The Local Government (Management of Local Authorities) Amendment Bill (“Bill”) is a Members Bill under the name of Stuart Smith MP, introduced to Parliament on 21 May 2026. The Bill seeks to clarify the allocation of decision-making power within local authorities under the Local Government Act 2002 (“LGA”).
Governance of local authorities
The everyday functions of local government (things associated with the “local council” like water, roads, and rubbish) are formally carried out by local authorities established under the LGA. Local authorities include both territorial authorities (city and district councils) and regional councils. They are corporate entities that can own property, enter contracts, and employ staff. They continue even as individual councillors and staff change.
Decisions of the local authority are made by its governing body, also commonly (and confusingly) referred to as "the council" or "the full council". The governing body occupies a similar position as the board of a company. Its decisions, made by majority vote, are legally the decisions of the local authority.
Given the range of functions local authorities carry out, the governing body frequently delegates its powers to committees, subcommittees, and officials. Most powers can be delegated, with some notable exceptions including making bylaws and setting long-term and annual plans. In practice, implementation of those higher-level decisions are carried out by officials.
The LGA also provides for the appointment of a chief executive who is responsible to the local authority for a range of operational functions. The chief executive typically employs subordinate staff without direct input from the governing body. Similar to a company board, the governing body usually exercises high-level oversight and policy-making, while day-to-day decision-making sits with officials appointed by the chief executive.
Policy issue
The purpose of the Bill is to align the governance and management of local authorities with those of the corporate and not-for-profit sectors. It is intended to provide elected members with a greater mandate to effectively govern and control the activities of local authorities and thereby minimize increasing tensions between councillors and management of local authorities.
Franks Ogilvie have seen this tension increasingly playout in practice. The Bill appears to be directed at the increasing tendency of local authority officials to assert that some decisions are “operational” and thereby within the exclusive remit of the chief executive (and not subject to governing body direction). This assertion is problematic for obvious reasons. If any decision is legally off-limits for the governing body, it is immune from democratic oversight and contrary to the purpose of the LGA. Any exceptions to the principle that the governing body has full decision-making oversight should be express.
While local authority members are democratically elected by the public, there are otherwise clear similarities between the corporate structure of private companies and that of local authorities. Both are corporate entities in which formal decision-making power rests with a governance board, but where most day-to-day functions are delegated to employees and agents.
However, the LGA governance provisions are far less clear than those in the Companies Act. The latter requires the activities of the company to take place under the supervision of the board and confers on the board all the powers necessary for that purpose. While the board can delegate, it remains ultimately responsible for the exercise of powers by company agents and employees.
The LGA does not expressly affirm this principle. It says that the governing body remains “responsible and democratically accountable” for the local authority’s decisions, and it confirms as a matter of procedure that local authority decisions are made by majority vote in governing body meetings. But it confers no express powers on the governing body, nor does it directly define the relationship of the governing body and the chief executive. These matters are left to implication.
The ambiguity provides an environment where officials can tenably claim that operational decisions are off-limits, with what is operational having little clear definition. Most often, this plays out in practice as officials obstructing the access of governing body members to information (or forcing them to seek it under the Local Government Official Information and Meetings Act 1987). In others, it is used as a means of refusal to follow policy directives from the governing body. For example, the recent refusal of Wellington City Council officials to bring cleaning services in-house as directed by the governing body on the basis that it was a commercial procurement decision and therefore fell within the operational sphere.
To be clear, the LGA does not recognize a legal distinction between governance and operational distinctions. At most, it recognizes that governing body members should not involve themselves in employment decisions (other than appointment of the chief executive), and even that is left to implication.
Because of resource imbalances, it is far from guaranteed that this matter will ever reach court for determination. Legislative clarity is therefore essential to setout who can do what within local authorities and minimize the potential for future disputes and obstruction.
What the Bill does
The Bill takes steps to address this ambiguity by aligning local authority governance more closely with the corporate and not-for-profit sectors. It is intended to provide elected members with a clearer mandate to govern and oversee the activities of local authorities.
The principal amendment is new s 41B, which is broadly modelled on s 128 of the Companies Act. Section 41B confirms that while the activities of a local authority must be "managed" by the chief executive, that management is subject to the direction and supervision of the governing body. Subject to any statutory limits, the governing body has all the powers necessary to carry out that supervisory role.
A separate amendment to s 42 confirms that the chief executive retains exclusive responsibility for employment decisions. Another amendment clarifies that nothing in the LGA prevents a local authority from seeking advice from a person other than the chief executive, providing some statutory support for independent advice to elected members.
The Bill is similar to a recommendation made by Franks Ogilvie in its submission on the Local Government (Systems Improvements)Amendment Bill (link), currently before the Committee of the Whole House. While the latter Bill does not directly address governance, it addresses other matters that are conceptually related such as the right of elected councillors to information. Under Parliamentary Standing Orders, it would be possible for the Bill to be added to the System Improvements Bill as an amendment paper, although whether that occurs is a political question.
Whether the Bill will fully resolve tensions between elected members and officials remains to be seen. Some of the problems undoubtedly arise from the management culture prevailing among public service professionals and cannot be directly fixed by legislation. But the new provisions should provide a clear counterargument to the claim that any element of local authority activity (other than employing staff) is beyond the governing body's oversight.
Next steps
The Bill is yet to have its First Reading. If it passes, it will proceed to Select Committee, where the public is likely to be able to make submissions.
For further information on this or similar issues please contact Director Brigitte Morten
