Victorian households could be stung more amid push to dump council rates cap

Victorian councils could be allowed to charge residents more amid the cost-of-living crisis after an ALP policy committee recommended a cap on rate hikesbe loosened — and then dumped.

A cap on council rate hikes should be loosened and eventually dumped, a Victorian ALP policy committee says.

Leaked documents reveal that the cross-factional Labor committee is worried that some councils can’t afford to pay for services that “meet community needs” due to the cap, which this year restricted rate rises to 3 per cent.

It says local government sector costs have outstripped the index that is used to set the cap, and that the index should be tweaked to reflect “the real cost increases experienced by different categories of local councils”.

In the “medium term” it says councils should be allowed “to set and collect the rates they decide are required to support services and investment in assets used by their community based on local democratic processes”.

One Labor source said this meant scrapping the cap, which limits how much councils can hike charges on households each year.

“Do they realise it is a cost of living crisis?” they said.

Local Government Minister Nick Staikos says there is no plan to change the “fair go rates” system. Picture: James Ross

On Saturday night Local Government Minister Nick Staikos said there was no plan to change the “fair go rates” system that had delivered savings for households.

“Since the introduction of the cap, the average rate cap between is 2.3 per cent, putting more money back in the pockets of Victorians,” a spokesman said.

The leaked ALP documents say that the methodology to set the cap, which is based on advice from the Essential Services Commission, “does not reflect the composition of council expenses” and that some councils have contracted work out as a result.

“Councils have also ceased providing some services, particularly in-home aged care and early childhood services, despite robust community campaigns,” it says.

The policy committee also recommends a review into how councils respond to ratepayers in financial hardship.

Households could be facing a rates rise. Picture: iStock.

Since it was introduced in 2016, the rate cap has been as low as 1.5 per cent and as high as 3.5 per cent.

Labor said in 2016 the policy was to tame “uncontrollable rate rises” that had averaged 6 per cent a year over the previous decade.

In releasing its advice for a cap of 3 per cent this year, which was ticked off by Mr Staikos, the Essential Services Commission said any council worried about financial sustainability should engage with communities to argue for an exemption.

But the regulator also says that last year no councils applied for a higher cap, and this had been the case for five consecutive years.

The Government has said it will be guided by the ESC, and points to an auditor-general report showing that state councils had a collective operating surplus of $1.755bn in 2023-24.

The Victorian Labor state conference is due to be held later this year, with policy recommendations voted on by party delegates.

Originally published as Victorian households could be stung more amid push to dump council rates cap