NZCPR SUBMISSION: Water Services Entities Bill

Please note: We would like to encourage as many New Zealanders as possible to send in a submission opposing Three Waters. Short submissions are acceptable. You are more than welcome to consider the following submission as a template. Please use your own words if possible so it is counted as a separate submission - and not lumped in with this one! 

Our NZCPR analysis of the Bill can be found HERE, Frank Newman's excellent evaluation is HERE, and the link to read the Bill and send in your submission is  HERE. Hard copy submissions can be mailed (freepost) and if you have any difficulties making your submission, the Committee Secretariat can help - phone 04-817-9520.

17 June 2021

Committee Secretariat
Finance and Expenditure Committee
Parliament Buildings
Wellington

Dear Sir,

Thank you for providing the opportunity to make a submission on the Water Services Entities Bill.

This submission is on behalf of the public policy think tank, the New Zealand Centre for Political Research.

The NZCPR opposes the Bill and asks the Select Committee to recommend that the Bill be withdrawn on the basis that it is contrary to the public interest and harmful to democracy.

Our concerns are as follows.

1. The case for change has not been made

The need for changing our 100-year-old system of water service provision and delivery has not been made.

According to the Ministry of Health water quality audits, and surveillance reports from the ESR, the overall quality of New Zealand’s water supplies is excellent.

There is no catastrophic health risk from water in New Zealand that justifies the scale of disruption that would result from the Bill.

While problems do occur from time to time, they are localised and are usually addressed with urgency by the councils involved.

Contrary to the scaremongering claims made by the Government’s grossly misleading advertising campaign the system is working extremely well in most parts of the country.

That’s not to say that improvements can’t be made, especially by smaller councils with limited financial resources, but if the Government had genuinely wanted to improve water services in New Zealand, they would have considered more targeted solutions.

The fact that no such options were considered, indicates that the Government’s priorities with respect to Maori interests, may have been the primary consideration.

2. Flawed assumptions have been used to justify the reforms

Flawed financial modelling

The government has relied on modelling with flawed assumptions and has not adequately explained the financial risks inherent in the debt funding proposed for the Entities. The modelling fails to properly account for the $48 billion in additional debt accumulated over the 30-year projection period by assuming the debt does not need to be repaid.

It also fails to draw attention to the financing risks and the potential liability to water users should interest rates rise above the assumed 3.5 percent.

The effect of the erroneous assumptions is to understate the true likely cost to water users.

We would suggest the Select Committee undertake their own inquiry into the finances before agreeing to support the Bill.

Ownership and community engagement

The government claims local authorities will continue to own the water infrastructure and communities will continue to have a say in the management of the water. That is clearly not the case.

Clause 166 of the bill tells the true story. It says a “territorial authority… (a) has no right, title, or interest (legal or equitable) in the assets, security, debts, or liabilities of a water services entity (and the constitution cannot confer any such right, title, or interest…); and (b) must not receive any equity return, directly or indirectly, from a water services entity;…”

Councils will retain none of the benefits of ownership. It is ownership in name only, not in practice.

Furthermore, it is implausible to claim, as the government does, that a local authority will influence the management of the water assets when it’s role in the governance arrangements is diluted by 50 percent to Maori interests in the first instance, and that 50 percent interest is further diluted by the interests of the other local authorities within the Entity.

The end result is that local communities will in practice have negligible - if any - say in the management of local water services.

3. Much simpler alternatives are available for the Government to improve water infrastructure and services - if that was the real reason for the reforms

The obvious solutions lie in the fair funding of local authorities.

Firstly, central government should start paying for the benefit it receives from local authorities. Around thirty percent of New Zealand’s total land area is held by the Department of Conservation, which, like other government agencies, is exempted from rates. With stewardship land making up almost 90 percent of some council areas, if the Government fronted up and contributed its fair share to the cost of council services and community infrastructure, local authorities would be in a far better position to invest in upgrading their water assets.

Secondly, they could adopt a funding model that emulates the 50:50 shared funding arrangement used for roading projects, so water infrastructure could be directly co-funded in partnership with local government – or at least, they could make funds available on terms similar to that which central government itself enjoys.

In addition, many councils have themselves suggested innovative ways that they can work together to reduce costs.

The fact that this type of approach has not been taken suggests the underlying motivation for the reforms is not to improve water services, but to introduce co-governance and provide special benefits to Maori that other New Zealanders will not enjoy.

4. Co-governance is discriminatory and anti-democratic

Recently the Attorney General ruled that a Council Bill to create co-governance was discriminatory to non-Maori and in breach of the Bill of Rights. He urged the Council to withdraw the Bill, and they did so.

In his report he stated, “In a representative democracy, it is important to maintain approximately the same level of representation for everyone. The proposed arrangements in the Bill would make the number of council members for the Maori ward disproportionately higher than the number of council members for the general ward in comparison to their respective populations. As the disadvantaged group is those on the General roll, changing representation arrangements away from proportional representation therefore creates a disadvantage for non-Maori as they cannot in future elect to change rolls”.

Similar discrimination is being created by this Bill.

The proposed co-governance arrangements for the Regional Representative Groups and Regional Representation Panels establishes 50 percent iwi representation and 50 percent council representation. This arrangement, however, grossly discriminates against New Zealanders who are not able to register with an iwi, since the proposed number of Group or Panel representatives for iwi would be disproportionately higher than the number of Group or Panel representatives for non-iwi, in comparison to their respective populations.

Since this discriminates against non-iwi, the Bill is a breach of Section 19 of the Bill of Rights and should be withdrawn.

5. The Bill and the process that has been followed is completely undemocratic because communities have been excluded from the process

Councils were instructed not to consult with their communities over the reforms, and now clause 14 of Schedule 1 of the Bill specifically withdraws the consultation requirement of councils to engage over changes to the way water services will be provided. This is an effective ban on the ability of local residents and ratepayers to have any say about reforms, which effectively strip them of assets they and generations of their families have paid for -along with their rights of local control over water services through their elected councils.

Conclusion

This Bill is not in the best interests of New Zealand.

It is based on dubious modelling and assumptions, that cannot and should not be relied on.

The estimates of lower prices cannot be trusted and the debt that will be generated will create a huge debt burden for future generations.

In addition the co-governance arrangements are discriminatory and anti-democratic.

We ask the Select Committee to withdraw the Bill.

We further request the Select Committee to undertake its own inquiry into the finances since basing significant reforms on flawed modelling is a recipe for disaster.

Thank you for the opportunity to have a say on the Water Services Entities Bill.

Yours sincerely,
Dr Muriel Newman
New Zealand Centre for Political Research
www.nzcpr.com