The Victorian Opposition has floated a cap on council rates as a potential vote-winner, but local governments say it would rob residents of the right to choose.

Opposition leader Daniel Andrews said a Labor government would force councils to justify any increases to ratepayers, and be forced to appeal to the Essential Services Commission if they want rate rises above CPI.

“It’s time to do something about the council rates, the wasteful spending and the lack of transparency,” he told the Herald Sun.

The Victorian Local Governance Association (VLGA) believes rate capping is an ill-conceived policy that undermines local democracy.

“Rate capping does not address the major issue of local residents, as citizens, having a say in how councils determine priorities in revenue raising and expenditure,” VLGA President Cr Sebastian Klein said.

“The VLGA is keen to work with councils to provide an evidence base of the effect that a rating structure based on CPI would have on local services.

“The imposition of rate capping by another level of government is not the answer; rather it undermines the role of communities in setting their own agenda.”

“Decisions about rates and the services provided by councils to their communities are a matter for local residents,” he said.

The VLGA is proposing models of participatory budgeting in local government, which it says are already happening in some parts of Australia and overseas.

“The VLGA's response is not to simply bemoan the idea of rate capping. We seek to improve the discussion about rates and services, especially between councils and their local residents,” Cr Klein said.

The discussion of rates will be taken up again soon, alongside the bigger question of the financial sustainability of local government at VLGA’s second ‘Governance by Design’ panel in July.