Merging Qld councils make no sense: economists

17th August 2007Queensland Premier Peter Beattie should ditch his plans to slash the number of councils from 156 to 72 on economic grounds, according to three experts.

Throughout the controversial process, Mr Beattie has maintained the state needs stronger councils to deal with growth.

Advice received by the government showed that at least 40pc of councils were financially troubled and without a serious overhaul many faced ruin in years to come.

But Queensland University of Technology economics lecturer Dr Mark McGovern said the economic arguments used to justify the agenda are the weakest.

He said “large” did not automatically mean “strong” – and the Beattie government couldn’t have picked a worse time for change.

Councils were busy dealing with the ongoing drought, the challenges of population growth and extra responsibilities being imposed on them by government.

“Most acquisitions and mergers in business fail,” Dr McGovern said.

“That doesn’t bode well for effective (council) amalgamations, especially in periods when they are trying to do a lot of work.

“If you wanted to time it well, there wasn’t a worse time to do it.

“You couldn’t choose a time when you could be more likely to make big mistakes – the question is, why risk it?”

Dr McGovern said many local government tasks would be better achieved by smaller councils, or resource sharing – a theme picked up by Federal Labor leader Kevin Rudd in recent weeks as he called for any mergers to be voluntary and backed by a majority local vote.

“In service industries, it’s difficult to achieve economies of scale,” Dr McGovern said.

“It’s like saying, If you put all of the hairdressers in Brisbane together, you’ll get economies of scale.

“There are good reasons why professionals practise in various locations, when you lose contact … costs rise.”

University of New England economics lecturer, Professor Brian Dollery, says the amalgamation process will cost money.

The Director of the Centre of Local Government said mergers increased responsibility for staff, and typically, wages rise in line with that, imposing costs on new councils.

“Growth isn’t uniform across Queensland, but he’s applying this formula uniformly,” he said.

“Brisbane is the biggest council in all of Australia – how cheap are services there and how cost-effective is it?

“It’s not a startling example of efficiency.”

Using interstate and overseas examples as a guide, Prof Dollery said the economic benefits of amalgamation would be limited.

Councils around the world, from Victoria and South Australia to Toronto, Canada, were “de-amalgamated” or “divorced” after waves of mergers failed to cut costs.

Prof Dollery’s colleague, Joel Byrnes, said the possibility of a costly legal battle should be a cue for the premier.

“We know one thing about amalgamations, and that is they cost money to implement,” he said.

“The Beattie government probably needs to step back, and take a deep breath, and slow down.

“Good reform takes time, and if this is good reform, they shouldn’t be afraid to take time and consider the issues.”