Feeding "our" children

The debate about the compulsorily funded school lunch programme is being characterised by opponents of the government, as one of mean-hearted people unwilling to feed "our" children.

Advocates of the school lunch programme claim:

• There are children going to school without breakfast and without lunches, and they will perform worse at school than had they been fed...  this is true, but not just for the reasons advocates of state feeding of children claim.

• Simply providing food for the children who are in need (and whose parents can't or wont pay for it) is bad, because it makes those children feel singled out because of the negligence of their parents/guardians unlike that of  children who would not get such meals. this is likely to be true, but neglect to note that is likely to be the case more generally anyway.

• If "we" can't feed "our" children, then what are "our" priorities anyway? 

Of course all kids should be going to school having had breakfast and provided lunches, who would argue against that?

The Government is dancing around the key philosophical argument around this, and despite lazy attempts to portray it as a "culture war", it really isn't. It is an argument around both the role of the state and individual responsibility, and it is obvious that there are people polls apart on this.

On one side is what is, in essence, a socialist position, that it is not only morally right, but there is a moral obligation for politicians to force taxpayers to pay to feed all children at school. The argument being that this provides for the best outcomes for children, and demonstrates a kind and caring society.

On the other side is what is both a conservative traditional, but also a classically liberal position, is that the primary moral obligation to feed children arises with those who chose to take responsibility for them - the parents/guardians.  There being two reasons why the feeding doesn't happen.  First, is if there is genuine poverty, this still obliges the parents/guardians to seek support from the existing welfare system or charitable services to put their children first, and of course people are free to support such services if they want to show kindness to those in need.  Secondly, if parents/guardians put their own needs and wants above those of their children, such as simply feeding them, then it is better to address this neglect, either through education or punitive measures.  

Those on the left diminish or do not believe that compulsorily funded state meals for children undermines parental responsibility, even though it fairly obviously does by feeding all children at school (as the predominantly middle class moans in recent weeks demonstrates). Their belief is that the utility of children being fed (and of course the argument is on the detail of what they are fed, and cost is not an issue for those who simply think the state should take the tax it needs to do what they want) outranks any other consideration.

Those on the right do not believe that the utility of feeding, essentially children from low-income families, does not justify forcing taxpayers to pay for feeding all children, and are suspicious of what happens next. Will taxpayers be forced to pay for "free" school clothes, "free" school transport  for families living close to public transport that goes to the school they choose) or more? All of this would mean less responsibility for parents to think about the needs of their children, and more taxes for everyone to pay.  Most would agree that it is ethical to help parents in need temporarily, and for there even to be assistance, whether charitable or not, for kids who don't get fed, but that isn't a universal meal programme.

Of course as a libertarian the idea taxpayers should be forced to pay to feed other people's children is morally unacceptable. If you want to help people with feeding their children, then feel free to do so, indeed that is the kind and caring thing to do.  There is no kindness in letting politicians raid money from other people, including those who disagree vehemently with the concept, to pay for a scheme organised by politicians and officials, rather than actually making a contribution yourself. 

A state big enough to feed children for one (some say two) meals a day, is big enough to parent them even more, and the record of the state as parent is woeful. 

Some conservatives think the socialist objective of free school meals is a plot to undermine the family, and make people more dependent on the state. I doubt that, although the willingness of so many to simply grow the state without any concern for the scale of its presence disturbs me.  The more of people's money that simply gets taken for other people to spend as they see fit, the less agency you have over your life, and the less accountability for it.  Whereas the more you have, the more options people have to advance their lives and those of their loved ones, and support those they want to.

What I think does matter is the issue of parental neglect.  After all, if parents can't do something as basic as provide a meal for their children above their own need for food, what else are they neglecting?  

Most parents dedicate their priorities to their children. They think of their children 24/7, they think of what they need and do what they can to provide. It's concerning if parents fail either by their own lack of competence or more insidiously, lack of care.  

More importantly, let's define what the problem actually is?

For decades the state didn't feed children at school, and did this generate a systemic problem that was distinguishable from the children routinely neglected by their parents?

Are there parents/guardians in such abject poverty that they haven't got a few dollars to provide a bowl of cereal with milk and fruit each morning (compared to everything else they buy)?  There probably are some, and in particular this probably happens over short periods for some families when there is unemployment or an emergency (e.g., having to move home, refridgerator 

If so, those people should be helped and targeted, because it doesn't just affect food, it affects everything else needed to raise those children adequately.

Are there parents/guardians who consistently neglect their children? Then they should be identified and appropriate carrots and sticks used to change their behaviour (both rewards and sanctions).

One of the single biggest factors for children failing are parents who neglect them materially and emotionally, and these are directly linked. Parents in material hardship do all they can to provide for their children, whether working or seeking charitable help directly or from family, friends and neighbours, and that should all be encouraged. It is entirely appropriate for people in need to seek temporary assistance. However those that do not do this, are either incapable of being parents or are simply negligent.

The kids in need should be helped, but the posturing over this programme, which papers over cracks that neither side in politics is keen to address (as the hard left regards personal responsibility to be a conspiracy and the hard right fears the state being a parent), is appalling.

It should be gradually wound down and replaced with a targeted programme organised by the schools themselves, out of their own budgets.  

Ignore the privatisation scaremongerers

I remember the time before what socialists call the “neo-liberal” era which “sold out” the country to “rampant capitalism”. Sure I was at school, at the time when people and businesses had to plan weeks ahead to get the Post Office to install a phone line (no mobile phones then, as the Post Office hadn’t deemed that to be appropriate until 1987, even though Australia had had a limited carphone mobile service from 1981 and the UK had launched mobile telephony in 1985).

It was an era when the 100% state owned Air NZ had to get Cabinet approval to buy new airliners, and was made to buy Rolls Royce engines for its Boeing 747s, because it was thought it might improve trade prospects more generally, even though the airline had the spares and the staff training for General Electric engines (and the Board had recommended such aircraft). Such is the ways of nationalised industries.

It was also an era when phones calls beyond your local calling area (which in Wellington did not include Kapiti) cost tens of cents a minute, so a ten minute call (remember no SMS or email) to Auckland might cost several dollars. Phone calls internationally cost dollars a minute, so twice a year my grandmother would talk to her sister in Scotland, for birthdays, for around 10 minutes. Those calls cost $30-$40, and it wasn’t because of technology, it was because the Post Office used money from phone calls to cross subsidise its unprofitable postal monopoly. Then there was the Post Office Savings Bank, a government bank that at a time of double digit inflation had children’s “savings” accounts paying 2% interest. Effectively a scheme for the state to steal savings from children, but hey it wasn’t privatised nor “foreign-owned” (strange how supposedly “anti-racist” socialists are so agitated about foreigners when they own businesses they use), so it was great - the socialists got kids' money to spend on "the People" (which is of course what they always say).

Wellingtonians 40 plus might remember the Wellington domestic terminal, later the Air NZ domestic terminal, which on a windy wet day would leak, with the lino floor flooded, being drafty with not enough seats for people waiting for flights. Until (foreign and local capitalist owned) Ansett NZ was allowed to fly domestically, all jet flights were boarded through steps in the wintery Wellington windy rain. The Government and Wellington City Council argued over decades about who should pay for a new one. They would also remember Wellington City Transport, which was 100% owned by the City Council and subsidised by ratepayers, so that on Sunday evenings hardly any buses ran at all, all of the routes terminated in the city centre (needed more buses and drivers for that, and the Tramways Union would hold the city to ransom if it didn’t get what it wanted). New buses required the Council to order them, and as a result the fleet would be on its last legs before new vehicles would get ordered. 30 year old diesel buses would be operating (the economic life of a diesel bus is around 15 years) and of course Wellington’s trolley bus infrastructure would be patched up for decades.

None of this is reflected on by Max Rashbrooke in the Spinoff. He wrote a piece last week that followed on from the rather awkward set of comments between David Seymour, Chris Luxon and Nicola Willis which indicated various interest in looking at further privatisation, but unfortunately Rashbrooke didn’t demonstrate a great deal of depth in thinking. Most of it was parroting the claims and slogans of former union economist Bill Rosenberg, and high level papers written overseas by leftwing researchers.  

I couldn't resist, it was so full of nonsense, it deserves a response:

- “Privatised TranzRail had an appalling safety record, its staff dying at work at eight times the national average. And while cutting maintenance to a level Rosenberg labelled “abysmal”” What was the safety record before privatisation, before SOE status, before corporatisation (before there was safety regulation of rail)? Rosenberg, a former CTU economist bases the maintenance level on “what”? Bear in mind that in 1984 Booz Allen reported on how the rail network had been over-maintained in places, but also how 

- “Fay Richwhite and their fellow owners took out at least $370m in profits from a firm for which they had paid just $328m”. Dividends over a 12 year period, but of course taxpayers have never taken a dividend from Kiwirail or NZRC, ever. Socialists need to decide if the state owning trading enterprises is to make money from them for “the People”, or for them to be moneypits for the “Public Good”, but that isn’t clear.  Truth is most are primarily commercial but they might want certain services delivered at taxpayer expense, but this doesn’t require entire operations to be operated Soviet style.

- “Helen Clark’s Labour government was then forced to repurchase the railways, creating KiwiRail as we now know it. The whole episode cost the state around $4bn, according to then business commentator Brian Gaynor”. Nobody was forced to repurchase it, in fact there were three transactions from buying the Auckland track for $81m (Treasury valued it at $20m), buying the network and then buying the whole business. If nothing had happened, it still would exist, it just would have seen a series of lines close that carry little traffic, and the state has poured much more into Kiwirail since.  For what end though?

- “Profits flowing offshore to wealthy interests rather than ordinary New Zealanders” What profits? Kiwirail has never generated a dividend, and besides “ordinary New Zealanders” wouldn’t get it, it would go to the Minister of Finance to wash in with other spending.

- “The maddest examples have come when monopolies – water, rail – have been sold to private firms, even though competition is the only thing that makes markets work” Rail isn’t a monopoly, and in NZ water hasn’t been privatised (and corporatisation was opposed by economists like Rosenberg in the 1990s, see the resistance of the Alliance to the creation of Watercare Services, and demonstrates the utter failure of the socialist model of democratic control of the provision of services.  

- “A private monopoly is the worst of both worlds: no competition-based incentives to improve, and no public-good ethos pushing the organisation to look out for citizens’ interests”. Do tell us about this public-good ethos, the one that saw the Post Office take weeks to install phone lines, that gouged consumers for toll calls, that saw rampant theft of freight on the railways as a monopoly government department (it had a statutory monopoly until 1983 on long haul freight), the Post Office Savings Bank that gave kids 2% interest on savings accounts when inflation was in double digits. Please!

- “in the UK, privatised railways have been such a disaster – massively increasing costs with no corresponding rise in quality”. If you think rail travel in the UK is no different in quality today compared to the era of British Rail you need help. By any measure, frequency, number of routes, reliability, speed and capacity, and indeed patronage (which has grown to record level turning round decades of patronage decline), it is a remarkable transformation. Yes subsidies have spiralled as well, but it’s overly simplistic to think the UK has a private rail system now, as Network Rail effectively renationalised the network over 20 years ago, and most services are franchised (with the franchisees either paying to operate services on routes that are commercially viable, or pay to operate those that are not). Furthermore, rail freight volumes have increased 80% since 1983, hardly a failure if a key goal is to shift more freight off of congested roads. Socialists (mainly the unions that can’t shut down the entire system with a strike anymore) say privatisation didn’t cause the rise in patronage, but if privatisation “harmed” services, wouldn’t people have just abandoned rail in favour of buses and driving? Well of course they didn’t.  The system has been highly flawed, that’s for sure, mainly because it is highly politicised and Train Operating Companies have been poorly incentivised to control costs (because their main client isn’t their customers but the state), but that’s an argument for less state control, not renationalisation.  As usual, it's much more complex than simple slogans

- "Even worse has been the privatisation of British water services, whereby firms have extracted tens of billions of pounds in shareholder dividends, hiked water fees and discharged large amounts of effluent into local waterways." Yet DIA’s own report on the Three Waters reforms noted the performance of English water companies exceeded that of any in New Zealand, and Scottish Water. A huge amount of investment has gone into renewing water infrastructure in England, in fact OfWat requires it, and regulates water user fees. New Zealand HAS the model the UK had before privatisation and it’s an abject failure. NZ has local democratic control of the water and waste water system, and it is falling apart in many centres. It doesn’t generate dividends, it charges people based on the value of their property, not what they use, and effluent gets discharged into waterways regularly.  We have socialist water and it doesn’t work. 

- "Privatised bus companies, the OECD concluded, are cheaper than public ones only because they cut wages." This is simply false. The OECD did not conclude that, the link is to a report on a roundtable discussion involving case studies in four countries, three in Europe, plus the USA (which has few privatised urban bus services). It is not an official report from the OECD. EVEN then it said that private operators can be more innovative than public ones. The idea you can compare the performance of the Yellow Bus Company in Auckland in the 90s (let alone the ARA), or Wellington City Transport in the 1980s to their equivalents today is extraordinary.  When bus services were moved into the contracting model, there were savings of around 15-20% which enabled more routes and frequencies to be offered, but it did stop the Tramways Union from being able to shut down an entire bus network when it didn’t get what it wanted.  

- "Even when three of them were fully state-owned, the “gentailers” that supply our electricity were able to operate rather like a cartel, generating excess profits and freezing out potential competitors." Wait what? So it ISN’T state ownership you oppose, it is running trading enterprises as “enterprises”. So you don’t want the state to make dividends from its businesses?  Well we did the socialist model before, for decades. It saw massive investment in generating capacity (politicians liked power stations then), but let the local distribution network fall apart (politicians don’t like charging people for what they use), a bit like water.  Were they operating as a cartel? Well shouldn’t the Commerce Commission be dealing with that, in which case, maybe this claim of it being a cartel (which is serious), is actually not true? Maybe if they were all fully private, they could be properly subject to scrutiny because politicians wouldn’t be worried about loss of dividends.  In fact there may be a case for structural separation of generation from retail, but that's about ownership.  Not a lot of coherence in the issue here is there?

- US healthcare – not voucher-based, admittedly, but the nearest thing the developed world has to a private health system – is a catastrophe. It’s not the nearest thing the developed world has to a private health system, as there are umpteen other examples. Nobody, literally nobody advocating for more market-oriented healthcare thinks the over-regulated, highly subsidised US model (Medicare and Medicaid are uncapped liabilities to US taxpayers) is a model for anyone to follow, but it doesn’t stop socialists from the Anglosphere blanking out Switzerland, France, Singapore or the Netherlands. Australia’s system is a mixed model, but that doesn’t fit the narrative.

After all of this selective agitprop (yes education vouchers “fail” but let’s not mention Sweden which to this day maintains one of the most open market education systems in the world, but that doesn’t fit either), we get the philosophy:

There is a basic philosophical issue: public services – health, education – are things people deserve as of right, as a basic entitlement of citizenship. They are not the equivalent of buying, say, another item of clothing, and treating them as mere consumer goods risks degrading their deep importance.

Hold on, most of this article focuses on railways, then water, and talks about electricity, then ends with health and education.  Is the claim that the state has to provide everything that is a “basic entitlement of citizenship”? Should the state own all housing? Should the farms be state owned and all food supplied by state shops (after all food is MORE important than health and education, because most can last months or years without health and education, nobody can last more than weeks without food)?  The sneering comment that “treating them as mere consumer goods” says a lot about attitudes, that when the public are allowed to choose it is “degrading”. Really?

If, as is often the case, privatisation means charging for something once paid out of taxes, it is likely to have a harmful effect on poorer households.  Why? Because poorer households use the most electricity, rail freight or water? Of course they don’t, but is the argument here that everything people need should be free at the point of use, but that half the population should pay taxes so the others don’t?  We can see what “free” water has done to demand for it, and the infrastructure. We see it with roads everyday where consumers aren’t exposed directly to the costs of what they use, with the result of queuing. Public health systems are all about queuing after all, socialists seem to think that is fair, as long as the workers get paid well, the workers not in those systems should be grateful “is isn’t ‘Merica”!

You see the problem is, the common people are stupid and ignorant, whereas public servants, producer unions (especially those run by people paid much more than the average wage) and politicians are enlightened, capable and benevolent…

People don’t generally know what healthcare they need; in education, research suggests “competition” between schools is often driven either by parents making calls based on external factors like uniforms, or by prejudiced views about keeping their kids away from certain other children.  

Well just give them what you think they deserve, parents are incompetent clearly. The state should probably feed kids too (already started with that). Parents must make lots of bad calls too, so maybe the state should buy groceries, buy clothes, maybe run activities for the children to keep fit and socialise, maybe ensure they don’t have “prejudiced views”, maybe build a sense of community. Maybe we can call them Brigades, give them uniforms. Maybe they can help identify grownups who express “hateful and harmful” views. You can see where this attitude that parents know least can head, but it is exactly the arrogance of people who think because some parents make poor choices, none should be allowed to. 

I could go on, there is a misconstruing of how Telecom performed in the 1990s (which from a consumer point of view saw prices plummet across almost all services, essentially enabling people to communicate across the country and internationally affordably for the first time). 

The only interesting part of the article is the claim that if only the public could be “involved” in the decision-making of state owned organisations they could be more responsive.  This is quaint but delusional.  Most people have the time to work, look after their families and then spend quality time enjoying themselves. A small, but vocal minority get involved in activism and inevitably those who will shout the most and get involved the most will be those with spare time or motivation, either because of their political ideology or in many cases simply having time because they are retired or not working. The citing of the “successful German model” for electricity companies is laughable given some of the highest electricity prices for consumers in the EU. If that's success I'd stick with the status quo thank you very much.

It ends with this “We could also entrust frontline public servants with more responsibility, putting them in charge of locating efficiencies and potential innovations” Sure, because public servants are well known to be at the frontline of identifying the most efficient ways of doing things, and innovating with technology and service delivery, that’s why they have jobs they rarely can lose, and don’t get paid based on performance. It's naive at best.

I get that socialists hate private enterprise at worst or are highly sceptical of it. What I don’t get are the absolutely contorted contradictions of, on the one hand hating private enterprise making a lot of money from former state enterprises, and then not wanting the state to make money from them (but rather for taxpayers to subsidise them, for no clear aim other than to make sure people don’t pay for what they use).  I absolutely don’t understand how intelligent people who purport to be interested in public policy outcomes parrot agitprop slogans from trade unions.  What is the point of the state owning Kiwirail? Is it to get more freight on rail and off of roads? If so, is that the best way to do it?  None of this is clear.  What is the point of the state owning a power company? To make it cheaper for some consumers? To reduce emissions (which will make it more expensive for someone)?  Nobody knows.

Socialists have successfully scaremongered about privatisation in NZ for decades. This scaremongering stopped water getting reformed in the 1990s outside Auckland, and has stopped serious reform of ACC, and making the electricity market more competitive (by the state not having a stake in generation and retail). It’s largely banal slogans pushed by Marxists with a strong vibe of xenophobia, and it deserves to remain back in the 1990s with the Alliance.

POSTSCRIPT: By the way, I am not in favour of privatising prisons. The state has a core function to protect law and order, and to protect citizens from the initiation of violence by individuals and state.  Politicians and public servants should be held accountable for the success and failure of managing them, and with the monopoly of the legal power to incarcerate people being quite unique, passing that responsibility to a business - regardless of efficiency - dilutes that accountability.  

What is "fair" tax?

There's been quite a lot of commentary about whether the "rich" are paying their "fair share" of tax, with an inferred moral and philosophical position that what is "fair" is "a lot" and is not just tax on income from employment or businesses, or tax on consumer goods, but tax on property acquired after both earning income and paying tax on the purchase of that property.  This is the concept of a "wealth tax", so let's consider both what this actually means, and whether a different conception of what "fairness" is might see the debate going in a different way.

Let's say you have land, or shares in a business, or an expensive asset (motor vehicle, boat, aeroplane, art work), and a socialist government (which is what it would be) decides you should pay it some proportion of whatever value it deems appropriate, in tax.  This is likely to follow you having already paid the following taxes:

• Income tax on your employment, or dividends from a business, interest from investments.  After all, to acquire an asset, you need to acquire income to get it.  Yes some people inherit wealth, some people are gifted wealth, but many earn it from employers or their own business.  Government already taxes that, and if you are wealthy the marginal rate of tax on most of that is 39%, so if you earned say $1 million, $370,000 in income tax is already paid on it.
• GST on your purchase. Yes this doesn't apply to land and buildings, unless you actually build something, or refurbish it. It also doesn't apply to buying shares in a business, but it does apply to cars, boats, aeroplanes, art works, jewellery and the like. 15% of the price is added on and taken by the government assuming it is bought through a business beyond a certain threshold. It doesn't apply to private sales of course.

So after paying tax to earn money, paying tax to buy the asset, the money-grabbing socialists want MORE, and of course if your cashflow is poor (you may have retired), then you will need to liquidate assets to pay a tax on wealth.  Yet who asks the question, why should you pay tax on owning property?

What does "fair" even mean?

From the socialist mindset, which is that of David Parker, the Greens and Te Pati Maori, and indeed appears to be that of multiple journalists, it's only fair if the state gets to take a share of everything you earn and own, including any increase in value in assets you may happen to own.  However, this idea of fairness is rooted in several concepts:

1. There is something immoral about owning property and it increasing in value without being forced to share that with the state (and enable politicians to spend that money).
2. People only obtain a lot of property because the state enabled them to do so, and so (despite them already having paid other taxes in the process of earning income and buying goods and services) the owners of such property should keep "rewarding" the state (and by extension "the community") for letting them succeed.
3. The actual amount of taxes confiscated from people should bear no relationship to the extent to which they avail themselves of what the taxes are spent on.
4. The state can spend your money better than you can, and in ways that are virtuous and benevolent to society, whereas you only spend money to benefit yourself and your family, and what you value.  Your values as a taxpayer are subordinate to the altruistic values of politicians who know how to spend your money to be kind.

This is largely nonsense. There is nothing immoral about owning anything and having its value rise without other people sharing in it, any different from it being somehow moral to own property and see its value fall, and require other people to help you out because of your losses.  Of course the socialist wealth tax advocates are never too keen on people getting big tax breaks or subsidies if their wealth collapses due to bad investment or simply the market for their assets evaporating.  

There is a kernel of an argument that a stable government with rule-of-law and property rights enables people to thrive, but the amount of state that does that is a fraction of its current size. The GST paid by the consumption of wealthy people could pay for all of that (indeed Roger Douglas proposed in the 1990s that GST could not only pay for the core functions of the state, but the welfare functions as well).  However, even if this is extended further, is it really a rational argument that the wealthier you are, the more the state has done to enable it (except for those who own businesses granted effective statutory monopolies through regulation or import tariffs/controls), and even if you pay more and more in income tax (even if it was a flat tax, a high income generates more tax than a lower one), it can never be enough?

The third point should be the centre of fairness. Treasury estimates around half of all taxpayers are net receipients of taxpayer funds through the welfare and tax credit system.  Why is that fair?  Let's assume those taxpayers occasionally consume the health system, many have children that consume taxpayer funded education and some will have taxpayer subsidised housing. An argument can be made for public goods to be funded collectively, but there are precious few of these. Why should people who have generated considerable income and acquired assets legally be expected to pay for the costs of services other people consume, many many times over themselves?  What is the fairness in being forced to pay for someone else's private goods and services? If taxes are to exist at all, they should only exist to pay for public goods.

The fourth point is clearly nonsense, the state is not a more moral actor than you are, and on average it isn't either.  This is a philosophical point of difference. Statists and socialists think governments are better placed to spend money (because it can "help" people) than you are, whereas libertarians and free-market liberals are sceptical of this. After all, a government may raise salaries for teachers, but this typically rewards both the best and the worst ones, which is a distinction that a government supported by teachers' unions does not recognise.

The real truth about tax is that it is theft and it isn't "fair" at all, it is at best a necessary evil to fund a substantial state, and the amount people pay is based on no moral basis whatsoever. Unless you believe people who have a lot of money have got it through immoral ends or are beneficiaries of a large state (regardless of how this has little evidence), then tax is simply a means to an end - the end being politicians spending money on what gets them re-elected.  The only way to make tax fairer is to have it lower and flatter, and simpler, so people get to keep more of what is theirs, and those who want you to spend it on other things, have to persuade you to give them your money

Be wary of anyone wanting to make tax "fairer" because the bottom-line is that they just think that they (or people they support) are better placed to spend your money than you are.  Oh and the spin-merchants of so-called "wealthy" people who say they "want" to pay more tax (but wont actually do it unless others are forced to) are a bizarre breed who actually think politicians and bureaucrats can spend their money better than they can, for benevolent purposes.  

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?)

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.

Water - the last utility of the Soviet era

You could hardly not notice the growing list of scandals seen in local authority supplied water, sewer or stormwater services in recent times and wonder what has gone wrong.  From lead in water supplied by Dunedin City Council in a number of small towns, to the Havelock North water supply contamination and the breakdown of multiple parts of Wellington's water networks.  Imagine if a private water bottler had been caught with the contamination of supply seen by some local authority systems, the howls of outrage from politicians would be palpable, but it isn't quite that way - you see water in New Zealand is perhaps the last bastion of what socialists call the "democratic control of the means of production, distribution and exchange" of the key utility networks.

Unlike electricity, gas, telecommunications, ports, airports, railways and even roads, water (outside Auckland) in New Zealand was shielded from any serious economic reform during the 1980s and the 1990s. That was a time, which seems so long ago now, when there was widespread commercialisation and in some cases privatisation of utility networks, and either liberalisation of market entry or the application of independent oversight and regulation of the management and supply of the services concerned.

Before then, local electricity distribution was led by local authorities, which managed them much like water and the results were underinvestment in power line networks in some places, gold plating in others, and frequent power cuts as parts of the networks failed.  Now these networks are either privatised or run by local trusts, but all subject to regulatory oversight around capital spending and how much they can charge consumers for maintenance and renewal of their assets. 

You see local authority issues with infrastructure don't mean all infrastructure, because they actually have little struggle at all with the infrastructure they are not responsible for owning, managing or funding.  Electricity, gas and telecommunications networks all grow, expand and get maintained with little recourse to ratepayers or indeed the "democratic control" that the left is so keen on.  Now that isn't to mean that there isn't some government intervention, such as the vast spending on fibre optic networks funded by central government but undertaken by private enterprise, but this is not the model by which water networks are funded or managed in New Zealand - you see water remains the last bastion of the Soviet style era of socialist management of a utility.

If you want to take a nostalgic trip back to the era of Rob Muldoon, the era that the late Jim Anderton and his Alliance Party, and indeed at one point Winston Peters, pined for, you need only look at how the "three waters" (supply, waste and stormwater) are supplied and managed in New Zealand today.  Indeed, it is a case study in exactly how the principles of democratic socialist economics work in practice.  You can see the vestiges of this thinking in Green Party policy today, which says "Ensure Council Controlled Organisations are only used where this has benefits over direct service provision by local authorities".  

Leftwing opposition to reform of water is long standing.  It is almost laughable today to recall when former Green MP (and still Wellington Regional Councillor) Sue Kedgley regarded reforms to the Local Government Act allowing local authorities to choose to contract private companies to provide water infrastructure for contract periods of longer than 15 years as  "the potential to be hugely harmful to the public".   She much prefers a democratically controlled water supply that sees lead enter it, with the ultimate penalty being... you might not get re-elected as a city councillor.

However, it is the late (conspiratorially minded) Penny Bright, who founded the wittily named "Water Pressure Group" in Auckland that for many many years was the squealer that regarded any private sector involvement in the water sector as beyond the pale.  She regarded water as "a basic human right", albeit one that she thought was best delivered by a bunch of politicians re-elected every three years directing a bureaucracy.  She was passionate about her beliefs, but wrong.

The problem with water is the problem that was seen with telecommunications when it was run by the Post Office, or electricity when it was run by the Municipal Electricity Department of Wellington City Council (or whatever council) et al, which is that political control of the funding and of the taxation needed to maintain and renew a complex utility was extremely poor at being accountable to those who "own" the infrastructure and consume its services, because there is little link between what you pay, where that money is spent and how much is spent on the water networks.  The NZ Post Office once thought it was a great idea to install "triple twisted copper cable" for telephone lines in the Wellington suburb of Khandallah, despite it not being the international standard for phone lines, because some engineers thought it would improve its robustness - at the same time upwards of 50% of coin operated public phone boxes did not work (there were no mobile phones then).  Bureaucratic service delivery agencies don't get driven by customer needs, but their own internal imperatives and those of their political masters, which understandably are pulled in many different directions - but customer service (being a monopoly, funded from taxes) isn't upper most (unless of course, in a few cases, it is to help a Councillor or his mates out).

Local politicians almost never campaign for election on issues like renewing water infrastructure, but they sure like big shiny showoff things like convention centres, sports stadiums and "visions".  After all, why campaign on something that involves digging streets up and nobody really notices, when you can get your name put on a park or a building instead?  Imagine if the issue of installing more mobile phone capacity were up to local government and it were paid for by rates, would it ever get done?  Water supply pipes, wastewater pipes, stormwater pipes, none of them matter much to most people most of the time, until their service stops or their property is flooded - so they are easy for politicians to defer spending on. 

There is one exception in New Zealand, which is Auckland.  Watercare Services was set up in 1991 as an example of how to commercialise water delivery (albeit not stormwater), and it is from this that the leftwing backlash against water reform arose.  Opposition to commercialisation, opposition to people paying for the water they use was central to this.  The idea that it is somehow fairer for the single pensioner who uses barely enough water for a few cups of tea and a shower a day to cross subsidise the water used by a family of four was not an argument worth having with the organised, almost hysterical, opposition to reform.  So Watercare Services was not replicated elsewhere, albeit that local government reforms did allow local authorities to do so if they wished - but rare is the local politician willing to relinquish control.  It's notable that Auckland doesn't seem to have the issues with supply or wastewater of other cities, although stormwater remains a major issue (and is outside Watercare's remit).

So water, as it remains, has all of the symptoms of a centrally planned, "democratically accountable", bureaucratically delivered service.  It's funding for capital is entirely dependent on local politicians choosing to allocate rates money to it or to borrow to pay for large investment, and so it has to plan from year to year based on how councillors manage their priorities - whether it be convention centres, minimising rates increases or getting elected.  It is only when water infrastructure gets critical (i.e. pipes bursting, supply running out or being poisoned) that political attention is given, and that is frankly too late. Water in New Zealand is socialism in action, and it demonstrates that it is profoundly difficult to get politicians to focus on long-term priorities that are not seen as trendy (note that some are extremely eager to make interventions under the auspices of trying to stop climate change, even though the impact of those interventions is infinitesimal, it's much more about being seen to do the right thing).

Ironically, the recently elected Labour Government has decided to reform water in a way that a previous Labour Government refused to do so for roads - by encouraging local government to take water out of its control altogether and putting it into a handful of centrally government controlled organisations.  Yes it is arguably nationalisation, but it is a transfer from barely capable local control to something else.   It is almost admitting that local democratic control of a critical utility has failed as a delivery model, and that having arms-length professional organisations (let's call them State Owned Enterprises maybe?) that charge consumers for the services they provide, recover capital costs from consumers over the lifetime of those assets and seek to optimise costs and service delivery (with regulatory oversight) is a much better model - i.e. the model that many politicians on the left would have called "neo-liberal" and a precursor to that nastiest of words "privatisation".

However, NZ has had decades of water being supplied "not for profit" and with "democratic control", maybe it's about time it was left to professionals, with the political role being to set up the legal framework to ensure that water is run as a business like other utilities.  The Government's proposals are encouraging, although I would be much more draconian and just take it off of councils and legally require them to cease charging water rates or cut general rates that fund water, and then establish a mix of metered or uniform charges for water consumers.

Of course the UK privatised water many years ago, and hasn't looked back. Some stats on that experience (source: Statement of Professor Chris Binnie, former President of the Chartered Institution of Water and Environmental Management (not uncritical of the water privatisation process):

• Drinking water quality measured at tap increased from a 99% pass rate to 99.96%
• Properties at risk of low water pressure reduced from 2% to 0.001%
• Properties subject to unplanned water supply interruptions of 12 or more hours reduced from 0.4% to 0.003%
• Leakage dropped from 4,980ml/d to 3,306ml/d by 2000, but is still too high (3,183ml/d) in 2018
• Residential water meter use raised from zero to 55%, with a target of 80% by 2040.
• Per capita water consumption dropped from 155 l/h/d to 141 l/h/d (with more households, each household using less water)
• Household properties at risk of internal sewer flooding reduced from 32,000 to 3,000.
• Non-compliance with the EU Bathing Water Directive (regarding dumping of wastewater at sea) reduced from 16% to 1%
• Failures to respond within 10 working days to complaints dropped from nearly one third to 0.4% failure within five working days.
  

Sure there is plenty to criticise (e.g. Thames Water remains slow in addressing leaks, but it has reasonable incentives to address it, because it can't charge consumers for water leaking from its system and it is generally more costly to provide more capacity for storage than to fix leaks), but it is notable that the water problems are as much about an ideological resistance to reform as they are due to the failings of a system that is not well set up to incentivise investment, supply of services to consumers and deliver long term outcomes.

It looks like New Zealand (except Auckland) is coming to an end of its Soviet-style/Muldoonist era in water management, thanks to a left-wing Labour Government acting to implement reforms that are not far removed from what the Lange/Palmer/Moore Labour Government or the Bolger/Shipley National Governments might have done. It's also telling that the much vaunted "power of general competence" that the first term of the Clark Government granted local government has proven to not be competent in managing the three waters in so many cases.  

Perhaps there are other compentences that local government should be freed from as well?

Greece votes for a dream, and it is only that

The news that Greece looks like getting a far-left government let by the soft communist Syriza Party has excited some commentators, but what is perhaps most deceptive is the claim that it is a "rejection of austerity", as if the choices to Greek people were like a menu.

In fact, the choices are far more stark, because what Greek politics is and has been ever since it joined the Euro (indeed one could say ever since it joined the European Economic Community), is an exercise is mass deception and reality evasion.

The troubles of the Greek economy are not due to "the Germans", nor are they due to "the bankers", they are due to the peculiar, though not unique, mismatch between the part of Greek society that wants money from the state (and protection for their businesses or jobs), and the part that doesn't trust the state at all, to the point that it egregiously evades taxation on a grand scale.

This mismatch used to be managed by stealthily stealing from most ordinary Greek people through continual devaluation of the drachma. 

Then it was covered by structural adjustment transfers from the EEC/EU, as Greece gained money to build transport, energy and civic infrastructure, and of course the ongoing subsidies for its agricultural sector.   When it joined the Euro, the Greek government gained access to easy borrowing in a hard currency at low interest rates, so it ran further deficits.  The OECD describes Greece's economy as thus:

In Greece, economic difficulties go deeper than the direct effects of the recent crisis and fiscal consolidation is urgent. Difficulties have been brewing for years, so when the crisis came, Greece was significantly more exposed than others. Besides the severity of its fiscal problems, Greece has, over the past several years, gradually but persistently lost international cost competitiveness, resulting in widening current account deficits, a deteriorating international investment position, and a poor record of inward foreign direct investment. 

Greece has a highly regulated protected economy, with a bloated state sector. 

Syriza wants to protect the economy even further, increase the state sector even further, cut taxes and thinks that banks in other countries, supported by taxpayers in northern European Eurozone states, will help Greece out.

There are, in effect, two paths.

Either a renegotiation of existing loans to be written off or extended is achieved, and Syriza quietly folds its promises on state sector pay, free electricity (indeed any further giveaways), and Greece remains in stasis.  or

Greece defaults on debts and leaves the Euro.

In the former scenario, it looks like at best Greece might get some easing of terms of debt repayment, but the idea that it will get half of its debt written off again, is unlikely, given the previous deal saw private Greek government bondholders accept a 50% write down of debt.  There is little real chance the Greek government could get anything from the private sector, so any further loans will be government to government.  

If Greece gets the sort of deal Syriza hopes for, it will set a precedent that Spanish, Italian, Portuguese and even French and Belgian governments will want to replicate.  At that point, you would have to wonder how much tolerance voters in Germany, the Netherlands, Finland would have for propping up their profligate southern neighbours (let alone the former communist bloc countries that went through much more radical and painful structural reforms than Greece should be facing). 

The real risk is that voters in those countries eject governments that agree to bail out other governments with their money.  After all, who wants to be seen to be bailing out Italy?  German guilt over the war can't be stretched that far.   It threatens unravelling the Euro and even the entire EU project, as parties like Syriza effectively want a fortress Europe that looks closer to the former COMECON than a customs union.

The latter scenario has seemed less likely, but I'm not so sure.  A deal gets offered to Greece that extends the terms for existing loans, in the hope that Greece engages in reforms, but ultimately Greece will run out of money.  At that point, it faces either not paying its pensions or public sector workers, or issuing a new currency, and then the Greek economy finally collapses under the weight of its fundamental contradiction.  A western European standard of living cannot be sustained with an economy that is akin to a wealthy developing country, 

The only solution to this is to reduce the costs of doing business, address the corruption within the regulatory/subsidy/state contract/tax system, remove protection for existing businesses (and jobs) and to cut the role of the state, while enabling the state to be more effective in carrying out its core responsibilities.

However, the outgoing Greek government only made modest progress on this, and Syriza is philosophically opposed to making life easier for the private sector.  Syriza believes in the state owning larger businesses and licensing/protecting smaller businesses.  It believes in a generous welfare state and public sector, and wants lower taxes on everyone except the "rich", who of course have either already left or have at least set up their accounts in a way that they are away from the hands of the taxman.

Even if Syriza does get a deal that avoids a default, it will only delay the next crisis.  An anti-business, anti-free enterprise party will continue to strangle Greece just like similar policies have done for many years.  

What's bizarre is that Greece's northern neighbours have faced much more serious levels of reform and restructuring in the past twenty years than it needs to, but they did it.  Bulgaria and Albania are both much poorer than Greece on a per capita GDP basis, but have economies in much better shape. 

The tragedy is that too many Greeks have voted for a dream that they too can convince taxpayers in other countries to buy them a standard of living they don't earn themselves, and that they can convince banks and other private investors to risk their money with a government that is unwilling to pay them back.  It is a dream, and it is about to become a nightmare. 

What I wrote before about Greece, two years ago, remains true.  

What went wrong with Greece

Greek voters have rational choices, but they reject them

Greece's tragedy should be a lesson to all

Greece for dummies. Austerity = living within your means

Greek crisis is a taste of things to come

Greece is collapse under the weight of its own contradictions

Greece's socialism catching up