I've been critical of the Labour Government's Three Waters' proposals, primarily because of the bizarre excessive centralisation, the opaque accountability and the lack of any serious measures to link the provision of water services to consumers. The co-governance element has little value and is only an inching forward of a ideological agenda to change public sector governance from one monopolised by liberal democratically elected politicians to one shared with appointed tribal elites. It is the wrong solution to the right problem. Besides, it was the hard-left, in the Alliance, Greens and the post-Douglas Labour Party that stopped water reform in the 1990s, so why trust them now?
If it were up to me I WOULD take water off of local government, I'd vest it in companies, owned directly by ratepayers, required to make a profit and transition income away from rates, towards user fees (even if it is a flat fee). The bogeyman of privatisation, so carefully cultivated in the 1990s, and spread through the education system and much of the media is so stultifying that even ACT is quiet on it, but I think water SHOULD be privatised by handing it to property owners. Inevitably these companies would merge and acquire one another, going from around 60 to around 10 or fewer, but that should be led by the market, not by Cabinet directed by the Department of Internal Affairs (DIA) and its consultants. For all of the best will in the world, the odds they know what the optimum structure of the water industry should be, are remote.
It's fair to say the two biggest reasons people are opposed to Three Water are co-governance and loss of local control.
Regardless of the various theories behind what people think co-governance is, the fundamental point is that it introduces Iwi appointments of half of the members of a selection panel, which itself selects the Board members for the four water entities (which have boundaries that appear to look like they suit some Iwi boundaries, rather than the structure for the water industry). There is a point that there is traditional Mana Whenua governance of waterways, but fresh, waste and stormwater infrastructure is not about that. It is quite different to have power over the use of waterways that might feed a water treatment/reticulation system, or may receive waste/stormwater, where there is a genuine interest in the use of the resource (and discharge into it) and the infrastructure feeding it. Indeed I think there is LESS accountability under co-governance, as it is easier for Mana Whenua to hold water entities to account if they aren't part of the management of them.
The loss of local control I care relatively little about. Local government has in so many cases demonstrated that it is incapable of taking a long-term view of water infrastructure, and certainly is uninterested in concepts like user-pays, asset management and other ideas that, I suspect for too many local politicians, are either seen as a "neo-liberal free market" conspiracy, or something confusing to rip off ratepayers.
So National has proposed the following:
Councils (TAs and unitary authorities of course) will need to deliver a plan for how they will transition their water services to a new model that meets water quality and infrastructure investment rules, while being financially sustainable in the long-term. The Minister of Local Government will approve such entities.
It essentially means that structural reform will be led by local government, not the DIA and Cabinet, and it gives local government flexibility to determine how best to set up institutional arrangements that will be financially sustainable in the long-term. It seems difficult to see how this can be achieved without being entities that are politically at arms-length, that are guaranteed revenue from either user fees or a proxy for user fees (hypothecated water rates for example, particularly for stormwater services). Commercial Council Controlled Organisations may be obvious, but it seems likely that Councils will need to cluster together to be viable. Central Hawke's Bay, Hastings, Napier and Wairoa have talked of this, but I suspect there needs to be a lot more of that, perhaps no more than four such entities in the South Island and eight in the North Island.
Finally, there is provision for the Minister to step in if Councils are slow in providing viable proposals, which seems appropriate, although you might wonder what happens if a Council that wants to merge its services with others that don't want it. It has potential to get messy, but options can be developed for this.
Supporting the Water Quality Regulator to exclusively target water quality. It will also cover wastewater and stormwater, with a goal to reduce or eliminate contamination of local beaches and waterways.
It isn't unreasonable to have oversight of drinking water quality, but the inclusion of waste and stormwater is odd, as this is a function of regional councils. Should regional councils lose this function? If not, will the regulator cover others who discharge waste into waterways? If regional councils are to retain responsibility for waterways and water catchment, then shouldn't they be expected to perform these functions, and if not, why should they have these functions? It seems overkill. The Water Quality Regulator should best just focus on water quality, but it also needs to be moderated itself, so it doesn't seek standards that are excessive. There are also questions about how it will operate in relation to the water entities.
National will establish a new, independent Water Infrastructure Regulator within the Commerce Commission to work alongside the existing Water Quality Regulator (Taumata Arowai). Water services will be regulated under Part 4 of the Commerce Act, alongside other essential infrastructure such as electricity lines.
This is economic regulation and is effectively a way of ensuring oversight of the new water entities not overcharging or over/under spending on water infrastructure. It is encouraging to treat them like electricity lines companies, although a lot of work is needed to establish the value of the regulatory base of those assets. It seems odd that it would report to the Minister of Local Government, it would be more appropriate to report to a Minister of Infrastructure (who also looks after energy and communications).
BUT..
National is terrified of the p. word.
The public ownership of water is not up for debate. Councils will not be able to propose water service models that involve privatisation. National’s plan is to return water assets to their rightful owners: the local communities who paid for them. We want local, public control and ownership of water assets, and that’s what this plan will deliver.
Even Rob Muldoon once considered selling minority shareholdings in Air New Zealand. This is a pathetic surrender to left-wing scaremongering. What is actually wrong if one or more Councils say they want private capital to invest in their water infrastructure, in a corporate model that pays dividends? This would access new capital, and with an economic regulator there is no risk of any form of "profiteering" that Marxists claim would occur under this? Have a backbone why wont you? National did, after all, part privatise electricity generation and retail companies, why be scared, or is it up to ACT to propose allowing this?
Finally, what about user pays vs. rates?
The policy essentially leaves this open, so it could be user fees or could be rates based, but rates would need to be hypothecated. The only issue is that if Councils choose to go the user pays path, should there not be means to regulate Council rates downwards so they don't use it as a chance to maintain rates levels as well as user pays? Why should only water entities have fees regulated, when Councils should have rates regulated more generally?
Conclusion
The proposal has merits, in fact it IS arguably enough. Just. It lays the groundwork for water being treated as a utility, a service for consumers, and it is difficult to see how the entities that Councils propose can be viable for borrowing large amounts of capital if they are NOT commercial in some form (even in the form of consumer trusts), and it would seem easier to deliver long-term financial sustainability if there is user pays rather than rates (which are, after all, still Council determined). However, I can imagine it might be necessary to be heavy-handed in making Councils set up entities that will be able to borrow and manage the enormous infrastructural uplift required. It also seems unlikely that central government can avoid putting significant amounts of taxpayers' money into uplifting the infrastructure deficit, but only on a one-off basis. I suspect the end point in a few years will be around a dozen water companies.
The fear of privatisation is pathetic, weak and disappointing, when there should be no reason to not argue for the right of local authorities to choose privatisation if they wish. I know it's there to fend off the even more pathetic, scaremongering hysteria from the left, which will be amplified by idiotic leftwing journalists, but if you believe in local empowerment (!) then let it include the private sector. After all, most of the country's electricity lines companies and all telecommunications are delivered by the private sector, how is the party of business so terrified of it?
Still is it better than Three Waters? Yes, it is. It has at least some requirements around performance, and oversight. It gives Councils a short time to get their act together to set up entities that will meet water quality requirements, and infrastructure investment requirements. It is less centralised, at first, and offers more opportunity for some innovation locally, and ultimately both central government regulators will direct the water entities to deliver.
Sure it isn't what I would do, but it has the potential to get not too far away from what would be a good model for the water sector.
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