]. To address this concern, New Zealand could take the opportunity to elevate and integrate metrics/objectives other than pure economic growth to target major societal challenges, such as climate change resilience, housing, healthcare, local workforce development and child poverty. For example, low carbon construction methods could be employed, or local government could require the private sector to commit to reinvesting within local economies or ensure that job opportunities pay living wage. Genuine engagement with communities will also help to identify and ensure sustainable outcomes.

Another concern in the UK is the potential for City Deals to lead to a growth in inequality between cities and/or regions [7]. The utilisation of financial mechanisms favour those areas with strong growth opportunities. This could lead to areas with less growth potential being further isolated. However, City Deals hinge on rejecting “one-size-fits-all” policymaking. The focus for some regions may be on objectives which are not purely economic or growth-related. 

City Deals are not right for every area 

Despite the value that a City Deal may bring, it is not likely that a model of this kind will be suitable to every area. City Deals are best suited to improving large, complex economic systems, rather than providing an area assistance package. The pursuit of a City Deal will require careful consideration to be given to the area’s suitability for a City Deal and, in particular, whether it is ready (in terms of its priorities, growth opportunities and governance structures) to effectively negotiate and deliver a City Deal. 

Clear process for negotiation

Central government will need a clear process and goals for negotiating City Deals. Many UK cities felt the Government had not decided how City Deal discussions would work prior to negotiations commencing [8]. They also noted that the process was not designed to allow joint working between cities, and cities were not prepared and ready to present jointly developed policy proposals from the start. A regional approach to City Deals in New Zealand may need to facilitate opportunity for co-design of proposals (i.e., sharing ideas between cities/regions to develop common approaches to shared issues).  

Central government oversight and capacity to manage 

A well-resourced, dedicated body within central government should be established to oversee and manage the deals. There has been criticism of the capacity of central government to deal with the number and scale of City Deals in Australia [9]. Lack of resources, insufficient cross-department representation or skills, and differing funding sources can delay implementation of the deals. Equally, in the UK, some cities were concerned that City Deals could become process-driven and dominated by targets [10]. The process needs to remain nimble to cut through barriers and help cities be effective in driving growth. This is reflected in the Future for Local Government Report that recommends establishing a dedicated Crown department to facilitate a more effective working relationship that focuses (amongst other things) on putting in place these arrangements.

Assessment, monitoring and accountability mechanisms 

City Deals rely on transparent and quantifiable measures of success. Local governments will be required to closely assess, monitor, and report on the outcomes of their projects and whether they are delivering on their commitments. This will likely require additional capacity and resources within local authorities to deal with the extra demands of project assessment and monitoring [11]. 

Genuine collaboration 

City Deals require genuine collaboration between central government, local government, and communities (including local businesses, iwi and hapū). However, care should be taken to ensure that the parties work together in partnership, whilst maintaining clearly defined areas of expertise and boundaries. The Australian City Deal model has been criticised for becoming a “collaborative extravaganza” [12]. 

Conclusion

There is much to be said for the implementation of City or Regional Deals in New Zealand. It is an opportunity to develop a localised, collaborative, and long-term approach which plays to the strengths of both local and central government to ensure local and national objectives are met, delivering on priorities in partnership with iwi and hapū, and alongside communities.  

City Deals should endure beyond the political cycle (at both the local and central government level) and give confidence to communities and the market that there is a commitment and plan to deliver the infrastructure communities need. If done right, this coordinated, long-term vision and accountability will provide the certainty needed across the infrastructure system for everything from access to private sector resources, capability and funding, to the development of local education and employment programmes. 

Whatever the election outcome, New Zealand seems to have converged on a desire – and we certainly have an opportunity – to create our own take on City and Regional Deals and learn from the experiences overseas.  

Footnotes

[1] https://www.mondaq.com/australia/construction-planning/500118/improving-infrastructure-planning-and-funding-using-uk-style-city-deals
[2] Review into the Future for Local Government (2023) He piki tūranga, he piki kōtuku, Wellington: New Zealand, p.43
[3] Financial-incentives-for-local-development.pdf (productivity.govt.nz), p.50, citing Fraser D. (2016). City Deal or no deal? - BBC News
[4] See, for example, City-Deals-Insights-from-the-Core-Cities.pdf (centreforcities.org); and We need (better) city deals from the Commonwealth (sgsep.com.au)
[5] City-Deals-Insights-from-the-Core-Cities.pdf (centreforcities.org), p.5
[6] Financial-incentives-for-local-development.pdf (productivity.govt.nz), p.50
[7] No. 93 - City Deals (cles.org.uk), p.6
[8] City-Deals-Insights-from-the-Core-Cities.pdf (centreforcities.org), p.3 
[9] Five years on and the Federal Government's much-hyped 'city deals' haven't lost lustre despite funding problems and delays - ABC News
[10] City-Deals-Insights-from-the-Core-Cities.pdf (centreforcities.org), p.5
[11] City Regions - Deal or No Deal? (azureedge.net), p.31 

This article was co-authored by Nikki Anderson, a law clerk in our Construction and Infrastructure team.