Is National's proposed water reform enough?

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.  

The horrors of water privatisation are largely imaginary hysterics in the heads of leftwing politicians

What has been the biggest farce of the attempt to entrench an anti-privatisation clause in Three Waters legislation? 

The attempt by the Greens to entrench their policies in Parliament is not necessarily surprising for a party that regards private property, enterprise and individuals with scepticism, but state property, state enterprise and public servants with benign intent.  Eugenie Sage is hardly the sharpest knife in the kitchen from the Green caucus either.

Jacinda Ardern's claim to be ignorant of the proposal is also farcical. On the one hand is seems difficult to believe that one of the country's most centralising governments doesn't have a handle on the detail of policy of one of its most controversial proposals. On the other hand, if she doesn't then why not?

What virtually NO-one in the media has asked (certainly not RNZ), is why the fear of privatising water? 

You see it is precisely because of hysteria about water privatisation that New Zealand's fresh and waste water infrastructure was not substantively reformed (outside Auckland with Watercare Services) in the 1990s, and that hysteria was largely fuelled by the likes of the Greens in the form of the Alliance. The Alliance, along with the then "Water Pressure Group" (led by the completely loopy, and now late, Penny Bright) that painted a picture of doom and gloom from supplying water with user fees, in a commercial structure, that saw Auckland being the beginning and end of water reform.

It is thanks to muddled-headed Marxists like Eugenie Sage that water remained the most unreformed infrastructure sector, leaving it in the idealised world of "local democracy", "local empowerment" and of course largely staying far away from people paying for what they use, but rather taxing everyone so the biggest users of water (typically businesses) get subsidised by the smallest users (typically people living on their own). That's socialism for you.

Yet what does privatisation of water look like?  DIA's own report called "Transforming the system for delivering three waters services - The case for change and summary of proposals - June 2021" has a handy chart depicting the relative performance of ten English water companies, with government owned water companies in Northern Ireland and Scotland, and New Zealand council owned water providers. 

All of the private water companies outperform the others across a range of measures regarding customer service, and the conclusion of the report is:

• New Zealand has a long way to go, to catch up with the performance of more mature systems overseas

• We are at a starting position similar to Scottish Water, before the Scottish reforms. In the last two decades, Scottish Water has been able to close the performance gap and is now among the top-performing water services providers in the United Kingdom.

In other words, not only are private water companies in England performing better than the New Zealand council owned examples, but they have been outperforming Scottish Water - which has been the pin-up case study for the Ardern Government.

So let's be very clear.

Privatisation of water is not something to be scared of, in fact had it happened 30 years ago (not that it was even on the agenda) then there wouldn't be an infrastructure deficit in the billions for water.  Rates would be lower, yes you'd be paying a bill for water, but if it had followed the English model, there would be a water sector regulator capping the rate at which water prices could be increased, and ensuring that the natural monopoly water and sewerage companies had to meet key service standards.

Even the Government's own report acknowledges that it is PRIVATE water companies that perform well.

So what's actually wrong with private companies providing water infrastructure and services?

Why wont any Opposition MPs say there are benefits from letting the private sector take over?

Why do hysterical leftwing lightweights dominate this narrative and why do journalists never challenge it? (I mean it can't be because two of the major broadcasters are state owned can it?)

Who cares about one-person one-vote, when you can have one vested interest, one-vote

The so-called "Review into the Future of Local Government"was quite a review.

It didn't review whether local government is needed, and if so, what it should and should not do.  No, you see the philosophy of the Labour Government is that local government is essential, and should be empowered to do whatever "The Community" (Councillors) think it should do.

The review sees the problems in local government not a lack of confidence that local government is competent in providing services (e.g., to not provide a basic service without making the public sick) so that government routinely takes it off them, nor that it has played a major hand in creating the housing crisis (by making it difficult and expensive to build new housing), nor that is has played a major hand in limiting competition in supermarkets (by consulting with incumbents about whether a new one should be built in an area, in competition with it), not even how often local government chases totemic projects that are unnecessary.

No, you see the Ardern Government is concerned about:

• Low levels of voter turnout (which largely reflects that the public thinks local government is boring and their votes make little difference)
• There is limited representation and undervaluing of Hapu/Iwi and Maori as a critical partner (heaven knows why unlimited representation would be a good idea, and how is the undervaluing calculated objectively? Is it just a feeling?

That literally is what the executive summary says is the "problem" (page 08) (PDF) as beyond that is a statement of the solution. 

There are nine (!) sections of recommendations, which is apt for a government keen on bureaucratic bloat.  They are separated into the following sections, which I'll summarise:

• Revitalising citizen-led democracy:  This is mostly about consulting more, with more community engagement.  However, it also includes "chief executives to be required to promote the incorporation of tikanga in organisational systems".  This is cultural reform of local government, it isn't just using tikanga as part of the consultative process, but it is including it in how local government runs. Quite what this is meant to achieve is unclear, but given the problem definition is so narrow, it appears to address the second problem.  What actually matters though is that the problem with local government is NOT consulting with the public, indeed nothing stops homes being built, supermarkets being built, transport infrastructure being built and anything been done in a city more than consultation.

• Tiriti-based partnership between Maori and local government:  This is a fundamental, quasi-constitutional view that sees local government as not simply representing local residents and responding to their needs, demands and issues, but introducing co-governance so Hapu/Iwi get equal say in what happens in local government, compared to mere voters/residents.  It goes beyond consultation and engagement, to include "genuine partnership in the exercise of kāwanatanga and rangatiratanga in a local context and explicitly recognises te ao Māori values and conceptions of wellbeing". Genuine partnership, after all, means sharing power and this in relationship to government and self-determination.  It seems unlikely that local government could go against Hapu/Iwi in any decisions in this context.  It also seems unlikely that this could see local government taking a perspective that values more individual freedom, choice, competition and property rights, rather than one that values the exercise of power of numbers over individuals and their property and businesses.

• Allocating roles and functions in a way that enhances wellbeing:  This is a serious level of waffle, largely because the term "wellbeing" is now the catch-all term from socialists to prioritise people's feelings over property (particularly other people's), freedom, economic efficiency and individual rights.  The main recommendation here is that central and local government review the functions of each level of government based on the concept of subsidiarity (a concept that would support individual freedom and choice if bureaucrats and politicians didn't think they knew best), local government capacity to "influence the conditions for wellbeing" and for te ao Maori values to underpin decision-making.  Frankly, given its record, the less allocated to local government the better.

• Local government as champion and activator of wellbeing:  This is basically a recommendation to grow local government to spend more of your taxes (of which there would have to be more), making you feel better. It is a thoroughly statist view that claims local government can be some sort of innovator and experimenter in enabling "social, economic and cultural and environmental wellbeing".  This is so completely ludicrous that is deserves to be laughed at. Local government ran electricity distribution for decades and hardly innovated at all.  Local government can't even contract bus services to pay by EFTPOS, unlike the entire retail sector has done so for over 20 years, nor can some of them even manage to penalise bus operators for cancelling services.  The greatest innovations have come from technology and processes introduced by the private sector, and the idea that the great fist of local government can slam down on a city and innovate across all aspects of people's lives is the fantasyland of hardened socialists in the local government sector.  The main innovation local government can engage in is to get out of providing much of what it does, and get out of the way of people and businesses to build homes, businesses and voluntary organisations, and grow their communities through their own initiatives.

• A stronger relationship between central and local government: This is code for "give us more money we are not accountable for raising from taxpayers", but the recommendations are basically a need to study more on "building on the current strengths and resources" and to "support genuine partnership" with "opportunities to trial and innovate". Well for over 30 years central government has been taxing motor vehicles using local authority roads and raising enough money to pay on average half the cost of maintaining and improving those roads.  That partnership exists because central government told local government it had to stop running its own works department monopolies and run professional asset management over its road network.  There is no need for a "stronger relationship", as local government doesn't need to do more!

• Replenishing and building on representative democracy:  The one recommendation that may make sense is to make the Electoral Commission run local elections, but the rest is a wishlist of activism around local elections. Introducing STV as a voting system for local government doesn't get me excited one way or the other, but let's note that with low voter turnout, a more complex electoral system doesn't actually deliver much.  Lowering the voting age to 16 is a standard leftwing policy primarily because they know they are more likely to benefit from persuading young minds of the sort of wellbeing nonsense seen in this report, although by no means are there recommendations to give 16yos the legal status of adults across the board (e.g., criminal law, alcohol consumption), and why not 14yos or 12yos? A four year electoral term in the absence of one for central government is simply bizarre.  Why does being able to change local government LESS frequently, BUILD on representative democracy?  No, it's about giving councillors more time to do stuff without being challenged.  

• Equitable funding and finance: As with all terms with an Orwellian element to them, you should always run a mile from the word "equitable", because it always means anything but.  There is some merit here, in that central government should taken into account with all of its decisions, its impact on local government (which should actually be ratepayers and residents). However the rest is just putting the hand out for more money.  It wants "co-investment" by central and local government to meet "community wellbeing priorities" (!).  It wants central government to tax people more to create a slush fund called the "intergenerational fund for climate change" which would no doubt be tapped to waste on pet projects for local government to virtue signal about (given that almost all sectors local government is involved in are already covered by the Emissions Trading System).  The perennial desire for local government to get new means to tax, while retaining rates are there.  This is a manifesto to take more money from you, and isn't remotely "equitable", but reflects desires from local government to do more without being able to convince ratepayers to let them force them to pay more. 

• System design: Central and local government are apparently meant to work together to create a Tiriti-consistent structural design for local government (whatever that means) to give effect to a bunch of design principles.  It wants more "shared services" and a "digital transformation roadmap" for local government, again none of this is based on achieving actual outcomes based on performance.

• System stewardship and support:  The recommendation here is that government decide on the best form of stewardship, being the way by which local government is responsible for what it does and does the best that it can do. However, why is this a problem? Is it because local democracy is a very poor incentive on local politicians to make wise decisions when it is about spending other people's money (especially money borrowed from people who can't vote yet) and about other people's property? Could it be that the best way to manage this is to keep local government to a minimum of "public good" elements that cannot be efficiently or effectively provided by other entities? Isn't this just an admission that local government is bad at making important decisions on long-term issues?

Of course the key issue of this report is that it recommends that mana whenua sit on local councils, with full voting rights.  These representatives would have the same power as elected councillors, except of course, residents/ratepayers would have no power to remove them (except for those few that may be involved in mana whenua processes to select their councillors).

I don't think much of liberal democracy, as it is not very effective at protecting individual rights, but it does have one useful function, in that it provides an effective process to remove politicians if enough people are fed up with them.  This proposal destroys this for mana whenua representative.  It institutes the principle that you can be taxed, regulated and governed by people you have NO say in being selected or being removed.

Sure you probably think you have little say in who is in local government, but you certainly do have a say, even if those you voted for did not get elected.  You will not do so in Ardern's "new democracy" as described by Willie Jackson.

And if this is good enough for local government why is it not good enough for central government? After all, the nationalist MP for Waiariki Rawiri Waititi has already commented on his opposition to liberal democracy.  Now this is a sentiment I have some sympathy for, because majority rule does NOT protect individual rights.  If Waititi and indeed the Labour Party simply wanted to set Maori free to live their lives as they see fit, and largely govern themselves (within a framework of rule of law that protected individual rights including property rights), I would be in favour of that.

However there is no possible way that the New Zealand Labour Party wants to let people live their own lives as they see fit in such a way.  The review of local government is about growing local government, it is the idea that wellbeing comes not from what individuals, families, colleagues, friends, communities, businesses and societies do, but from what government does - and the main tools of government are ones of coercion by taxation (and dishing out financial favours to preferred individuals and groups) and regulation.

The Government should, of course, throw this report in the bin, and hopefully if there is a change in government that is exactly what will happen.

There is a desperate need for a review of local government that will decide what roles and responsibilities it should have and what ones should be taken away from it, and that would do much more to enhance wellbeing, by enabling more housing to be built, more businesses to be developed, more competition in retail and the economy, the environment and society to grow with local government being barely visible.  It may manage some parks, have a fast, efficient planning permitting function, deal with neighbourhood noise and pollution complaints, and ensure rubbish is collected.

In the meantime though, the idea that elected politicians should be replaced by mana whenua representatives with MORE power to increase rates, establish new taxes and pass bylaws (and ban property development) is just a form of petty nationalist authoritarianism eating away at an already flawed system.

What does the future of co-governance look like?

Power without being elected

With the impending passage of the Canterbury Regional Council (Ngāi Tahu Representation) Bill, New Zealand will have taken a giant leap in the direction of reducing democracy in local government. It's important to be very clear about what this means:

1. Ngai Tahu will appoint two members of the Canterbury Regional Council (known as Environment Canterbury), they will sit alongside and have identical powers to elected members. 
2. Ngai Tahu members will be selected by Ngai Tahu by whatever means Ngai Tahu deems appropriate
3. Those councillors will have full powers to vote on spending, on taxes (rates), on buying and selling assets and on bylaws.
4. No electors in Canterbury region will be able to remove Ngai Tahu representatives (except of course, those with authority in Ngai Tahu), includes those affiliated with Ngai Tahu who do not have influence with the iwi.

It's very important to recognise what government, including local government actually is. 

Government is an institution with the monopoly of legalised use of initiated force against people and their property, and it devolves some of that power to local government. 

Environment Canterbury has such powers, powers to forcibly take money in the form of rates and to levy the public for services, it has powers to make bylaws and has powers to constrain the use of property. 

In a liberal democracy the constraints on that power come in two forms:

• Legislative constraints (as local government is constrained by legislation and regulation);
• Local democracy (the ability to vote out and replace Councillors who exercise these powers).

Parliament has chosen to weaken the ability of Canterbury electors to do the latter.  The key element in a free liberal democracy is more the ability to peacefully remove people from power than to select those that exercise power, but this legislation removes the right of Canterbury electors to remove two councillors.  Indeed, those councillors are only accountable to those with power in Ngai Tahu, not electors at large.

This is literal corporatism, in which a corporate private entity exercises direct political power, with there being no effective means of removing them (except of course if Parliament changes the law to abolish their position).

Bear in mind there is nothing stopping Ngai Tahu proposing candidates for election now, or funding and supporting the campaign of candidates it approves of, but it doesn't believe that would be successful.  

Bear in mind also that members of Ngai Tahu who are Canterbury electors retain the power to vote for Councillors, they have that power now, but they will also have some influence (it could be a lot or it could be negligible) in the selection of unelected councillors.  Members of Ngai Tahu who are Canterbury electors get two chances at selecting councillors.

Some may say sure but non-resident ratepayers get a vote too. Yes they do, but it is a vote and if they were residents as well, there would still only be one vote. There are sound arguments either way about non-resident ratepayer voting rights, but that is a separate issue.  Note that there are plenty of people affiliated to Ngai Tahu who are not electors in Canterbury too.

Where next?

There are  other examples that have parallels to Canterbury.  The Rotorua District Council (Representation Arrangements) Bill, would have generated higher Maori representation on that Council than their proportion of the population.  David Farrar ably demonstrated how unjust that would have been, as each Maori ward councillor would have represented far fewer people than a non-Maori ward councillor.  The Bill was dropped  in part because the Bill of Rights assessment said Maori wards would have disproportionately higher representation. 

Wellington City Council took it upon itself to include two mana whenua representatives on Council Committees (not full Council). One each from Taranaki Whānui ki Te Upoko o Te Ika and Ngāti Toa Rangatira sit on all Council Committee with FULL voting rights. It justified the idea as contributing towards decision making, but this is frankly absurd.  Having voting rights for unelected councillors (which is effectively what it is) is more than "contributing" it is exercising power.  The representatives also get reimbursed by ratepayers, "by paying each iwi an annual fee, equivalent to the remuneration of a full time elected member, which is currently $111,225".  So ratepayers get to pay for representatives they cannot vote for or against, that exercise power over them.  6 Councillors voted against this nonsense, namely Mayor Foster, Councillor Calvert, Councillor Rush, Councillor Sparrow, Councillor Woolf, and Councillor Young. However, the majority prevailed (Councillor Condie, Councillor Day, Councillor Fitzsimons, Councillor Foon, Councillor Matthews, Councillor O'Neill, Councillor Pannett, and Councillor Paul).

Noting this already happens for Rotorua Lakes District Council, it has iwi representatives with voting rights on Council Committees.

What would need legislation is to enable full Councillors to be appointed by iwi rather than be elected by electors. 

It seems highly likely that the Labour Government, with full support from the Greens and Te Pati Maori, would endorse local government having appointed (not elected) City, District and Regional Councillors, with the rights to vote on your rates, bylaws, spending, sale and purchase of assets and planning rules.

Let's be clear this is NOT the same as Maori wards. In principle, if a Council wants those on the Maori electoral roll to have Maori ward councillors, as it is for Parliament, it does not undermine democratic accountability. Maori electors shifting from general wards to Maori wards changes their representation, but they are still elected and accountable to electors.

Having iwi choose representatives is the same as having any large private interest choose representatives on Council. Councils exist to provide certain public goods and services, but also to regulate activity including planning activity.  Iwi themselves have substantial commercial and property interests.  Consider if Councillors (as some do) have large property or business interests in a district, they are at least accountable to electors, but the iwi representatives are not.  

So could Labour, the Greens and Te Pati Maori require all Councils to have unelected Mana Whenua councillors? Of course.... but could it go beyond that?

Iwi selected MPs?

Te Pati Maori Co-Leader Rawiri Waititi has already expressed his contempt for democracy as being the tyranny of the majority. Now I SHARE this concern, which is why I want the power of government limited, but I don't share his objectives or solution, or his perception of the problem. He wants a separate Maori Parliament which would decide on matters for Maori, although does not explain how that would work in practice.  

Applying the principles of the Canterbury Regional Council (Ngāi Tahu Representation) Bill to Parliament would mean that all iwi would be able to appoint MPs to Parliament (perhaps with some proportionality? or perhaps each being equal?) to have the same voting rights as elected MPs (which Maori would continue to be able to vote for).  

That would make Aotearoa/New Zealand far from being a liberal democracy, as Parliament would be dominated by entities that themselves determine how to select people to exercise legislative power over people and their property. 

This isn't about race, this is about the exercise of powers of coercion and the primary means of constraining that, which is the ability of the subjects of that coercion to exercise a vote to change those exercising that power.

If Iwi Representation were required to enlist electors that are iwi affiliated, removing them from being able to vote for other Councillors (and indeed with numbers of Iwi Representatives proportionate to population of iwi affiliated electors), it would be completely different. It would simply be redesigning Maori wards to fit that model. The same in Parliament. 

If Maori seats were simply redesigned to be selected by Maori voters voting for representatives by iwi (and then there being some system to elect the appropriate representatives across multiple smaller iwi), it would also not be a problematic in applying liberal democracy.  However, if some MPs were just appointed, it would be undemocratic. 

Consider that Myanmar adopts this model, except it is the army that appoints MPs. 

Why do this?

Supporters of the legislation see it as implementing the Treaty of Waitangi, under the interpretation that the Treaty is not just about granting sovereignty over taonga and governorship to the Crown, but about a power-sharing relationship between the Crown and iwi (an interpretation that was largely confined to academic and radical political circles until the 2000s). 

If the Crown, represented by the liberal democracy of the New Zealand Parliament were separate and excluded Maori (as repulsive and Rhodesia like that would be) then this interpretation may have merit. Yet it does not exclude Maori, Maori have the same voting rights as everyone else, and both Maori and non-Maori vote for MPs who are Maori (and non-Maori).  In other words, Maori are represented in Parliament, their views are heard, and communicated by the MPs they elect, both from the Maori roll and the General roll. They are equal in their exercise of power to everyone else. 

Beyond that, consultation and engagement over public policy is extensive and is entirely within the role of a liberal democracy and for consultation with iwi to be treated as being part of implementing the Treaty.  Consulting Mana Whenua is entirely right and correct for local and central government, but when it comes to choosing who gets to exercise the monopoly of the use of legitimised force - through government- it should NOT be determined by unelected people.

For better or for worse, every single MP in Parliament, and up till now, every single Councillor in regional councils, territorial authorities and unitary authorities (et al) have their authority through public endorsement at the ballot box. The worst form of government every devised, except for all of the others tried throughout history, as Churchill was purported to have said.

Sure, I think most central and local politicians are utterly hopeless at defending the rights and freedoms of the public and private property rights, but their power is constrained by the ability of sufficiently outraged electors to throw them out of office.

Unelected politicians do not have such constraints. Be suspicious of anyone who is appointed to exercise legislative and tax raising powers.  

Environment Canterbury disgraces itself by actively seeking to weaken the power of its elected Councillors in this way, and Labour, the Greens and Te Pati Maori have all shown themselves to be parties in enabling this to come to pass. Imagine if Federated Farmers had appointed representatives on rural councils, or Chambers of Commerce on urban councils etc. 

Any future government should explicitly prohibit any local authority from appointing anyone to have voting rights in Councils or Council Committees without having been elected in local body elections, at a bare minimum.  

What's the alternative?

The role of liberal democracy in New Zealand needs to be able to be debated without the kneejerk reaction of "racist" from unreconstructed leftists and ethno-nationalists who want to shut down debate using pejoratives. 

Those who think mana whenua do not have a role in being consulted on local and central government matters are not helpful, because if the Treaty is to work in the context of a liberal democracy, then engagement and consultation is essential. However, mana whenua should not expect to exercise direct political power to erode or undermine the wishes of directly elected representatives of all electors in New Zealand (especially since they too get to choose those representatives).

Those on the radical left who think this is "white supremacy" and "neo-colonialism" ought to put up their models for a form of government, and have them subjected to scrutiny as to whether or not they can protect the rights of all individuals from unbridled power and the corruption of power which is much more likely under systems of those appointing people with power.  After all, the UK retains the House of Lords, with appointed politicians, who scrutinise and delay legislation (although they cannot stop it), as a hangover from a very much class supremacist view of government.  New Zealand should not replicate this sort of political structure.

After all, liberal democracy is now the dominant form of government in most of Asia, Africa and the Americas, and frankly it is only autocracies like the People's Republic of China, the Islamic Republic of Iran and Turkmenistan that question the validity of governments that are constrained by secret ballots and the essential, concurrent freedom of speech and the press. 

Have mana whenua consulted, include them on informal committees and boards used to advise Councils and Government.  Government and Councils can also include them in co-governance of assets or systems if they wish - the whole debate on Three Waters co-governance is entirely legitimate (sure I don't agree with the proposal, but everything local government does is entirely at the behest of Parliament, which grants local government its power, it is still fundamentally accountable to electors).

The co-governance of Urewera National Park and the Waikato River are enshrined in Treaty settlements, and there is no conflict between any of this and a liberal democracy, because elected MPs agreed to it.  

In liberal democracy power IS shared, between representatives by geography and representatives by political ideology and philosophy, and when enough electors tire of one lot, they replace them with a new bunch. Does it achieve much? Often it doesn't, but it does achieve one thing - it means that all of them fear causing so much disenchantment that they lose government or worse of all, lose their seat in power.  Ngai Tahu and all Iwi ought to value that, and ought not to be immune from it.

UPDATE: So Tamati Coffey is inviting other iwi to consider "this path" to better representation.  He introduced the Rotorua rorting local elections District Council (Representation Arrangements) Bill, so he's showing his colours around corporatist government. Maybe it would be better if the former TV presenter simply abandoned representative democracy altogether if he doesn't believe in it?

Submit today on the Rotorua District Council (Representation Arrangements) Bill

David Farrar's Kiwiblog has an excellent submission on this absolute travesty of basic individual rights and liberal democracy.

This debate about this issue has been muted. Stuff reports it, with taxpayer funding from NZ On Air, without ANY discussion about the implications for liberal democracy.

What is proposes is a form of racial gerrymandering that means that Māori Ward Councillors on Rotorua District Council will represent fewer people, but with the same amount of power as General Ward Councillors. 

As Farrar says:

This bill would give the Māori ward three Councillors for an electoral population of 21,700 and the General ward three Councillors for an electoral population of 55,600. This means the vote of someone on the general roll will be worth only 39% of the vote of someone on the Māori roll in terms of Ward Councillors, and 58% in terms of the whole Council. 

It debases the votes of non-Māori ward voters, and for what? To seek to equalise representation not on the basis of counting heads, but by valuing the votes of Māori ward voters 2.5x more than non-Māori ward voters.

Let's apply this to Parliament?

Extend this to Parliament (assuming no change in the number of seats) and the result would be this:

General Electorates: 36. 1 MP for every 89958 voters

Māori Electorates: 36. 1 MP for every 7591 voters

In essence it multiplies Māori roll votes 11 fold compared to non-Māori. The exact impact on Parliament is difficult to forecast for multiple reasons, as no doubt there would be more candidates, but also the impact on emigration (let alone immigration) would change the demographic as well (some advancing this policy would like that). 

It could be assumed that the majority of Māori Electorates would vote Labour, and some would vote Te Pāti Māori, maybe one or two could go Green or even NZ First.  

How would that affect the list seats? It is entirely possible to leave them as is, with one person one vote and let proportionality come to play, but that is likely to create an overhang. Let's say based on the current Parliament, that one in seven of the Māori electorates go to Te Pāti Māori, which would mean it gets 5-6 seats. Even if it got double the party vote of 2020 (which would be 2.34%) it would only be entitled to around 3 seats in Parliament, so Parliament would grow by 2-3 more seats in total.  Advocates of such a change might say the overall impact would not be significant, because ultimately National would get most of its MPs from the list, so proportionality might be retained overall, but the effect would be dramatic.

Moreover, if you can argue for electorates that require 11 general roll voters to elect an MP, but 1 Māori roll voter, then you can argue that Māori party voters get the same magnification of impact.

and that would truly be the end of liberal democracy as we know it, and is internationally recognised on the basis of one person one vote.

This sort of gerrymandering is seen in corrupt democracies, which try to construct constituencies that have small numbers of politicians representing large numbers of people who politicians want to reduce the franchise for, with higher numbers for the preferred group.  During the dying days of apartheid, the South African Government argued for its democracy to enable white South Africans to have a veto of decision making over the black majority.  This was rightly decried as racist and unacceptable. Going from total white minority rule to white minority veto was not advancing the rights of all South Africans.

However, there is a movement in Māori politics that is antithetical to liberal democracy and individual rights. Te Pāti Māori MP Rawiri Waititi said it clearly when he thought Aotearoa had a great future "but not necessarily as a democracy". 

It isn't exactly rude to ask if the Green Party of Aotearoa or the New Zealand Labour Party share his view. 

Now I'm highly sceptical of liberal democracy as a tool to protect individual rights, and Waititi is dead right when he raises concern about majority rule. Unfettered democracy does enable mob rule and does enable injustice, but the contraints on this should be constitutional to ensure basic rights are not overriden. I have a lot of sympathy for calls for tino rangatiratanga for everyone.

However, nobody advancing this change is caring remotely for the rights of individuals to peacefully go about their lives, this is about advancing power, albeit at the local government level, to regulate and tax people's property and businesses.

You have only a few hours to express your opposition to this racist travesty of a Bill, that has NOT been advanced by the local MP Todd McClay but rather Labour list MP Tāmati Coffey.  Labour, the Greens and Te Pāti Māori are all advancing it.

It deserves to be voted down in flames, and it deserves your submission in ardent opposition to it.

Either go here:

https://www.parliament.nz/en/ECommitteeSubmission/53SCMA_SCF_BILL_121327/CreateSubmission 

or here:

https://www.protectyourvote.nz/

now.

Three Waters: The wrong solution to the right problem...

I've already written about what the problem is and what is wrong about the Three Waters proposals and what an alternative could be.  So let's be brief here...

There is a major problem with the status quo

The records of territorial authorities in managing fresh, waste and stormwater infrastructure vary wildly, and some are absolutely dire. People have died as a result, and annually thousands get sick.  Anyone who says the status quo is ok is kidding themselves.

Local authority democratic management of the Three Waters is democratic socialism at work notice the Greens are opposed to Three Waters because it challenges their own philosophical point of view.  This is not a model anyone who believes in capitalism, free enterprise, individual rights, user pays and less government should ever support. So National and ACT supporting winding back the reforms is one thing, but it is pure political opportunism to not suggest that there needs to be fundamental reform.

ACT after all was once founded by some of the greatest reformers in New Zealand's history, but that seems to have been forgotten in favour of tinkering which only has merits around the edges.

In the 1970s and 1980s, electricity blackouts were far more common, primarily because the incentives and governance around local authority politically controlled power retailers and distributors, receiving power from a central government politically controlled generator and grid operator, were appalling. Gold plating in some places, underinvestment in others, with undercharging of residential consumers, overcharging of commercial consumers.  That's democratic control of the means of production, distribution and supply, and it's a failure. Chronic underinvestment, lack of innovation, service breakdowns and no serious accountability. 

This is in spite of Labour giving us in 2002 the Power of General Competence for local government in the Local Government Act 2002, which gave local government to pursue any activity to advance the social, economic, environmental and cultural "well-being" of their community. That statist mumbo-jumbo encouraged local government to take the eye off of core infrastructure, and engage in whatever they liked that they thought was good for everyone. It is hardly a surprise that water wasn't that sexy to politicians who were empowered to get involved in any sector they saw fit.

The Clark and Key Government's effectively endorsed the status quo.  The current system is a FAILURE of the philosophy of this government, that political control of infrastructure and funding services through taxation, not user fees, and running services based on bureaucratic and political incentives, not commercial, is preferable to the much-hated model of free enterprise, private investment and capitalism.

You're absolutely deluded if you think there is real accountability in a local authority politicians risking being voted out because the sewers are broken.  After all they are ALL responsible, and ALL pass the buck either to officials or central government for not giving them more of other people's money. By and large, many local politicians are statists more often than not they distrust markets, distrust the private sector and don't like losing control. It is not surprising that in some cases the lack of water infrastructure hold up property development, because far too many local politicians want to allocate infrastructure through central planning funded by taxes, not commercial incentives funded by user fees.

Water should not be subject to political control from either local or central government.

So what about the Iwi involvement in governance?

So why is Minister Mahuta and the Ardern Government looking to turn water on its head, to take it off of local government (in practice) and to share governance with Mana Whenua? Presumably because she sees this as a way of strengthening the application of the Government's philosophy around the constitutional arrangements of the country, by implementing the concept of Te Tiriti partnership in governance of a sector of the economy, even if it doesn't involve any assets owned by Mana Whenua. 

Obviously water in rivers, lakes, harbours and other waterways are deemed a taonga, but these do not define water infrastructure assets. Those assets affect waterways, in particular either drawing from them or discharging into them, but that's a reason why Mana Whenua should absolutely NOT control Three Waters, but have a role in applying their property rights up against water service providers.

There is an obvious role for any entities in the water sector to consult and engage with Mana Whenua regarding the use of public waterways, and discharges into them. Indeed, the idea of Mana Whenua having ownership rights on at least some such waterways that need to be respected by water entities is entirely consistent with private property rights and a free market economy.  However, to blur this by giving them a say in governance of the water entities blurs this, and weakens accountability regarding outcomes over waterways. Although Peter Cresswell is right to consider providing some Mana Whenua control as a form of privatisation, it is a fiction because they can neither sell it, nor hold any financial accountability for failure (nor benefit from success). Mana Whenua are obviously consumers of water infrastructure as most everyone else is (whether as individuals consuming water and waste water services, or property owners protected by stormwater infrastructure). 

There is no more reason to include Mana Whenua in governance here than in other sectors of the economy. Either be transparent about it, set up companies and hand over shares (and let them get dividends and pay tax on that income), or just ensure the consultation and engagement process obligations exist for the new entities.  It is difficult to see what is added by including them in an opaque governance process other than the potential for cronyism, indecision and blurring of interests between consumers, property owners, custodians of waterways and the provision of infrastructure distinct from those waterways. The irony is that this Government has pushed and pressured local authorities to introduce separate ethnically defined Maori wards for local government, but is now seeking to dilute local authority power, and so the scope of influence of those elected to such wards. It would be much more effective to include Mana Whenua participation with the regulator, as this ought to be the key entity monitoring and enforcing performance around drinking water quality and discharges from waste and stormwater. Good public policy avoids conflicts of interest, so it is much better if Mana Whenua do not have a governance role in water assets, but rather a regulatory role as property custodians of waterways.

This appears to be an opportunistic move by Mahuta to appease the Maori caucus and sideswipe Te Pati Maori (or even ingratiate herself with it, if Labour needs Te Pati Maori support after the next election, which is an entirely plausible scenario).  

It's a poor governance model for water and for Maori, as consumers of water services, but also custodians of waterways.

Success depends on getting the right level of investment and in ending taxpayer funding of water infrastructure

Is there a case for reform? Sure there is.  In fact it is palpable.

So reform of water is needed, the current model is broken, and reform ought to take water away from being funded by ratepayers and be funded by consumer, through user pays of some form of another.  Matt Burgess from the NZ Initiative is right that a mix of commercial incentives and user pays are necessary to achieve the purported goals of the reforms.  He further notes in NZ Herald (paywall) how local authorities have used the inability to pay for water infrastructure as a reason to delay or oppose property development, harming housing supply. 

However, Labour politicians have for years been distancing themselves from successful reforms their predecessors implemented in other sectors that have never been seriously revisited, such as in electricity.  The bogeys of unpopular privatisations from the 1990s haunt the 2020s, even though this isn't privatisation, there is great fear there could be privatisation.

However, there are two approaches to this.  One is simpler, just leave it up to local authorities to decide whether or not to own shares (Three Waters "rules out" shares!) in water companies, or to divest themselves of it to use in other sectors.  This has happened with ports, airports and bus companies.

I much prefer issuing shares to both water consumers of fresh and waste water (those who own property or rent properties they live in) and property owners (for stormwater), and let them decide whether the public wants to own water infrastructure.

This is a complete anathema to Labour, the Greens and doesn't even seem to warm the cockles of much of the National Party - genuine PUBLIC ownership by giving the public shares. Shares in companies that charge for the use of their infrastructure, of both private and government landowners (Councils will have to pay for stormwater infrastructure protecting their roads, for example).  

I believe the public would embrace being given shares in these companies. Now they will need to raise capital, but they will be in a much better position to do this with the powers to borrow, powers to directly charge for water infrastructure and to raise capital in markets.

Watercare Services are already partway there, but the 2002 Local Government Act diluted the provisions for Local Authority Trading Enterprises, hindering their ability to borrow against income.  Watercare services could fairly easily be converted into the shareholder model.

We've been here before - with roads - and Labour abandoned reform initiated by National, to take control of local roads off of local authorities.

The case for reform of water has parallels to the case for reform of local roads that the Shipley Government tried to implement up till 1999.  

The Shipley Government had a proposal called Better Transport Better Roads which sought to take local roads off of territorial authorities and placed them into half a dozen or so roads companies.  The difference being that central government was looking to put its own roads (the State Highways) into a roads company too.  The roads companies would be required to deliver high standards of service to road user, and would be fully funded from road user fees (road user charges and fuel tax), but empowered to let road users choose between paying road user taxes or paying them directly.

A major flaw of the proposal was that it wouldn't regulate rates down after removing rates funding of roads, but you can see the parallels with the Three Waters proposal.  The merits were that National saw that councils in many cases didn't adequately fund local roads, and that there was too much diversion of council attention onto politically sexy activities (stadiums, conference centres, art works and sports events), moreover it wanted to move to a model of full user pays - and that roads ran as businesses, with the ability to borrow and directly charge road users, would do that.

Local authorities HATED it, SO DID LABOUR. Labour complained that it was taking away local democratic control and would be a precursor to privatisation.  Of course roads companies weren't going to be sharing governance with Mana Whenua either.

This is a chance for worthwhile reform that engages the public and gets incentives right

But the Ardern Government has been dishonest with local government. It consulted, and didn't like the response it got, so it is doing what it wants anyway. Minister Mahuta claimed on TV that 30 options were looked at, but only a handful are depicted in the consultation documents. 

It is also completely uninterested in letting the allocation of resources and investment be determined by user preferences and market forces.  Water reform in the UK has been extraordinarily successful, with similar issues to New Zealand, through commercialisation and privatisation. It's pure blinkered ideology to ignore that, but Labour need not privatise water to get many of the benefits of a commercial model that applies user pays.

Three Waters reforms as they stand risk creating entities with poor incentives for efficiency, poor incentives for high quality customer service and poor incentives to avoid gold-plating or green-plating investment from funding provided by central government. There will be poor incentives for users to use water more wisely, and without generating a return on capital little indication as to what are the most efficient use of resources across the sector.

However, given the grotesque level of malinvestment being directed into other sectors (see Kiwirail), it's hardly surprising that the Government doesn't really understand the merits of stepping back and letting a sector be professionalised away from political and bureaucratic control of investment.

So what's an alternative to the Three Waters Reform?

I’ve already written critically of the Three Waters reforms in a polemical way.  It's rather curious that Nanaia Mahuta is so committed to these reforms given she has no record in her political career of ever having passionate views about structural reforms of any sectors of the economy.  You wouldn't know what she thinks about energy, transport or communications sectors, so why water? Surely it can't be because of the transfer of some power to Iwi under the new mega-water "entities"? 

Regardless of her motivations, I think the problem definition is largely correct.  The status quo has failed appallingly, and that status quo is combination of leftwing ideology about the "power of general competence" of local government (and it being committed to "economic, social, environmental and cultural wellbeing") and rightwing ideology about supporting localisation of power (although that power still lies with politicians, apparently local politicians that fewer people vote for are more accountable than MPs).  

Yet it is abundantly clear that the options assessed (at least from the public documents) were remarkably narrow minded, apparently only considering:

• Sector-led reform: This would be returning to the philosophy of the “power of general competence” that local government is capable of reforming itself to address the problems listed. This seems unlikely and is in effect a “status quo” option.

• National Three Waters Fund:  This option is frankly bizarre. It is touted as being similar to the National Land Transport Fund (NLTF), yet there are so few useful parallels. The NLTF is funded mostly from user fees on motorised road users, through fuel tax and road user charges.  There are NO centrally collected user fees on water users, and many local authorities don’t even impose user fees at all. Furthermore, the NLTF fully funds the State Highway Network, which is central-government owned and operated, there is no equivalent in water.  This looks like a brain fart from some politician.

• Regulatory reform only: This has its merits, if only because there is poor oversight of what territorial authorities do with water already, but existing governance structures range widely from being promising (Watercare Services) to being very poor. This is unlikely to be enough.  

It might be too much for me to expect a Labour Government to have assessed privatisation, even if it dismissed it on grounds of being contrary to the policies and principles of the Labour Party, but it should have been included to see what the benefits and risks would be.

So assuming privatisation per se would fall on deaf ears, here’s my quick and dirty alternative. Quite simply it is to commercialise and transfer control of water assets to ratepayer or consumer owned companies, those entities would carry the local authority debt associated with those assets. My proposal is:

1. A water sector regulator would be set up, which in association with the Commerce Commission, would oversee the water entities, particularly the transition of the reform, but also ensure that these monopolies don’t abuse their position, and are accountable for the effects of failure on consumers and property owners.  Yes yes, I would MUCH prefer some consumer association that would test water quality and seek transparency in these entities, but that's too much to hope for.  A regulator is likely to be necessary at least for the first five years, particularly to enforce some basic standards of drinking water.

2. All territorial authorities would be required to transfer fresh, waste and stormwater assets into water companies.  This would also include debt associated with those assets (which would have to be agreed with the Commerce Commission, to stop local authorities transferring unreasonable levels of debt to the new entities). These companies would be at arms-length control from territorial authorities, with independent boards prohibited from taking direction from councillors as to specific capital spending decisions. The companies would be required to make a return on capital and pay taxes. This would help avoid both over and underspending on infrastructure and remove politics from decisions around water infrastructure. The companies would be required to provide services to end users and to make a profit. They would be allowed to merge and consolidate as they see fit, and if the efficiencies claimed are real (and some no doubt are), this will become abundantly clear as being the right choice. Those that lag and perform 

3. The water companies would have all shares initially owned by the territorial authorities, but within twelve months shares would be transferred either to ratepayers with property serviced by their networks (with some proportionality by those served to different degrees by the three networks) or to consumers (which in some cases is ratepayers at least for stormwater). These shares would be tradeable, although there could be limits on foreign ownership if desired. However, the companies would essentially by owned directly by the public, rather than by local authorities. It would leave accountability at the lowest possible level, those who have paid for it and who own it. It’s actual people power.  I am ambivalent about whether ratepayers or consumers gain shares, and tend to prefer consumers (i.e. those who will be responsible for water bills) take fresh/waste water shares and ratepayers stormwater shares.

4. Water companies would be required to move towards full user pays and rates would be regulated downward. This will include but may not require water metering. Metering is appropriate for fresh and wastewater, but not stormwater, so the water companies would levy consumers for fresh and wastewater (not necessarily property owners), but property owners for stormwater. The charges would be subject to oversight from the Commerce Commission initially to ensure water companies weren’t seeking to gouge consumers. However, EQUALLY important is that territorial authority rates that have been used to pay for any of the three waters are regulated down. That regulation should not be for a one-off reduction, but the Commerce Commission should be required to authorise any territorial authority rates increases above inflation to ensure that territorial authorities are not using the reduction in rates as an opportunity to increase rates to grow other functions.  The net burden on property owners and consumers in each district (adding rates and water charges) will be taken into account.  

5.    Water companies should borrow to fund upgraded infrastructure and recover this from user fees.  Ultimately consumers should pay and as with electricity lines companies, and airports, the Commerce Commission should have oversight over the financial performance 

Opposition to the Three Waters is well justified, but taking power away from local authorities is a good thing. Yet proposed opaque governance structure, which inexplicably adds the Iwi element, is not a recipe for significant efficiencies going beyond some economies of scale and bargaining power in procurement. The forced amalgamation is unlikely to be the best outcome, because neither the Minister nor DIA officials are likely to know what's best.

So Three Waters reforms should stop, but the need for reform remains.  However, even ACT has taken a very pathetic, limp approach to this issue. 

Three Waters Reform: The left opposed water reform in the 90s, why trust them now?

You might have noticed the childlike cartoons the Government has chosen to communicate to you about one of the most radical infrastructure policy reforms proposed for over twenty years – the Three Waters Reforms. Those cartoons might have put you off, but they shouldn’t. For all of the fluff government is involved in, one of the most important activities it unfortunately is responsible for is the supply of reticulated water and the collection of wastewater and stormwater. Forget Covid19, because if the water systems fail you really ARE in for a public health crisis. Millions of people worldwide don’t have access to clean drinking water and don’t have safe sewage collection and disposal, and it costs lives. This is important, too important to have those who use and pay for it talked down to like primary school children, and too important for you to ignore.  Bear with me, this is complicated...

What’s the problem?

The current system of managing water infrastructure is, in many parts of the country, a failure. Who could miss the regular reports out of Wellington, the capital, which has systematically failed to put enough ratepayers’ money into the water and sewage systems? Stories of drinking water from Hawke’s Bay to Otago being infected or tainted. So the case for reform is overwhelming. The Government’s own papers indicate 40,000 people lived under temporary or permanent “boil water” notices for their reticulated supply in the year 2018-2019. Four people died and over a third of the population in Havelock North became ill because Hastings District Council didn’t effectively manage the town’s water supply. An earlier study indicated 35,000 people get ill annually because of the quality of drinking water.

The Government’s own report estimates there is at least a $120 billion gap in capital spending on water infrastructure. Another stat is it is estimated that 21% of water is lost in reticulation – 1 in 5 litres of water that Councils collect to reticulate to homes and businesses is wasted in the distribution. That is frankly outrageous.  Local authorities are often reminding us all to look after the environment and not to waste water, but their own ineptitude results in enormous waste.  It is notable that there are limited statistics about the state of stormwater infrastructure, because local authorities just don't know. If your home or business has ever flooded due to rainfall, then you might care, because stormwater infrastructure is what helps protect your property.

Why has this happened?

The Government claims the problem is a matter of:

· Lack of economies of scale: 67 local authority entities supply water infrastructure (there are small private operations as well) without the capacity and capability to address issues. Career paths for those in the sector are limited with multiple small entities and small scale capital spending generates insufficient competition in the contracting sector to put price pressure on those costs. It claims water entities need customer bases in the high hundreds of thousands to be viable.  There is definitely merit in this.

· Unaffordability of needed investment: Under the current approach, the money ratepayers would need to be forced to spend to remedy historic underspending is enormous. Government estimates increases of 300-1500% in spending are needed over the next thirty years compared to current levels. This is quite credible, indicating a desperate need for both new capital and for ways to obtain efficiencies to reduce these costs over time.  However, it would be dishonest to pretend that those who use water shouldn't pay for this, albeit over many years. 

· Poor incentives and lack of effective oversight:  This is where the Government lays bear what’s REALLY wrong. It is that the model of “democratic control” of the provision of water services, and the “power of general competence” of local government in overseeing that control is a failure.  It is worth remembering that "democratic control" is a touchstone of leftwing political philosophy.  

To quote from the Government’s own report:

Local authority service providers operate in a political environment, in which investment decisions are made by elected representatives who have a duty to consider broader community interests (for example, other investment priorities and affordability of rates increases) and a constrained financial environment, in which the main funding and financing  mechanisms are via ratepayers and council borrowing. These factors combine to limit the level of three waters investment.

In short, local politicians prefer spending rates money on other stuff and prefer not to raise rates to pay for water infrastructure. It talks of misaligned incentives, which is surely a euphemism for politicians care most about being elected, second most about getting attention for shiny stuff they made ratepayers pay for, third most about other stuff they can get credit for in three years. How many local politicians campaign on fixing the pipes, especially when such work can literally take years to complete, is largely only visible as a disruption and the end result is… continuity of what you had before?

These failures are a legacy of opposition to water reform in the 1990s

Electricity, gas, telecommunications, aviation, ports, road transport, public transport, all were subject to significant reforms in the 1980s or 1990s, but water was largely left alone. With the sole exception of Auckland, with the creation of Watercare Services in 1991, all other water provision was left in the hands of territorial authorities. Water is a legacy of the Muldoon era and beyond, with the exception of some local authorities consolidating and in some cases implementing water metering, not a lot happened.

Some Aucklanders might remember the Water Pressure Group, led by the late, conspiracy theorist, Penny Bright.  One of the cause célèbre of the hard left was opposition to the commercialisation of water in Auckland seen in the creation of Watercare Services, which supplies water and wastewater (not stormwater) services in the city. The New Labour Party, later the Alliance (when it included the Greens) were loudly opposed to what they saw as the bogey of privatisation (which never happened).  As the Alliance was on the ascendancy, after the 1993 General Election, National pursued little in reform of the water sector, and as Labour went back to the left under Helen Clark, the idea of reforming water was parked.  After MMP, there was no majority for any serious reforms in the sector, and from 1999-2008 the Clark Government proceeded, with support from the Alliance and the Greens (who had now left the Alliance) to pass the Local Government Act 2002 to grant local government a "power of general competence".  In short, the left trusted local government to get on with the job. Of course the Key/English Government from 2008 until 2017 did nothing either to reverse it.

The power of general competence and community empowerment have been a failure

The implementation of the power of general competence was to usher in a new era.  Then Local Government Minister Sandra Lee said "It is both a reaffirmation of the place that local government has within our democracy, and of the rights of local people in their communities to exercise controls over their aspirations, their decisions, and the democracy that affects them."   

So communities were "empowered" which of course is code for empowering local politicians. Sandra Lee even made it clear that water privatisation was to be prevented. "We are not going to agree to allow councils to sell what is not a commodity--the access to clean water--but a fundamental human right."  I'm not sure how the people who died in Havelock North had their "fundamental human right" protected, and how asserting that right works if the Council has let the local infrastructure fall into disrepair.  Indeed then Associate Local Government Minister Judith Tizard later claimed credit for having including "cultural wellbeing" in the objectives of local government.  Not much culture if you're sick because the Council supplied water is contaminated.

Backed wholeheartedly by the Greens, the reforms were to usher in a new era of “local democratic accountability” with more powers to deliver what “the community wants”. Indeed, it is the heart of the mantra of the economic left that justice is achieved by more “democratic control” of resources. Well we’ve seen how democratic control of water has been going, and the results are in – it's been a failure.

 What needs to be fixed?

Users, in many cases, don’t pay for what they use. With the cost of water infrastructure for many hidden in rates bill, there are no incentives to manage water use, and those who need water face rationing alongside those who waste the resource. Furthermore, those who benefit from stormwater infrastructure don't necessarily pay rates reflecting the protection of property value they obtain from it (nor do insurance costs reflect that adequately).

Local authorities get paid rates regardless of how much water is used or wasted. So they have poor incentives to stop wasting 21% of the water collected and distributed, to plug leaks so that they can sell the water they collect. 

Local authorities aren't required to spend money on water infrastructure so they may levy water rates, or pay for water from general rates, but they have a "power of general competence" and they are accountable to you every three years at the ballot box.  They spend money how they like, and your power to change that is tiny.

Politicians are no better able to decide how best to spend money on water infrastructure than they are on electricity (which they don’t) or telecommunications (which they don’t) or on farms. Bear in mind local politicians are primarily responsible for housing shortages because they are the controllers of permission to build housing and to allow land to be used for housing. Expect them to make similar quality decisions around provision of essential infrastructure.

Imagine if your local power company spent the money raised from your power bill on a convention centre. The reason that, by and large, electricity and telecommunications infrastructure work is because you pay for its use and the providers spend the money on maintaining and providing the service. It’s capitalism working, because those companies borrow money based on future earnings and invest in the network to continue providing reliable service.

Given that the Ardern Government is the most leftwing government in New Zealand in nearly 40 years, you might think that with reality confronting ideology, they might actually think that this is a failure due to their own philosophy not working empirically. You see if the Douglas/Richardson reforms had NOT progressed, you’d be seeing the same malinvestment in electricity (which was beset with blackouts in the 70s and 80s before reforms), and telecommunications (which famously, before the mobile phone era, saw it take weeks to get a phone line installed).

What is proposed?

It’s curious that the Government has relied somewhat on Scotland as a source of advice for how to implement water, especially when its own report indicated much better performance in England (see above)– which DID famously reform water by privatising the lot in the 1980s. It notes that privatisation of water in England  improved productivity by 2.1% per annum over 24 years (64% all up) after adjusting for quality of service improvements. Achieving a net saving of 64% in cost over such a period has to be tempting.

That is, of course, the right answer.

It isn’t proposing that, because you see, the Ardern Government is in many ways, continuity Alliance,

It is proposing:

· A water regulator to set standards for water quality, with powers to direct water providers to act to meet its directives;

· Consolidating 67 entities into 4;

· The new entities will be owned by local government

· Two boards will govern the new entities. A professional independent board, akin to boards supplying other infrastructure (a semi corporate board) and a regional representative board, which is to be split 50/50 between local government and Iwi.

· The Regional Representative Board will appoint members to the independent selection panel to select the Board, which will then select the board. In effect local authorities and Iwi will indirectly appoint the board.

· Setting of charges must be done transparently, with no changes to how people are charged in “the initial years”. The new entities will have powers to borrow.

· Protections against privatisation, mostly by local government and Iwi having to have a 75% majority in favour of it.

· The entities be statutorily required to uphold “the principles” of Te Tiriti, with the board needing to have competence in Te Tiriti, Tikanga, Matauranga and Te Ao Maori;

· The entities must direct water users funds towards the capacity and capabilities of mana whenua to support delivery of water services

· To throw taxpayers’ money at the entities to lure in local government to agree.

So it is resisting commercialising the delivery of water, preferring to largely aggregate water into entities similar to what governs water in some parts of the country already. They will be, in effect, very large Non-Commercial Council Controlled Organisations with co-governance with Iwi.

What other options were considered?

Well not commercialisation or privatisation.

The report indicates that three other options were considered:

· Local government led reform: This of course would be consistent with the Government’s philosophy, but has no merit because there are few incentives to make it work.

· A National Water Fund, akin to how land transport funding operates. Except there are no fees charged for water use nationally, and it wouldn’t really fix anything other than enable consumers in places which have well managed water systems to subsidise those in areas that don’t.

· Regulatory reform only, in other words introducing a regulator without structural reform. This would not achieve efficiencies and achieve only limited accountability.

So privatisation wasn’t considered, but the Government should be transparent as to why – which is ideology and politics. Why wasn’t commercialisation considered, by creating genuine arms-length council owned water companies, similar to Watercare services? Why not vest those companies in shares held by ratepayers (noting that it is property owners that primarily benefit from stormwater infrastructure, which protects their property from damage) or even just citizens and permanent residents as consumers? After all, the success in England in holding companies to account for quality of service, levels of investment and addressing systemic underinvestment is considerable. Why does the Ardern Government acknowledge that success then steer down another path? It seems like it is purely ideological.

What's good about the proposals?

Large entities will be able to be more professional, achieve significant capacity building and attain economies of scale. There is no doubt that there are far too many local water entities. Having borrowing powers and the ability to levy charges on consumers is also critical, but these powers largely exist now within local government.  Regulatory oversight ought to result in better outcomes than just leaving it to local government and iwi to manage, and more money will ease the pain, but that's transferring a burden from ratepayers and water consumers to general taxpayers, with no sense of the distributional impacts of that.  

What's wrong about the proposals?

The new entities wont be companies, wont be required to make a return on capital or to pay tax, meaning it will be less transparent as to whether they are operating as efficiently as they could be, or maximising the utility of their assets. As a much larger version of the current model, there isn’t so much incentive to treat those who consume water and use wastewater and stormwater services as customers. Having a customer, provider relationship more directly would provide much more input into consumer preferences than by having an advisory board.  What's fundamentally wrong with considering water similar to electricity?

Local government will still own the entities, although this ownership effectively diluted because governance is now shared with iwi, who own none of the infrastructure, nor are accountable to ratepayers.

There are probably too few entities proposed and Watercare Services, which has fewer problems compared to many other water entities, will be required to be decommercialised and merged with Northland water provision, which may mean Aucklanders cross subsidising water infrastructure in Northland. There is no need to dis-establish Watercare Services and no options given as to the number or geography of the proposed entities. Local authorities that are successful ought not to be forced to be subsumed by entities of those that are not, noting that the three waters are NOT an integrated network like energy, telecommunications and roads. There is little need for disjointed networks to be managed together, except to achieve economies of scale and professional capacity for competency.

Governance remains highly political. With local government half responsible for appointing the panel that then selects the board, the incentives are there to offer positions to those they know and trust, in short local authority nepotism. With four entities, headquartered and dominated by Auckland, Hamilton, Wellington and Christchurch, expect the local authorities of those cities to take charge.

The introduction of iwi governance is a vast increase in power for iwi over core infrastructure that has no precedent in other industries, and which assumes that Maori as both consumers or voters is insufficient in protecting and promoting their interests, although it might certainly promote iwi interests. The iwi role will be to share oversight with local government, which already has a growing mandatory iwi co-governance role in any case. Iwi have the same incentives as local government in appointing people to select a board to govern water. The outcomes expected from this are extremely vague such as enabling mana whenua to express kaitiakitanga, but what will this achieve in terms of outcomes such as water quality, quality of investment and accountability? Embedding Te Mana o Te Wai is harmless enough, but this is hardly unique, because Te Mana o Te Wai is universal to humanity. More fundamentally, the Government is effectively proposing a transfer of 50% of the power around the water sector to iwi, with neither the responsibility of ownership, or accountability to consumers or the owners of that infrastructure. It is a significant uplift from current obligations around consultation with Iwi, to hand over an equal share of governance, with no indication of outcomes or what it means for other sectors such as electricity, gas or telecommunications. It is a form of privatisation of governance, to iwi. I

Now there IS a valuable point in “iwi/Māori have roles within the current three waters service delivery system that will need to be acknowledged. They are suppliers and/or recipients of water services (particularly to rural marae, papakāinga, and rural communities).” As suppliers, they should be subject to the same oversight as other suppliers, but as recipients they are little different from anyone else. They receive a mix of good and poor service, but it is unclear why their role as consumers is more special than anyone else. Sure, water is a taonga, but it is to all humanity. It’s ludicrous to claim that it is more special to iwi than it is to any other.

However, this is more fundamentally about the Government’s interest in what is, in effect, creeping constitutional reform, by redefining the Te Tiriti partnership of Crown and Iwi, into one that goes beyond meaningful consultation and engagement, to sharing powers over assets that do not belong to iwi (the three Waters are about infrastructure, not lakes, rivers and streams after all). There IS a role for consulting iwi about the use of property they own or control, but to privatise half of the control over ratepayer owned infrastructure, to iwi deserves to be justified in terms of outcomes, when the reforms themselves are based on addressing serious problems with the status quo. Should this really be used as an opportunity to facilitate more iwi control?

What should happen?

Reforms are badly needed, primarily because many local authorities have proven themselves utterly inept in managing and funding water infrastructure. However, the Government is proposing to consolidate existing water entities, including successful ones, into four entities which largely resemble Council Controlled Organisations and share governance with iwi. Yes, having professional large water utility entities will be a step forward, but continuing to have significant local authority governance, which has proven to fail, and using the reforms to implement iwi co-governance, with no sense as to what improvements to outcomes this could deliver, is missing an opportunity.

Government should be bold, it should transfer the water assets of local government into a handful of specialist water companies, and issue shares in them all to all property owners connected to their networks and float the companies on the share market (and as a sop to fear over foreign takeover, you could even cap foreign ownership at 49%). Let the water companies meter or flat fee property owners for their services, and force councils to drop rates proportionately and NOT increase them by more than inflation. Given their quasi-monopoly status, central government should oversee the water companies in terms of drinking water quality, but by having popular share ownership concerns over water companies gouging consumers can be ameliorated.  If the Government did this, I'd accept the value of an independent regulator, to monitor and report on performance.

 It’s time to take the three waters out of the hands of politicians and put it in the hands of consumers as shareholders, and run it like a business. You have no more reason to trust this Labour Government with water reform than you would Jim Anderton, who opposed competition and privatisation of telecommunications, electricity, aviation etc etc.

We've seen the results of having a utility sector entirely at the behest of democratic accountability to the community under local government. It's been a failure.  The water sector needs reforming, it needs bold moves resembling what happened and succeeded in England in the 1980s. Shame the Government is willfully ignorant and unwilling to even consider that model as an option.

The Government claims significant benefits from their reforms, over thirty years. This may well be credible, but is based on many assumptions around efficiency savings seen in Scotland with consolidation, and that these efficiencies wont be lost in a strange new co-governance model.  However, since the Government didn't even look at the option of following England  - even without privatising the companies - we wont know if it chose the best option, as the options analysis has clearly been politically cauterised, by people whose political ideology has so demonstrably failed in this instance.

Why would anyone trust them to get this right now?  

Local authorities are currently consulting on whether communities support the Three Waters Reforms, and many oppose it, not least because local government never likes losing power and influence.  You should let them know that you oppose the proposals, but not because it takes powers away from local communities (whatever that is), but because it puts power in the hands of people who are NOT primarily interested in delivering efficient, high quality services to consumers.

So tell your territorial authority AND tell your local MP what you think of these reforms.  Be grateful also that electricity and telecommunications aren't being run by your local authority.  Imagine the blackouts.