Rates Capping
The Government has proposed introducing a cap on how much councils can increase rates each year.
The proposed model sets a target range of around 2 to 4 percent per year, based on long-term economic indicators such as inflation and economic growth.
The cap would apply to general rates, targeted rates, and uniform annual charges, but would not apply to water charges or other fees and charges.
Councils would not be able to increase rates above the upper limit without approval from a new regulator appointed by central government.
These changes are proposed and may change as legislation progresses through Parliament.
How it would work
The proposed system is intended to keep rates increases more predictable and affordable for households, while still allowing councils to fund essential services.
Key features include:
- a target range for annual rate increases (around 2 to 4 percent)
- a requirement for councils to stay within that range in most circumstances
- the ability to apply to a regulator to exceed the range, with supporting evidence and a plan to return to the target over time.
Approval to go above the cap is expected to be limited to specific situations, such as responding to significant events or addressing infrastructure needs.
What this means for our District
The proposed cap is intended to limit how quickly rates can increase from year to year.
This may mean:
- more predictable rate increases
- stronger focus on value for money and core services.
Changes to how we fund services may also occur over time, for example through greater use of fees and charges. No decisions have been made on this yet.
What it means for councils
Councils would need to plan their budgets and long-term investments within the proposed rates range.
This is likely to:
- place more pressure on budgets
- require prioritisation of services and projects
- influence how councils fund infrastructure and renewals.
Councils would still be able to apply to exceed the cap but would need to demonstrate the need and how they will return within the range over time.
Some councils and infrastructure groups have raised concerns about the proposed cap, with views differing on whether the cap will achieve its aim of making rates more affordable without compromising service levels.
Next steps
Consultation on the proposed rates cap took place in late 2025 and early 2026.
The current proposal includes:
- a transition period starting from 1 January 2027, where councils begin planning for the cap
- a move to a fully implemented regulatory system by 2029.
Further decisions and legislation are still required before the system is finalised.
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