Appropriation (2026/27 Estimates) Bill

Thank you, Madam Chair. The Governance and Administration Committee met on 17 June to hear evidence on the appropriations within Vote Cities, Environment, Regions and Transport, which are the responsibility of the Minister of Local Government. The Minister of Local Government, as I said there, is responsible for six appropriations totalling about $126.1 million in 2026-27. This is roughly a quarter of Vote Cities, Environment, Regions, and Transport: $523.1 million. At the hearing on 17 June, we heard a lot about simplifying local government—the Government’s Head Start pathway—and the backstop process. We heard also a lot about city and regional deals around water services and the Government’s plans around what is happening in that space, but we also covered off some other areas as well, including cost to councils to simplify local government, transition of local government functions to the Ministry of Cities, Environment, Regions and Transport and strengthening environmental resilience.

We welcome the Minister here now, and I know that there are lots of questions that people want, so I’m keeping my part very short because we only have a short time. So I’ll leave the introduction at that.

Thank you, Madam Chair. I have a question around Taumata Arowai, obviously a Crown entity and our country’s national water regulator. The Government has budgeted $4.642 million for this financial year, yet the councils are contributing in levies, $20.658 million, this financial year but it’s actually for three financial years in a row, and we’re not too sure what it will be after that. That represents 80 percent of the total levies to run this organisation. If I look at, for example, Christchurch City Council, their contribution is $1.6 million, which obviously represents a significant increase in rates. I’m sure the Minister is aware of the impact on rates when it involves operational spending. So my question to the Minister is: why have councils been forced to be the primary funder of the operations of a national regulator that the Government has created?

Thanks, Madam Chair. I appreciate the opportunity. I’d like to ask Minister Watts, in terms of local government: elected local government is being abolished and without telling anyone what replaces it in terms of what was given to the committee. Regional councillors will not be elected in 2028. What sits in their place? We have been advised as a committee that there will be a board of mayors, Crown commissioners, or some hybrid system that has not yet been decided by Cabinet.

So my question is: in terms of the central democratic question, what has been planned? How will the public know, in terms of the system, if one system is being abolished and we are used to nationwide local government elections—I want to understand what type of system, what will be the public consultation in a very short time, what will be the envelope, and who will make those decisions in terms of that new system?

Well, thank you very much, Madam Chair. Good afternoon, fellow members. It’s an honour to be the member, and also the Minister of Local Government, and to be entrusted with this portfolio that is delivering for New Zealanders. We’ve had a number of questions there, one in regard to the water regulator and the levy model, and also another question in regard to regional councils. In order to set the context before I come to those two points, I think it’s important to acknowledge that there has been significant reform in the area of water services. The reform is focused on more flexible, cost-effective, and financially sustainable water services, and that is a priority of this Government.

The Local Water Done Well programme has seen all councils prepare water services plans, which provides them with a clear pathway to put in place the infrastructure required and the investment needed. The overseeing and the implementation of these plans is a significant task for the Ministry of Cities, Environment, Regions and Transport (MCERT), and I acknowledge my MCERT officials here with me.

In regard to the question around the levy for the water regulator, it is common practice across other sectors within our economy that the funding of those regulated entities is provided by those entities that, in effect, are the users of that. In this case, they are the local government mechanism. The regulation applies to water quality standards and, more broadly, around the efficiency in the context of water as well. So that is how it is.

In regards to the regional council model, the member is right to acknowledge that the Government has a wide-ranging reform programme in regard to the reform and simplification of local government. We’re working our way through that at the moment, and it’s pleasing to see that a number of councils have made voluntary submissions in regard to their plans to amalgamate. We’ll have more to say on that in the coming weeks to months, but in regard to regional council specifically, it is correct that these regional council elections will not occur again, and will not occur in the 2028 year, which is when they were planned to occur again. In effect, the functions of regional council will form part of new amalgamated unitary councils across the country, and that process of transition will be happening over the period from now to 2028.

The destination is not 2028; it is a milestone on that journey and then the further bedding in of that reform will occur post 2028. Those councils that have selected into the Head Start process can expect that they will have their, in effect, amalgamated entities in law by midway through of next year. That will then give them a certain clarity to start that reform programme faster, which was the feedback that they gave to us through the consultation process.

Thank you, Madam Chair, and I’d like to thank you, Minister, for that. I would like to ask a follow-up on the question from my colleague from the Greens around Watercare and what is happening in the Local Water Done Well area. Now, we noted that the Department of Internal Affairs reported that councils’ water services delivery plans under Local Water Done Well predict that nearly $9 billion more investment is needed over the next 10 years. That was over and above what councils’ long-term plans forecast. Now someone has to pay for that, and I’m presuming that there has been household modelling and the impact on household modelling, and I’m very keen to know which and what the modelled household impact is. So, who really pays for that $9 billion and what is the forecast impact on the average household bill?

I just wanted to follow up on my questions around Taumata Arowai, and I appreciate the comments from the Minister. I guess I want to get some insurance that there’ll be no other Crown entities, departments, or agencies that council may end up having to fund some of the administration. I look at something like Waka Kotahi NZ Transport Authority, which obviously works within the local government space. I’d just be good to get some insurance that that won’t happen.

One of the things I also want to look at is we know that the Minister’s proposing to introduce a rates cap, and whether he would look to exclude these levy costs from councils from that rate caps proposal, and whether he’s willing to work across parties to actually look at some of the reforms that are currently happening that are posing significant costs on councils from the administration of them, and develop them. They could be looked from being excluded from the rates cap because we see, across the board, councils struggling to actually keep up with the pace of the reforms—but the cost to council is significant.

I thank the members for the questions. I’ll cover Watercare first and then come on to the broader reform in regards to rates caps. In regards to Watercare specifically—so this is the entity responsible for the delivery of water services in the Auckland region—it is probably one of the most significant and substantive examples of the success of the Local Water Done Well reform.

The mechanism changes in the Local Water Done Well reform is, basically, enabling the funding and financing to flow to the Watercare entity in order to undertake and embark on a significant capital programme and investment programme. That capital programme is in the region of $15 billion over the next decade. We all acknowledge that there is a deficit of infrastructure required and the investment required to do so, but the ability to decouple Watercare from the Auckland Council balance sheet allows it to have the flexibility to be able to borrow that, and, of course, it is offset with the ability to collect revenue from water connection charges to offset that borrowing. So that has really unlocked probably what is one of the most fundamental significant reforms of the ability to invest in water infrastructure in New Zealand in the past generation, I would go as far as. The savings, particularly in Auckland’s case, are $900 million as a result of the Local Water Done Well reforms, and that is answering the member’s question.

In regards to the rates cap point, the member is asking around the interest around bipartisanship. I can give the member certainty in the context that it remains the Government’s intent to introduce legislation in regards to a rates cap model. We have spent an extensive amount of time consulting and working with the broader industry around policy design considerations for that model to work in practice, taking into account learnings such as Australia and where they have learnt from that. As and when it is introduced, it will go through a select committee process, and I would welcome interactions, support, and thought around that across the House. It is my view as Minister of Local Government that any legislation that we look to introduce, particularly new legislation such as a rates cap, is enduring. Therefore, it would be appropriate for us to ensure that that legislation is well considered and deals with the underlying issues but also provides the mechanisms and the safeguards to deal with, say, natural events and disasters where there are exceptional circumstances and we need a mechanism to deal with that that is built into the design of that legislation. We’ll embark on that process in the future.

Thank you, Madam Chair. I want to thank the Minister of Local Government for his earlier replies. Minister, I want to understand, in terms of the interim body, if the elected regional government is abolished, there’s not much time, and you’ve kindly explained that in probably about mid-2027 there will be the appointment of that interim body. Minister, can you please explain, in terms of the final design of the new set-up, with what the public understand, what will the education package to the public be in terms of consulting the public up and down Aotearoa that there is going to be a new body in the interim, there will be an appropriation for Parliament, and there will also be a completely new system—what consultation will there be done?

I have a number of questions in terms of the consultation, because it is important that when there is such a fundamental change in the new system, there is a serious component in terms of the planning of the design of the new system. It needs to be asked how public consultation will be done for voters of Aotearoa so that they can understand the reform programme.

But I also wanted to ask, Minister, if you could explain: has any assessment been made to the risk of regional planning capability in the abolishment of this current system to the new system because of the cost of living increases? What will worry people in their local communities is the cost of a new system. There will be the processes through Parliament in terms of legislation directed and designed by the Minister and officials and the impact of that new system being understood clearly by communities across Aotearoa.

Thank you, Madam Chair. Madam Chair, just because we’ve got a short time and it is jumping around a bit, but I do want to move to the city and regional deals from my questions, if that’s OK. This is something that’s been a particular interest for me, of course, coming from the Western Bay of Plenty, and that is one of the first areas where one of the city and regional deals were signed.

Minister Watts, you told the select committee at our hearing that pursuing Head Start does not affect a council’s eligibility for a city and regional deal, but that a region that has been through Head Start is likely to meet some of the prerequisites, such as the ability to coordinate as a region and produce a clear growth plan. Now, to me that seems a little bit of a contradiction. It seems like amalgamation is formally irrelevant to eligibility, but it’s also practically advantageous, from that quote. Councils have understood the message. It seems like it converts a voluntary pathway into a condition of access to funding. So I would like some comment, if the Minister thinks and believes that that’s true. Just to clarify that, because it did seem very contradictory during the committee hearing.

Yeah, I’ll come to the member’s question in regards to the broader city regional deal and the relationship in that context, just to clarify. I just want to acknowledge the member’s contribution and support. These regional deals are 10-year deals. They will span the political spectrum, and you’ve seen that in the UK, where they’re now 20 years ongoing. The importance of having alignment around the key aspects that are going to benefit our cities and regions are important, so I do acknowledge that across the House.

The assessment that the member is stating is not my view. It is not a prerequisite that the amalgamation of the councils is a prerequisite or a requirement of a city regional deal. It is, obviously, in terms of the criteria for a city regional deal being considered, a helpful example of how well in practise a region is able to work together. I think that is the point that is noted for those regions that have not yet negotiated or are negotiating a city or regional deal with the Crown, it obviously is advantageous to be able to signal their ability to work together, and that is important.

In the case of the Bay of Plenty and those aspects, the groupings of councils which were party to that agreement met the criteria in regards to that, and as a result the deal has been signed. So what they choose to do in regards to the amalgamation of their council positions or not is subject to their choice at this point. Western Bay and Tauranga did not participate in the Head Start proposal programme, and therefore, by virtue of that, they will be subject to a backstop process.

In regards to the questions around timing around that, because I think this is very important, Head Start proposals were due on 9 August. Government decisions around proceeding with any detailed design of those will be made in September, with final decisions in regards to that in 2027. It is the expectation that the detailed design of any backstop process will not be made or determined until 2027. And following decisions, legislation, and implementation of the successful Head Start proposals, then we will look to instigate the backstop process that will be developed and enacted in early 2028 and in place for the 2028 local body elections.

There was a question before around the entity body and when is it going to be in place. The entity body that’s been referred to will not be in place until 2028. What that acknowledges is that the backstop process will not apply until following the 2028 elections. Together with Head Start and the backstop, this will provide a clear pathway for reform for councils to move from where they are. Again, the Head Start proposal and pathway was put in place because we had feedback when we consulted with councils that a number of groupings wanted to move faster than the 2028 deadline. As a result, we created a voluntary mechanism to do that. Again, while I can’t be specific around the decisions off the back of that, we have been pleasantly surprised with the large number of 18 or so proposals that we received from councils across the country with an interest in looking to amalgamate into unitary groupings. That is important with a backdrop that we’ve only ever had one amalgamation in this country’s history in the last 35 years, which is one. To have 18 proposals in a voluntary process is not to be underestimated in terms of significance.

Tēnā koe, e mihi ana ki te Minita—thank you. I want to stay on the topic of local government reform. I have three questions themed around accountability to hapū and iwi Māori. Given that some councils are struggling to collaborate on local government reform, how will Vote Cities, Environment, Regions, and Transport and local government 2026-2027 ensure that councils are adequately engaged with and supported by local hapū, iwi Māori to collaborate and meet reform deadlines? Following that, given that councils aren’t able to successfully collaborate unlike their iwi Māori counterparts on critical reform, how does the Vote Cities, Environment, Regions, and Transport and local government 2026-2027 support partnership between councils who fail to collaborate across regional interests, opting to patch protect their own local interests and reform? The third and final question on this topic is regarding ministerial backstop powers. How much money has been allocated under Vote cities—under this Estimate—to engage with iwi Māori on the use of such powers to prevent reform failure?

So working backwards on those, the allocation of funding specifically to iwi Māori in regards to the Head Start proposal has been through baselines. There hasn’t been any significant allocation of funding actually to any groups or any entities as a result of this. What has been the case from the outset is that this has been undertaken first and foremost from the local communities and local groupings.

I just want to acknowledge the role of iwi Māori and broader hapū in the Head Start proposals. In many instances actually iwi Māori in particular have been more pro-reform in this area than potentially what some councils have been able to agree to. I guess that acknowledges that there is a clear understanding of the importance of getting to a point which is different to the status quo, and actually working more together as a region does have advantages which in many parts of the country iwi Māori have recognised in some cases before councils have got to that point of understanding. So that will continue.

There are other examples across the board where iwi Māori are very much aligned with the Head Start proposals that have been put in place. Seldom are there examples where there is large conflicting view in regards to that, which is positive. The view has always been that local councils have the best relationship with iwi Māori and their communities than central government, and they are best placed to do that. I’ve been very clear with my expectations to councils that they must engage in so in good faith and ensure that all people within the community including iwi Māori are at the table at a very early stage to ensure that anything designed is considered with all of the perspectives around that table from the outset.

Thank you, Madam Chair. I guess part of the reason why so many councils have entered the Head Start programme is because they’ve got one hand pushed up behind their back. I think this quote from the Hon Chris Bishop explains it quite well: “Lead your own reform or we will do it for you. Either way, change is coming.” So it was very clear that these councils were forced to do this Head Start programme, and to be fair, there are some councils that are in a good space to do it. But from a lot of the elected members that I’ve spoken to across the motu, they are being forced to do this and it’s been rushed too quickly and the community is not having their say.

What we’ve also seen from a recent report commissioned by Wellington was actually the cost to do this is extreme, and the cost for them over just a couple of years was $269 million. And my question to the Minister is: will these costs be excluded from those rates capping proposal? And will there be a mechanism for councils to seek reimbursements for this cost for because of a reform that this Government has forced upon them?

Thank you, Madam Chair. I’m sorry; I’m going to go back to the city and regional deals just to ask two follow up questions that I think I just want some clarification around. It seems that when I look at the appropriations of this portfolio, the total is $126.1 million, but the city and regional deals is described as unlocking funding for roads, infrastructure, and housing supply. So my question on this is what is the total funding committed under the Auckland and Western Bay of Plenty deals, and over what period, and in which appropriations do they sit for those deals? The other question I have, and I’ll just ask it now so that the Minister has it, is there seems to be a number of councils who are waiting with no decision that they have received. So I’d like to know how many regional deal proposals are awaiting a Cabinet decision, and does the Minister have an idea around when those councils will receive an answer?

Thank you, Madam Chair. I do want to go back just with a couple of follow-up questions for the Minister with regards to abolishing elected regional government. But one of the things, and the Minister has mentioned that there has been one amalgamation which is Auckland Council, and whilst there was a number of—there was a legislation and there were policies that came out under that amalgamation, it actually turned very messy because communities were not clearly informed as well as the elected members moving over to the new system.

My question to the Minister is: it has been signalled that there will be an interim period, and the Minister has explained that 2027, which then leads on to a 2028 time line—which will then be in line with the local government elections. Whilst it sounds good, can the Minister give assurance that that will happen accordingly, with respect to the new legislation? But also the Vote appropriation, can the Minister explain, in terms of the final design of the legislation, what exactly will Parliament be appropriating the money for?

In response to the questions first and foremost around the transition costs for all proposals, but in this instance it was referred to as Wellington, is that each of the Head Start proposals which are currently being assessed by officials, a number of them did include assumptions and indications around transition costs that may be considered or necessary by the groupings of councils in order to facilitate the transition. Officials are currently working in their way through that information. No decisions have been made by Cabinet in regards to what proposals will progress, nor whether any support will be provided for those transition costs. But it is currently under active consideration and we will release that decision as part of the information we do as noted in September.

The question in regards to the city regional deal proposals and how many more and are councils waiting; we did a first wave of that where we sought proposals and we made the decision to progress negotiations with three groupings, of which we have signed two deals, and we are imminent to sign the third deal in regards to that. We have no other negotiations currently under way. However, we have signalled to councils that post the Head Start process being reviewed and assessed by Cabinet, we may take a decision to open up a phase two around the city regional deals. We have not made that decision at this point. It’s still under active consideration.

Lastly, the question around the allocation of funding and around city regional deals and how much is allocated to both Auckland and the Bay of Plenty deal: as the member highlighted, the city regional deals include a wide range of portfolio implications, from health to education to roading and other aspects, and a number of projects and appropriations within that are either appropriations or they are intents to do something in the future, some of which are in the later period, so years seven to 10. It is not the case that there is a single number definitively that can be placed upon the totality of appropriation for a city regional deal because of the fact that some aspects of that appropriation and decision making is at different stages of design. So they also sit across multiple portfolios. So there isn’t a single allocation within the portfolio of city regional deals to fund that. It comes from respective Ministers, such as transport or health.

Thank you, Madam Chair. I appreciate the comments from the Minister. I just want to check if the Minister agrees, because we’ve had a lot of commentary about the level of rates increases from councils over a number of years and whether he agrees that the driver of increased rates over say the last five years has been insurance, interest rates, and inflation. And one of those drivers actually the council can control—it’d be great to get his opinion on that.

The other question I have is around this. As we know, councils are going through the Head Start process, which will see a number of councils merge. But also, at the same time, we have, I believe, 44 councils undergoing representation reviews due to legislation, and there’s the potential that there’s going to be a lot of money spent in that space, which obviously will be passed on to ratepayers. That may be redundant if they have to merge into another council. My question to the Minister is: what is the Minister doing in this space? Are there going to be some changes to actually allow councils not to do those representation reviews, or if they do them and they become redundant because they merge, will they be reimbursed those costs?

Just in regards to the question, in terms of the key drivers of rates increases in the country, the member is correct to note that we have seen significant increases in year on year rate increases; some jurisdictions up to 20 percent. Obviously, in your home region, double-digit rate increases, as well. The drivers of those are varied across the country. Obviously, high inflation historically has been a contributing factor, but one of the aspects is also the scope of what local government undertakes as a service delivery model. Currently, within the Act, it’s defined as “wellbeing”. It’s very difficult to define what is “wellbeing”—it pretty much could include everything. Legislative change that we will be putting through before the 24 September will define the core activities of local government across the key areas of rubbish, water, roading, civil defence, and parks and recreation, and there is a financial requirement, also, to spend money on those things first and foremost, before anything else.

As a result of that, and aligned with the implementation of a rates-capping model, we’re trying to, in effect, regulate those monopolies that will ensure that the increases in rates are at a level which is affordable for New Zealanders. In regards to the systems improvement bill, that is where that legislation will fall in regards to what are core services of local government. In regards to the questions around representation review, the member is correct that that is an area that has been highlighted from local government. It is something that I’m taking advice on, and I’m very open to thinking about how best to relieve that pressure on local government through, potentially, the Head Start legislation that we will put in place. I’ll have more to say on that soon.

My question is around the establishment of the Ministry for Cities, Environment, Regions and Transport, otherwise known as MCERT, and it’s to do with the funding for capacity and capability of the Crown to deliver on Treaty settlement commitments. One, how will this Estimate support MCERT to build any new capacity and capability to uphold Crown obligations to iwi and Māori, including Treaty settlement arrangements? What are the cost implications for Vote Cities, for this Estimate, to source new and to retain existing iwi Māori capacity and capability required to uphold obligations to iwi and Māori, including Treaty settlement arrangements? The third and final question on this topic is: what trade-offs will MCERT be required to make in its first year which may require weakening of Crown obligations to iwi Māori, including Treaty settlement arrangements.

Thank you. I do appreciate your comments. I’ve asked a lot of questions around the cost to local governments from these reforms being passed on to them by central government, which goes directly to ratepayers. There is the impact that’s going to happen with a rates cap, and, obviously, the fact that these reforms costs are going to have to sit underneath those things, underneath the rates cap. My question to the Minister is: will he commit to, where councils are spending money that is due to a central government reform—that that money will be excluded from the rates cap?

I do want to thank the Minister for his answers, but, Minister, I did ask an earlier question with regards to public consultation. Can you give an assurance that the changes—because these are drastic changes for the whole country, in terms of the reforms. Will the public consultation be done effectively in terms of the interim body and then the new system, and also how long will that interim period be?

In regards to the questions on public consultation in particular, it will always be the intent of the Head Start process—which is a voluntary process for councils to opt into—that it would be for those councils to undertake any engagement with their communities in regards to consultation and their proposals around what they’re looking to do as result of amalgamation. It’d be fair to say that there are a number of councils across the country that, for example, have undertaken and have held referenda on the decision of whether the communities want to proceed in that area or not, and it would be fair to say there is a range of views. But at this point, the Head Start is a voluntary process and we’ve left it for councils to undertake that conversation with their communities, and, again, of course, the councillors are democratically elected and therefore represent the views of their communities in that case.

The Head Start proposal, as I’ve said, will not conclude until 2028, and so there remains a significant amount of runway between now and then in order to continue discussions and to design and ensure that the model that is proposed and is implemented is fit for purpose for their communities. As I’ve highlighted before, I do have the expectation that there is active engagement with all stakeholders within the community to ensure that that reform is placed. We have only had one amalgamation of local government in the last 35 years, with the exception of Auckland. We are embarking, potentially, on a large number of amalgamations, and so I do not take that process lightly.

We do need to ensure that any reform that we undertake is enduring, is well-thought-out and well considered and that it does take into account the needs and requirements of the community. So the principles that apply to Head Start include things like protecting local voice, whether it is practical, and whether the efficiency is going to deliver value for ratepayers. In that context, that will remain the focus.

In terms of the Better Off support package, Minister, and the questions surrounding the role of iwi and Māori with these support packages, what input, if any, have iwi or Māori had in delivering the Better Off support package money for water infrastructure services? After receiving Better off support packages, how does this Estimate support local councils to deliver a new water services regime alongside iwi Māori as Te Tiriti partners?

A further question for the Minister is around improving departmental performance reporting now around the reporting aspects of the water programmes. The question is around the role of iwi Māori: if no allocation for involvement by Māori has been made under this Estimate, then what opportunities are there for iwi and Māori participation? What has been identified by the Department of Internal Affairs and/or Ministry for Cities, Environment, Regions and Transport that is non-financial? Further to that, one more: how does this Estimate ensure evidence of public value and departmental performance can be measured and demonstrated without hapū and iwi Māori at place?

I thank the member for the question. In the two minutes and 10 seconds remaining before the main event, I’ll keep this to within two minutes. The key element, I think, raised by the member is that the new Ministry for Cities, Environment, Regions and Transport, or MCERT, is that it brings together multiple agencies and multiple capability of expertise, particularly in regards to Māori advisory capability and teams within all of those respective agencies. We now have a singular agency where all of that capability is able to work together, and there are, obviously, opportunities and synergies to amplify that capability across all those agencies to derive better outcomes. That has been the intent of the formation of MCERT, and, to the member’s question around ensuring that there is appropriate investment capability and delivery in regards to outcomes for Māori, I’m confident that the MCERT model is going to amplify and ensure that that provision of information continues appropriately.

As I’ve noted to the member before, the design of Head Start has always been ensuring that those within the community that have a perspective and an interest in making sure that this works in practice are at the table from the outset to design the model that will work, and I acknowledge iwi Māori’s perspective across the country, where that has been very vocal and very positive and very constructive, and sometimes more advanced than, particularly, what other councils have been themselves. That is just the reality of where different groups are across the broader country.

But, overall, I’m very proud of the work that I’ve undertaken as the Minister of Local Government. We have embarked on the most significant local government reform that we have seen in this country in generations, and as a result of the reform which we’ve undertaken, that sets ourselves up for success. There is obviously more work to be done, but from this point forward, I am looking forward to continuing to do that.

Lastly, I just want to recognise the Hon Dr Duncan Webb for your valedictory, which is about to occur. Thank you.

CHAIRPERSON (Maureen Pugh): Members, in accordance with a determination of the Business Committee, the committee is suspended for the Hon Dr Duncan Webb’s valedictory statement. We will resume this debate at 7.30.

Debate interrupted.

House resumed.