Water Services Entities Bill

Members, we now come to Part 2. This is the debate on clauses 10 to 114 and Schedule 2, “Water services entities”. The question is that Part 2 stand part.

I welcome the debate on Part 2. It is a substantial part of the bill which seeks to establish the four water service entities; outline their role, their purpose, their functions, the ownership structure and allocation of shares, but also the Minister’s role; and the establishment of the regional representative group, the regional advisory panels. This is important because we want to ensure that local decision-making is reflected through this particular system.

It also includes clauses in relation to constitutions which will guide the way in which each entity will operate, and it provides sufficient flex in order for bespoke aspects of each entity region to reflect itself in its establishment. It also sets out matters in relation to the board that is consistent with the Crown Entities Act, and also relevant disclosure requirements therein.

I want to just turn briefly to some of the matters that have been raised, and use this also as an opportunity to clarify the nature of the ownership interest. Firstly, can I say that clauses 15 to 16 establish the council shareholding arrangement under the bill. There was a concern from councils that the term “share” was misleading, and I should say that’s because councils were concerned that the public would think that they had more influence over the entities than is provided in the bill.

Indeed, entities will own the assets. However, councils will own the entities—and through the governance role that we’ve provided, they will direct the entities to conduct their ability to operate water service delivery.

There was also a concern from smaller councils and those kinds of councils where their populations spill over holiday periods. I’m thinking of my own area of the Thames-Coromandel District Council. In terms of the shareholding population—and I would welcome the input of select committee members—in terms of these types of councils, they were concerned that a shareholding based on the usual resident population might have a perverse effect on the benefits that they may get. But can I say this: the whole point of scale and aggregation is to assure small communities—such as the Thames-Coromandel district—that they will reap the benefits of an aggregated approach to the way in which procured services to invest in infrastructure can take place.

The shareholding model—and I’d just like to make a point—was a matter that came out of the governance working group. They decided that because the shareholding was based on population—so 50,000 people and less—those council areas would receive at least one share. They would not be able to take a dividend that the benefits of this reform would continue to reinvest back into the service delivery infrastructure investment component. So there was quite a thorough consideration of these matters within that particular working group.

Let me come briefly to an issue which has occupied much of the time by members of that side of the House, and it is in relation to the regional representative group. Many of the councils in the early stages of problem identification—when we thought about what a solution could look like—made the point that they have existing relationships with iwi mana whenua as a result of Treaty settlement arrangements, that any reform going forward shouldn’t lose sight of the positive working relationships that they have with iwi mana whenua.

So at its core, on the regional representative group, you have a joint decision-making opportunity by having councils and mana whenua across an entity sitting side by side, talking about the way in which they can make decisions for the betterment of their communities to assure themselves of safe drinking water, better environmental outcomes, place making, and offering the ability to look for the very first time about common interests, working cooperatively and collaboratively—joint decision-making.

So I reject strongly views that have come out from one part of this House that propose that having joint decision-making at a strategic level in the way that we’re proposing for water service delivery will not benefit communities. It will; we’ve already seen it in practice. For those many councils who cherish the relationship that they have with their iwi mana whenua, this bill affirms that.

Thank you very much, Mr Chair, and thank you, Minister, for providing an overview in regards to Part 2, which, as the Minister has articulated, is the most substantive portion of this bill. We’ve got a number of areas that we’re going to get into in terms of questions on this part. But I think it is important, before we get into that, to just stand back and look at the concept around some of the key areas and challenges that have been raised in terms of opposition of this legislation, and they fall squarely as part of Part 2 of this bill. Right from the outset, in terms of the establishment of the four-entity model, while we didn’t discuss that in the prior part, the concept of how it was landed upon four entities and the significant pushback across local government across the country, around that structural model, has been well defined.

The Minister referred to clauses 15 and 16, around ownership shares, and I think there will be a number of aspects that we will want to get into detail around that specifically, because I think that also has created quite a significant amount of, I guess, confusion and clarity on one side, but also unmet expectations in terms of, you know, if you believe you own something, do you genuinely own it? That’s where the confusion has come, in that regard.

The aspects that I particularly want to get into first up is in relation to clause 27 of Part 2, “Subpart 4—Regional representative groups”, which is around the “Establishment and membership of regional representative group”. The Minister’s just stood up and talked about this concept of joint decision-making. Well, it’s not joint decision-making. Joint decision-making is a new term that is being introduced. But for those that are not over the detail in terms of how these groups will operate, half of the seats at the table are mana whenua - appointed and appointed by mana whenua; half of the seats are in regards to the territorial authorities. And there’s a number of challenges in regards to both of those aspects. But that group, in order to make decisions, needs a 75 percent majority.

So, you know, let’s be clear. If there is opposition in regards to that—and that’s well and above the 50 percent threshold, which I think you would infer from when you refer to words such as “joint decision-making”, that, basically, is going to result in one of those two parties, or a number of members within that group, having the ability to influence and control decision making. And our view is that complexity that comes from that governance model is going to increase the time it takes to make decisions; it’s going to add bureaucracy and additional cost, and that’s before we even get into the concept of have we got appropriate representation around the table that represents our local communities across our regions and provinces and cities. And the clear view from this side of the House is that we don’t have that.

So my Supplementary Order Paper is No. 287, and it amends subclause 27(2). The amendment is specifically in regards to the composition of those regional representative groups to ensure that every territorial authority is represented in those groups. Some of the significant opposition that we heard through the select committee process from councils across the country was around the fact of that loss of local voice, and we’ve heard that throughout. So my amendment is dealing specifically with ensuring that all territorial authorities have the ability to be represented across those groups. And some councils, as I’ve said, have raised concerns that they’ve been shut out of that debate, and I think that’s absolutely fair and genuine, and my amendment, in regards to clause 27, will in effect allow that representation. I think it’s important to say that this amendment is not going to affect the ability for the entities to have boards larger than that number. It simply ensures that at least one seat is available for every territorial authority.

The amendment also adds a provision that territorial authorities can provide a majority of positions on the regional representative boards, which we can get into in a little detail later on. The territorial authorities are the owners of these assets and, therefore, should have the control around those boards to oversee the management of those assets. So I would ask the Minister to consider those modifications to clause 27 as part of her deliberations.

Thank you, Mr Chair. I actually also wanted to follow up with some of the points that my colleague Simon Watts has very eloquently made, with reference particularly to clause 16, the council shareholding arrangement.

I speak often, and I speak glowingly, of the Selwyn District, which I am very proud to represent. It is the fastest-growing territorial authority in New Zealand. But, going on these figures, with reference to the shareholding arrangements, one share for every 50,000 people—and, going on the most recent census, the population of Selwyn was at just over 50,000. But, as I say, it’s the fastest-growing region in New Zealand and, by the latest figures from the council, our population is actually now at 79,000. So I’m very interested to hear from the Minister a process, an explanation of a process, for the re-evaluation and the reallocation of those shareholdings, because, presumably, the Selwyn District gets allocated one shareholding for, I think, approximately $750 million worth of infrastructure asset that it’s built up. But, then, what capacity or what allowance is given to that extra 29,000—and presumably, if I look at growth predictions, our region will be at 100,000 population within 10 years. So I would like an explanation as to the shareholding allocation, but particularly an explanation as to the scale-up and aggregation—if any accounting has been taken for those very fast-growing regions. I would imagine my colleague Matt Doocey has similar questions to ask, because the Waimakariri is also a very, very fast-growing region.

There is also, regarding Subpart 4 of Part 2, “Regional representative groups”, the joint decision-making process. Now, it is very clear that there are 12 regional representatives per entity, and 12 mana whenua representatives. I’m speaking with particular reference to the proposed Entity D, which will take up much of the South Island. I mean my comments I’m about to make, Minister, with the greatest of respect towards Ngāi Tahu, but I’m very interested in what communications exactly have been had with Ngāi Tahu, as mana whenua of the vast majority of the South Island. Has any conversation been had around the capacity within Ngāi Tahu and, indeed, the specialised capability? I look to the Government’s list of work streams, and I look at the enormous reliance that is starting to feed into public legislation on mana whenua. I look at the Māori Health Authority. I look at ECan, the Canterbury Regional Council. I look at the Selwyn District. I look at the new layer of mana whenua representation on the proposed new Resource Management Act. And I think, my goodness, there is a lot of pressure that is going to be put on iwi like Ngāi Tahu.

I would really like to know what knowledge the Minister has around specifically Ngāi Tahu’s capacity and capability. These are very, very specialised skillsets. Is there the skillset within the iwi? Is there the knowledge? Is there the knowhow to manage these enormous entities, with these enormously complex infrastructure demands, financial demands, future build demands? As you said yourself, Minister, you think that we’re short of $150 billion of infrastructure investment. Well, is there going to be—do you perceive—the capability and capacity within mana whenua, and, indeed, the 12 regional representatives, that will be on Entity D? Do you have confidence, going forward, that Entity D is going to be able to meet the expectations that you have of this projected work going forward?

Thank you, Mr Chair. I want to canvass clause 16, the allocation of shares in water services entities, and also clause 32 and 33. We have talked about the allocation if the population is not more than 50,000, and my concern is that we are going to see small local authorities such as, for example, the Gore District Council, who are going to feel completely disenfranchised from this process in that there will be ratepayers in those small councils who are paying not insignificant amounts. Farmers there are likely to be paying rates of $5,000, $6,000, $7,000 per annum, and will feel that they will not have a voice at this table. It’s a very unusual situation to be in, to be the owner of assets where the value will be in the millions of dollars—to be the owner of those assets but to literally have no voice, or such a small voice, at the table that they will be disenfranchised from the decision making.

It’s also a very unusual thing—and I know that the Minister has spoken about the partnership model, but it is a very unusual situation for owners of an asset to not have a majority say in the strategic use of those assets, which clauses 32 and 33 bring about. It is, I guess, part of the move from this being a voluntary opt-in to being a compulsory requirement to be in that it makes the shareholding proportion all the more important, and I think it is probably at the root cause of why so many local authorities have become so staunch on opposing this as they feel their voice is going to be so diluted.

And looking at the partnership—and, again, I refer to the comments my colleague Nicola Grigg made about Ngāi Tahu covering such a broad geographic region—there doesn’t seem to be anything in the method of appointing mana whenua representatives that might require that the mana whenua representatives actually have any knowledge of, or affinity to, or affiliation with, that geographic spread. So, for example, for the North Island entity, the mana whenua representatives could arguably all come from the Canterbury region and have very little, or no, knowledge of the assets and the issues that might be occurring around the Gore region or the western Southland region or the Queenstown region. So I’m really struggling to see how (1) that voice of the local people is going to be given effect to, and (2) that seems to be actually exacerbated by the appointment process of the mana whenua representatives not actually having any requirement to have that geographic spread either.

So I’m interested to hear from the Minister how she believes the shareholding model, based on population, is actually going to give voice to those very small local authorities such as the Gore District Council, with a population of around 8,000, but with people in that that are making quite significant rates payment that are going to, obviously, impact on the assets that that authority holds. Thank you.

Let me cover off some of the issues in relation to a genuine concern that the Finance and Expenditure Committee took note of which was small communities being outflanked by larger communities. I welcome the addition and the strengthening of the legislation to ensure that we get a representative mix of the rural, provincial, and metro communities on the regional representation group. Articulating that very clearly in legislation makes clear the obligation that the legislation has towards ensuring more local voice.

The other element in relation to the regional representative group was a matter that Ms Grigg raised, which was will there be capacity across the whole of the representative group, namely iwi mana whenua partners to contribute to this process. I suspect, just like councils, it’s a new domain of decision making that they’ll be entering into, that they’ll develop a relationship, and that they will build capacity over time in order to undertake the objectives of the regional representative group, which is to develop the strategic documents that will guide the water service entities, which will be to put through some rigour, the asset management plans and the pricing and funding plans that will give the assurance to their communities about the role and function of the water service entity to carry out the purposes that it was designed to do.

The other element, and I think that’s an important question to come back to, is around population growth. This was something I raised also in my opening statements around this. For those small communities who currently sit at about 50,000 or less, they receive one shareholding vote. But if I draw the member’s attention to clause 16(2), outlined in there is that every time there’s a census and the population adjusts, so will the shareholding. There’s a process for which that can be calculated and determined. So I think that’s a really important function to give communities confidence that in those growth areas the nature of the interests, the shareholding interests, can be taken account of. But I still maintain that setting up a shareholding interest based on population, where there’s no ability to take a dividend, will give small communities greater assurance that the establishment of these water service entities and the commitment to reinvest back into infrastructure will see the benefits in those areas that the member referred to, that I referred to in my own electorate, that many of us are worried about because we know that they cannot afford the level of investment and infrastructure that is required to underpin their existing needs of the water network, but also their future needs if they see themselves as a growth area.

I also want to come to the matter of the point that Mr Watts raised in relation to the membership of the regional representative group and every council should be represented. One of the concerns that I have, and I know that this was something that the select committee took very seriously and I feel obligated to raise it in this Chamber, is that if the regional representative group became too unwieldly too quickly—that is too large—and if we see in some of the entity areas where you have up to 21 or 22 councils and then immediately the representative group starts out with that number, the conversation right at the front end of a reform agenda will be: who’s there? It’ll be around representation. This has been tried and tested. I have some level of lived experience to make this comment because I know that in many iwi post-settlement entities, post-settlement governance entities, one of the biggest challenges, if you have a governance entity that is far too large, it in some ways hinders or impedes the ability to make the strategic decisions or even have the strategic conversation that’s necessary to guide and govern significant interests. So I’m not saying that the concern isn’t valid; I’m saying that we need to balance the legitimate interest of ensuring that councils and iwi mana whenua can contribute to the strategic decision-making but also stage out the way in which this happens because we are at the front end of a new reform and changing the way that we’re delivering water services across the country. I hope that they value the opportunity to start well, start with the intention in mind, which is provide strong strategic guidance to the water service entities to do the job they’ve been tasked to do.

Thank you, Madam Chair. I want to ask the Minister some questions about the operating principles in clause 13. Now, the operating principles of these proposed water services entities, the first couple of them are actually quite reasonable: develop and share “capability and technical expertise with other water services entities and throughout the water services sector”. Respectfully, Minister, that’s quite condescending. Water companies like Watercare, the engineering consultancies, and the contractors who support the delivery of water services develop and share capability and technical expertise with each other all the time. That’s what the sector does. Then we come to clause 13(b), “being innovative in the design and delivery of water services and water services infrastructure”. Minister, that’s called civil engineering. Innovation is something that we do when we design and construct infrastructure. Clauses 13(a) and 13(b) are condescending, but ACT can live with that because the 10 ACT MPs have got used to sitting across the House from this Labour majority—we know what condescending feels like.

Hon Andrew Little: It’s mutual.

SIMON COURT: And Mr Little acknowledges that. Now, I want to take the attention of the committee, and for those people that I know are watching this debate closely I want to acknowledge those people, because they realise how important it is to the future of New Zealand that the flaws with this legislation are exposed, whether they be the flawed funding and financing model or the balance sheet separation claims. Standard & Poor’s advised Department of Internal Affairs officials that this would be a high-risk, highly leveraged transaction and that without Government backing—in other words, there is no balance sheet separation—they would have a B credit rating, Minister, a B credit rating, which is one level above junk bond status.

So, look, there are many, many flaws with this bill, but I want to come to this one, clause 13(d), which requires these entities to partner and engage “early and meaningfully with Māori”, including to inform how water service entities can give effect to Te Mana o te Wai—those statements which only iwi and hapū are able to provide to water services entities and which can be all-encompassing, from the top of the mountain to the river mouth and beyond, we know, and include geothermal resources.

Now, clause 13(d)(ii): “understand, support, and enable the exercise of mātauranga Māori, tikanga Māori, and kaitiakitanga”. Well, what ACT proposes is water service entities, if they are to be created by this piece of legislation which this condescending Government no doubt will ram through at some point today or in the next few weeks—ACT proposes, in our Supplementary Order Paper 292, to amend clause 13(d) of this bill. Rather than just giving special rights to a group of people based on who their grandparents were, “partnering and engaging early and meaningfully” should be with all affected communities. That means communities who rely on the supply of water, whether it’s through an irrigation scheme for agricultural purposes, which this bill will now include, whether it’s to access geothermal resources to make renewable electricity, or whether it’s to get water from municipal supplies so that you can run your business, so that you can manufacture food, so you can manufacture steel products, for example, things that go into construction like water, which is needed to make concrete, Minister. So, Minister, I’d like you to respond to my question: why on earth is it that water services entities will only be required to take account of Te Mana o te Wai statements provided by iwi, hapū, and people whose grandparents might have been Māori, but not with all affected local communities, which include people who produce things like food, like concrete, and so forth?

Minister, would you take a call and respond to my question on clause 13(d), “Operating principles”—why you think a certain group should be given these specific rights over other groups.

Oh, good choice, Madam Chair, and, first, can I congratulate you with your ascension to a presiding officer. I know you’re a member with huge integrity that you’ll bring to the role, so congratulations. Well, let’s start with Part 2. Part 2 is a very interesting part of this bill, which talks about the water services entities, because, really, when you start thinking about what this reform is going to look like, there’s nothing more jarring than thinking about these four mega-entities. Already, Kiwis are very concerned about a similar model being rolled out through their health system, which has resulted in absolute failure. It is interesting, when you look at clause 11, the changes in the select committee: the objectives of the water services entity have gone from “deliver water services and related infrastructure” and been changed to “own and operate water services infrastructure”—own and operate water services infrastructure. I’d argue that especially for the residents I represent in Waimakariri, that will send a chill down their spine, that we are debating in this clause mega-entities that will own their water assets. Let’s be very clear: this part that we’re debating now and we’ll be debating for some time this afternoon will actually legitimise the forcible seizing of local ratepayer assets.

So there is a question of why these water entities need to own and operate, and if we look at clause 15(2): “A water service entity is co-owned”. Why would Waimakariri ratepayers be happy to move from single ownership to now co-ownership? How is the dilution of their ownership going to result in better-quality water assets? I’d be very interested to hear from the Minister in the chair, Nanaia Mahuta, why she thinks a council that already has very high-quality water assets and is delivering very high-quality water is now going to gain by diluting its ownership into co-ownership.

Then the second question around the issue of ownership: does the Minister think that she has been listening to those councils? Of course, when we had the three mayors stand up in Auckland—Mayors Gordon, Mauger, and Brown—the Prime Minister said, well, actually, she was open to listening. So does she think that her Government is listening by ignoring their pleas to retain single ownership and go into a co-ownership? What was the point, I suppose, of sending out the Associate Minister on his trip to all of the councils—where he got a very clear message: great guy but wrong party—who said that they were going to listen.

Let’s be very clear: clause 11 of Part 2, that we’re starting this debate on, has been changed in the objectives of the water services entities, which originally were to “deliver water services and related infrastructure” to now going to “own and operate”, and not only own and operate but, with clause 15(2), a water services entity is now co-owned. So councils will go from single ownership to co-ownership. Does the Minister feel that is good faith and right when councils were led to believe that they could opt in to this reform? As we know in Waimakariri, they went to their ratepayers: of those who responded, 95 percent wanted to opt out. Now we have a legislative all-in: mega-entities that we’re debating in Part 2 that are going to take over ownership and dilute ownership from councils. I think most listeners and viewers at home will be extremely concerned by what, basically, is State theft by stealth.

That last statement of the member is simply not correct. If anybody in this House accepts that kind of statement, (1) they haven’t been listening to the thorough considerations that have taken place over the five years through the various modelling of this Government in coming to this reform; (2) they have not taken on board the select committee report, of which they got a condensed amount of information in relation to the policy drivers and the modelling that’s occurred and the submitters; and (3) they believe that their own rhetoric will in some shape or form lead an alternative solution, because there is no alternative solution.

Hon Member: Not true.

Hon NANAIA MAHUTA: Can I just—yeah, well, it’s a statement of fact. [Interruption] Sadly, it is. But let me just draw the attention of the committee to what the member is proposing based on his own local council and a set of modelling that had some clear deficiencies, because we know that the Communities 4 Local Democracy based much of their proposition on the Castalia report, and there were some clear deficiencies in that particular report. One of them was that they—well, there are a couple of things in the proposal that should give people cause to consider what the alternative is that is being proposed on this side of the Chamber. Firstly, those councils that were part of that group wanted time to develop their own set of arrangements. The difficulty with that is that there will be significant variability across the country in what those arrangements could look like. It sounded, in some ways, like councils wanted to choose who they wanted to work with without a real sense of what the equitable benefits would be across regions and districts. That’s a worry.

The other element was that the Castalia report, through scale and aggregation, didn’t even factor in the procurement benefits that could be derived from the model that we have in front of us. That was a deficit. The other element was that it ignored significant case studies around both Wellington Water and Watercare, and the lessons that we’ve learnt from just our own experiences of where councils have got to, either through existing legislation or through cooperation. There is learning from both the Wellington Water and the Watercare model that we should not ignore, and we should say, “OK, if this is as far as councils can get cooperatively, what more do we need to do to ensure that New Zealanders as a whole, both ratepayers and taxpayers, can benefit from a reform agenda?”

That is where this Government is taking us, to the broader benefits of moving through reform, taking on board the lessons that we have within our own country context, drawing on comparative research, and then offering up bespoke opportunities for the New Zealand type of model, which is why we have, for example, Te Mana o te Wai considerations, the ability for councils’ existing arrangements around joint decision-making, especially when it comes to natural resources to be factored in, and when it comes to a really strong sentiment that many councils actually supported, which was a public model of water service delivery which rejected privatisation. I’ve gone to read many of the submissions here, and many feel very strongly about a non-privatisation agenda; these are councils. We need to take on board that consideration as we thoroughly and robustly debate the rest of the issue. So I really wanted to put that on the table.

Can I also highlight, in relation to local voice, that that is the reason why the Government’s Supplementary Order Paper strengthens local voice in a number of areas—but let me point to one for the purposes of the debate that’s come up in the committee. We want the ability for entities to use the establishment of regional advisory panels to take decision making closer to the community of interest so that that local voice can come through, so that those voices can contribute to the formation of the strategic documents that we’ve been referencing in the House. That is going to be an important element and addition to strengthening the model that we have, that keeps faith in the community that we’ll do something about it.

On the engagement provisions, this bill does not merely ensure that Te Mana o te Wai obligations are engaged upon; it’s also making regulations for a constitution and decisions relating to joint venture services and entity arrangements, and also in relation to the creation of statements of intent, asset management plans, funding and pricing plans, infrastructure strategies. Those are all the areas within the bill that there are engagement provisions that enable us to ensure that not only local voice is listened to but they are contributing to the direction and the operational challenge that these water service entities will have.

Thank you very much, Madam Chair. One cannot stand by and hear a statement from the Minister in which it’s quite clearly outlined that there are no alternative models. I’m unsure of the words to use to describe that but it’s simply not factual on the basis that Communities 4 Local Democracy tabled an alternative model that was independently peer assessed. It was supported by over 32 councils. It articulated a pathway in order to achieve local ownership of these assets to ensure that the capital that needs to be invested would be invested and it wouldn’t have these significant implications. But for the Minister to stand up and say, as she did just then, that there are no alternative models just simply amplifies to Kiwis around the country why this Government is simply not listening to the feedback in regards to this reform. That is deeply challenging for Kiwis across the country. To simply say—irrespective of the model put forward by the Auckland mayor, the Waimakariri mayor, and the Christchurch mayor—that there is no alternative is just not based on fact.

I’d like to get back to clause 27, in Part 2, which I noted before in regards to my Supplementary Order Paper (SOP) 287, and I’d started to provide an overview. At the heart of the opposition to this reform is that fact that this clause imbeds 50:50 co-governance over water services entities across this country. This is one of the single most fundamental elements of opposition, lack of clarity, challenge and questioning across this country without doubt. We’re not here to argue around the detail in terms of what that role would look like but the simple failure of this Government to bring all Kiwis with them on a reform agenda to articulate the reasons why this is so critical and why this will deliver benefits that we’re unable to achieve under the current state. The failure by this Government to bring all New Zealanders with them on this journey is going to be the single most fundamental element of why this legislation, under a future National-led Government, will be repealed. That is categorical.

My amendment around clause 27 relates to ensuring that territorial authorities make up the majority of the positions on those regional representative groups. Why? Because those individuals are democratically appointed by their communities to manage their community’s assets. Communities and local government are best placed to deal with local issues, and National absolutely respects representation from mana whenua at that table, and my amendment doesn’t take it away. The National Party absolutely respects and desires that mana whenua have a seat at the table alongside others in our community, and that is the simple difference here. But the voices around that table need to be reflective of the fact that the territorial authorities actually have the control of the assets within these water services entities.

So I ask the Minister to reflect on the significant opposition that we’ve had across this country over the period of this reform agenda that’s been on the table. We’ve had significant submissions. I’ve heard the comments saying there wasn’t too much opposition in the submissions received by the select committee. Well, that is absolute nonsense—absolute nonsense. If I table the form submissions by both the National Party, the New Zealand Taxpayers’ Union, and other members across the House, the issue of co-governance and the opposition around 50:50 co-governance is squarely within that. It’s just that the select committee decided to treat those submissions as one submission. But that doesn’t take away from the fact that nearly 88,000 Kiwis across this country took the time to submit their feedback and opposition. So that is a great shame.

I’m going to move to another clause, but I’m conscious of the time. I want to move to clause 45 in Part 2, and this is in my SOP 288. This SOP makes amendments in regards to clause 45, and this is moving into the sphere of the regional advisory panels. For those watching at home—and it’s coming up to morning tea, so I hope you’ve had a cup of tea—we’ve talked about regional representative groups and we’re now talking about regional advisory panels. The amendment I have put forward in regards to these regional advisory panels is to remove the requirement that there is an equal number of mana whenua and territorial authorities sitting at that table and instead make the change consistent with the change I’ve noted in clause 27, that the majority of seats around that table are comprised of representatives who represent our local communities, our local councils, and our territorial authorities.

Surely that is common sense in regards to the way in which we should be managing our water assets. It does not take away that fact that mana whenua will be at the table—absolutely not—but it ensures that the majority of seats around that table are made up of individuals who are democratically elected and represent our communities on behalf of the territorial authorities, whose assets are the assets that will be transferring into these mega-entities. And we can traverse later on about those assets and the ownership components of that. But I think that is absolutely a reasonable change, and I think that goes to the heart of some of the most significant opposition to this bill in the public arena—the fact that this position by the Government, whether it’s ideological or what, is that we have to have 50:50 co-governance and not only that but the fact that that group then has to have a 75 percent voting majority. In effect, either group or a small number of groups has the ability to veto any single decision. And in an asset as important as water, we need to make sure that we are working with our local communities and not against them.

So the amendment that I’ve put forward ensures those voices around the table in regards to governance of our water assets and that the control remains with territorial authorities, and respects that democratic element of our democracy around it—that representatives at our territorial authorities and local government are democratically appointed and accountable to the public for the decisions they make. Every three years they’re at the ballot box and that is very reasonable. But the fact is that those individuals around the table must have the control around the table in order to ensure that we are both planning and delivering and executing the sustainable change required for our water infrastructure across this country. Those individuals within their local communities are best placed to be able to contribute around that table in order to make decisions on behalf of their communities, who own these assets.

These assets have been contributed by ratepayers over decades and decades. The assets are owned by our local communities. They’re not owned by central government. This asset grab of simply moving all these assets into these four mega-entities—the heart of this reform—is the reason why the National Party remains strongly opposed to this model and does not believe that this model that’s currently on the table will achieve the outcomes we require not just now but 10, 20, 30, 40, 50 years out. We need a sustainable solution—one that is bipartisan but one that all parties agree to. But this Government to date has failed to listen to the feedback on the table, and that is a great shame.

So I ask the Minister to give thought to the amendments I have raised in SOP 288 and also in SOP 287. I ask him to give the due consideration or—if he does not—to outline to Kiwis around this country why this Government is not willing to make changes around the fundamental premise that this bill embeds—that the Government believes it requires 50:50 co-governance of water assets across this country. I want him to make it very clear why Kiwis are not right in regards to their opposition. I want him to be clear around why the Government believes they know best. I think New Zealanders deserve that comment from the Minister to articulate what I believe is one of the most fundamental issues with this bill.

The last contribution of that member Simon Watts would make some people listening to this debate think that Māori aren’t ratepayers and they’re not taxpayers, but they are. That is the reality. In many communities around the country, Māori are ratepayers.

But this isn’t a binary issue between Māori and everybody else; this is an issue about how do we provide safe drinking water, how do we achieve better environmental outcomes, how do we have water reform that enables a financially sustainable ability to fund water infrastructure which is a significant core asset. We’ll do that through scale and aggregation separating balance sheets. We’ll do that through ensuring good governance. We’ll do that through ensuring that the Crown’s Treaty obligation is built into the reform process. We’ll do that by ensuring that there is no privatisation. So shareholding interest does not equate to a dividend which makes it easier for privatisation. That is not the way this Government is going. We’re having a shareholding interest that protects the public interest in our water infrastructure network now going forward into the future, but, more than that, we want to ensure that there is local voice baked into every part of the decision-making process, because we know at a time when citizens are facing cost of living challenges, we need an affordable solution for the future.

That member said that there is no alternative model and that he proposes there is. Now, that was unkind of me, and I admit that, because in the three years prior to landing on the model that we’ve had, we tested many of the ideas that have been put up recently in the House by that member, and it looked like this: a scaled-up council-controlled organisation (CCO) model; the potential of a New Zealand Transport Agency type of model, the opportunity to aggregate it to a regional level in varying degrees, and then the opportunity to perhaps look to something that is totally out of the box and somewhat of an innovation between a CCO model and something else. All of those models were tried and tested and they are in the regulatory impact statement that is attached to this reform programme that the public can see and is fully visible to anyone who wants to analyse our considerations. Much of the information that we secured over a long period of time came from councils themselves; they weren’t numbers that were just thought up out of the air.

But this is the thing: the Government had some key priorities that it wanted to ensure could be achieved in a reform programme, in a way that all communities benefited, large and small, because we know that the costs impacting on small communities right now, going forward into the future, with climate change being a real significant impact—let’s look at Westland—needed to be addressed. That’s why the reform approach that we’re taking—and that is in front of you—delivers on all those key fronts: scale and aggregation, making sure we get balance sheet separation, good governance, making sure that our Treaty obligations are upheld, making sure that it is a public model where there will be no privatisation, ensuring that local voice is evident, and that we will deliver now, going forward into the future, greater affordability back to ratepayers.

Simon Watts: You know that’s not true, Minister.

Hon NANAIA MAHUTA: Let’s face it: the growing reality—and that member wants to reject it—is that Māori are ratepayers. In my community—actually, as a result of Treaty settlements—Māori make a significant rating contribution to councils in that area. That is the case, also, in the South Island. It’s not the sole justification for having joint decision-making on the regional representative group, but it makes sense that we take the conversation that those members want to have around ownership and assets towards betterment for the environment, the community; better drinking-water outcomes; and long-term intergenerational objectives to care for our most precious resource, which is water. That is why joint decision-making matters. That is why Te Mana o te Wai is embedded within the framework of this legislation, because we cannot just keep thinking about today; we need to think about tomorrow.

Simon Court: Water’s just a resource.

Hon NANAIA MAHUTA: We cannot think that water is an infinite resource.

Simon Court: It is.

Hon NANAIA MAHUTA: It isn’t. It needs to be cared for in a way that we’re making more efficient decisions and able to invest in the water network and able to adopt green solutions to make our communities more livable and vibrant for our kids and their kids to follow. Again, that’s why we won’t be supporting Supplementary Order Papers 287 or 288 that are being proposed by Simon Watts.

Thank you, Madam Chair. Minister, in clause 16(1) and (2), I’m trying to reconcile the share system where it says 50,000 people and under are one share. Well, I live in Northland, which you and I have discussed. So you’ve got the Far North and the Kaipara—that’s essentially two shares in that instance. Compare that to Auckland, which is going to have a good ol’ wheelbarrow full of shares. The infrastructure management of water assets in rural New Zealand is fundamentally different from anything that you might consider urban-centric. Waste-water management and stormwater management in rural New Zealand is often funded by ratepayers themselves. They pay for a septic tank. It’s not part of a reticulated scheme. They put a tank—I have rainwater on my roof, Minister. I paid for all of that, and yet here we are. You can see how it turns into, with the previous member before, deep confusion for rural asset owners and the management therein. There’s fundamentally a huge difference in stormwater management in rural New Zealand. It’s heavily weighted—the infrastructure—in terms of investment in rural New Zealand and stormwater management, and I can tell you, Minister, just one anecdote: I had farmer owner operators saying the process of cleaning canals, stormwater management, has been handbraked because they have to identify with cultural sensitivities. In rural New Zealand, someone apparently saw a taniwha there. Now, this is handbraking not only productivity but outcomes for freshwater and stormwater management. Earlier today, we talked about green overland flow. Well, respectfully, Minister, that’s nonsensical when most of this stuff has been managed and owned and nuanced, and all the understanding has been managed by rural New Zealanders. We don’t need this stuff in the country. There are parts of New Zealand—Dunedin, Hastings, Havelock North—that absolutely do, but stormwater and all the confusion at what this means in terms of asset management in rural New Zealand, this undoes. Can you please answer how we as farmers can operate in this lens.

Excellent—it’s always good to have a few Simons in the House. The fundamental principle for me is water is one of those qualities of human life which every human being and animal has an interest in, and that will apply to some of my thinking as I look into Part 2, and just to signal to the Minister and officials particularly around clauses 33 and following, so around the notion of regional representatives.

So I’ll start there, because the Minister’s spoken around scale and aggregation—that makes sense to me. I wouldn’t mind her articulating a little bit about what she understands of the Scottish model, because she’s put a few out there but hasn’t touched on that. But she talked a bit about local voices and good governance, and I wouldn’t mind understanding how she sees good governance manifesting itself in the likes of clauses 41 and 42, where we end up with co-chairpersons, co - deputy chairpersons, and so forth, because good governance relies on clear purpose, well-articulated values, consensus, and clarity. And the more you begin to split things, let alone split based on race, the more complicated things get. So I don’t understand how good governance can be argued when we’re creating quite a convoluted system, including around co-chairpersons and co - deputy chairpersons. That just seems to me to make things far more complicated.

I’d also like to know from the Minister how she can justify concepts of local voice when many, if not all, of the regional representatives are appointed. So this is not done by election; this is done by appointment, and it doesn’t matter if it’s mana whenua or the regions themselves. How is just simply appointing people ensuring a local voice, or one that’s to be held accountable?

What follows on from that is also that in this bill in clause 38, there’s a list of knowledge and experience, which I would argue is quite prescriptive. Again, local voices, I’ve certainly found in my time in Parliament, are rather diverse. There’s a range of views, competing concepts, and so forth. But she’s become quite—well not she; rather, the bill is quite prescriptive, including around the principles of the Treaty of Waitangi. Does she accept that these are not set in concrete? I am someone who disputes aspects of these principles, and I think in a democracy that’s a healthy thing, by the way. There’s a healthy debate—in clause 38(2) it sort of implies that these principles are totally agreed. Again, I just want to put on the record that they are not.

Clause 38(2)(d) talks about the perspectives of mana whenua, mātauranga, tikanga, and Te Ao Māori. That’s all fine and good; those perspectives are welcome. But they are just a perspective; they’re not the perspective, unless the Minister would like to disagree. I’d also like to know why science is not put in clause 38 as one of the aspects which is needed, because science is underpinned. I better be clear here for the people listening: I’m not referring to Western science; that’s identity politics nonsense. Science is science; it’s universal. I would have thought that with the management of water that that would be a key competency that should be placed. So, Minister, what I’m articulating here is, effectively, if we have a local voice, why are people being appointed? Why is there a relatively limited list of qualities required of these committee members, often with an implied singular view? And why is the likes of science missing?

Again, the co-governance—oh, not co-governance, sorry; the good governance suggestion that the Minister made: how does she see splitting up chairpersons and deputy chairpersons as good governance?

And then the last couple of points, because I don’t want to take up too much of the time. Clause 33 talks about appointing mana whenua representatives. If we take that as a given, how is that going to work in the likes of Auckland where there are many who claim mana whenua status, often actually competing. Are we going to see these representatives groups flooded with a number of—sorry, that’s not meant to be a bad water pun. But are we going to see these groups flooded in tensions within the groups themselves—as you know, within any tribal context, regardless of country, there’s going to be, if you will, infighting challenges? How is that going to practically work?

I suppose the final point that I’d like to make—and there’s a lot of discussion, understandably, around co-governance, and I want to return to where I started. Water is something for everyone, and I do understand, as the Minister and others have spoken, the value that the Māori voices bring to the table. I understand Māori—Madam Chair? [Bell rung] Thank you, Madam Chair. I won’t take too much longer. It’s trying to get to the heart of the question. [Member pauses] The anticipation.

Hon Member: What a build-up.

SIMON O’CONNOR: Indeed. Now, where was I going? Māori have absolutely a lot to bring to the table and the Minister’s rightly pointed out they pay rates, but, of course, the corollary to that is just about every New Zealander pays rates. Rates are not based on one’s ethnicity or identity; they all have voices to bring. So I suppose the question I want to put to the Minister, particularly when we have to have this co-governance model, is what is it that non-Māori are not bringing to the table? What is it with a Chinese New Zealander, an Indian New Zealander, an Irish New Zealander—what are we not bringing to the table? OK, so what is it that is extra special? And to use a personal example, what is it about my wife, who’s absolutely wonderful and Māori—what is the extra that she could bring to the table that I can’t?

Now, she probably is because she’s far more intelligent than me and an engineer by training, but, that aside, what is it in her particular quality as Māori that she is bringing to the table? And I think that’s really fundamentally important—it’s really important. As I said at the start, of course Māori perspective, Te Ao Māori, brings qualities, but what’s implied in legislation like this is that somehow it’s bringing things which other groups don’t have, and I don’t fully understand that. I might come from a different culture and concept, but I also understand the value of water to me, to my family, to multiple generations. I just don’t see what the extra is. And I do worry that we’re also moving into the metaphysical side, too—that we’re bringing in sort of belief structures, which I don’t think are particularly helpful. So I’d like to understand that.

Then the final point is really just a statement. Suggestions of privatisation, which continue to be brought up, are basically false flags, and I think those listening need to understand that I don’t think there’s any groups in this House which are looking for the privatisation of assets, and suggestions of that degree are really just something—false flag.

But, anyway, a number of questions and thoughts there, and I welcome the Minister’s thoughts.

Much to the goading of the Opposition, I won’t get involved in a race-led debate, because it’s the wrong debate to be having. And in the context of including Treaty obligations and Te Mana o te Wai in this legislation, as I said, one of the key factors that the Government considered was upholding the Crown’s Treaty obligations. It wouldn’t matter what hue of Government is in place. The National Party and the Labour Party have supported a Treaty settlement process, and falling from that Treaty settlement process are existing obligations that occur with councils in relation to the natural environment. And when we’re starting to craft an approach towards water reform, we could not ignore those existing obligations. Many councils themselves said these good working relationships that we have that are working for us as a council, for our community—we don’t want those things to be lost.

The other thing is that if we lift up those obligations within the context of this reform, Te Mana o te Wai speaks for everybody, but, most importantly, it speaks for the environment, ensuring that we’re looking after water as a sacred resource now going forward into the future.

The principles underpinning Te Mana o te Wai were established in 2014 under Nick Smith, and it included a number of stakeholder groups—the rural community; yes, Federated Farmers; it included industry users; it included horticulturalists, as well as iwi—to try and figure out what was it about Te Mana o te Wai that worked for everybody, but, more importantly, what is it about Te Mana o te Wai that must work for the environment. And that is why it has been brought into this legislation, because it makes sense to treat water as a whole system, not one water, not two waters, not even just three—water as a whole system, from source protection to its use in its varied forms back into discharging into our rivers, lakes, streams, and beaches. And that is what we have here within the context of the reform.

I want to come specifically to the points that that member raised in relation to co-chairs and elements of that and how does that add to improved governance. Actually, what the legislation provides for, through the constitution, is regional representative groups to decide for themselves whether or not they want co-chairs. It isn’t mandatory. And if you read the legislation, it provides that opportunity but it does not obligate or necessitate that that is a consequence of the establishment of the regional representative group. And that is as it should be, because what we need is for these groups to talk to each other, not position themselves and then take a vote.

I mean, I should also say that there was an inaccurate statement raised by a member on that side of the Chamber, who said that iwi mana whenua representatives could, by virtue of a 75 percent vote, stop things from happening. That is not the case. That is only the case if the regional representative group, or, if a matter of divestment or privatisation came up, it is required that 75 percent of a regional representative group, made up of all members on that group, would have to vote in favour of privatisation. Now, we know that is a difficult threshold to meet, and we certainly know that by having iwi mana whenua at the table alongside councils, they absolutely won’t go to that, because they do not want foreign interests involved in core infrastructure such as the delivery of waters. And that’s a total sum benefit for many New Zealanders who also don’t want privatisation.

We need to look to the legislation, the bill, because I think many of the concerns that the member may legitimately have can be alleviated through the protections that much of the form and function in the way that the regional representative group and the regional advisory panels are set out in the legislation, but there is the opportunity for variance through the constitution. And the reason why that is there is because we heard through the design process, and also through the submissions process, that each entity’s slightly different; they’ve got slightly different characteristics and motivations and things like that. But the common aspirations are set out in the legislation, and we just wanted to make sure that we weren’t being so prescriptive that those unique positive factors and characteristics of how an entity wanted to reflect itself in its water service delivery objectives—that that could be achieved through the constitution.

Finally, Madam Chair—great choice. I take this opportunity to rise to speak on this bill. It is my first opportunity, and forgive me if I repeat some of the things that other members might have traversed in the Chamber.

But I’ve found it extremely interesting sitting here listening to the Minister talking and starting her answer previously. Her comment was that Māori also pay rates, as if that is an answer to the question that was asked, and she said that she was being race-baited by one of my colleagues. I thought that her very comment that Māori pay rates was, in fact, race-baiting. If that is the case, the answer is: how many non-Māori do not actually pay rates? Are we now saying that if Māori pay rates and they get half the seats, how about the rest of us who pay rates and who do not get any representatives on this board, and what about the territorial authorities who are duly elected and appointed to look after our waters? But they are being told, “No, the Government knows best. We’re reducing your numbers and we will only have four big entities, and we will have equal representatives from territorial authority representatives as well as mana whenua—50:50.”

I can actually say that my background is also ethnic. I come from a Korean background, and I don’t know if many members actually know this, but my surname, Lee, it is actually Yi, but the prefix before the Lee indicates what clan I come from. I am a Gyeongju Lee, and if I come from Gyeongju Lee, my name also gives an indication as to what generation I am. In Korea, we also have clan land issues, so I do actually understand the issue that Māori have in terms of iwi and hapū and the clan land—the land that belongs to the whole hapū and iwi—and the kinds of disputes that go on within the family as well.

When the Minister talked about how the representation was really significant and that it wasn’t—I’m just trying to understand. Do even the mana whenua get true representation when you talk about having at least 60-odd iwi and hapū groupings in the Waikato alone, I think? The territorial authorities number more than 20—I can’t remember exactly how many there were—and if we are talking about having 50:50 seats in this particular grouping on one of the new entities that this bill makes, how many representatives is that going to be, Minister, exactly in the number, and can that number be said to be truly representative and democratic?

The Minister mentioned the democracy issue in this. She actually brought that in. When you consider the fact that New Zealand is supposed to be a democracy, and I sort of feel that this clause, in particular—and I support, honestly, Supplementary Order Paper 287, which Simon Watts has presented. It amends this bill to make changes to make sure of the “composition of the regional representative groups to ensure that every territorial authority is represented in the regional representative group.”, because if we are talking about a democracy—and the Minister said that she has read some of the submissions. When there are more than 88,000 submissions to the select committee and the majority of them actually oppose this bill, I don’t understand how she can honestly say that she has listened to the people who oppose it. Even the councils that she talks about opposed this bill.

The people of New Zealand oppose this bill and we oppose this bill, and I think she should actually take heed of some of the valuable suggestions that members in this committee are in fact making, because it certainly might make this bill better. On sitting here just listening to the Minister, it sounds typical of this Labour Government, as it is the Labour Government who knows best and nobody else can tell them what to do.

Thank you, Madam Chair. We’ve canvassed many issues this morning and last night on this Water Services Entities Bill, and this morning in the committee, Minister Mahuta—in response to a question I put to her as to why only iwi and hapū are able to make Te Mana o te Wai statements, which will direct the water services entities to give effect to those statements—said, “New Zealand’s different.” New Zealand’s different! Well, that aligns quite closely with what another Labour Minister said recently that “Democracy’s different in New Zealand. That’s why we need co-governance and need to allocate rights to groups based on who their ancestors were.” And yet for all New Zealanders, water is a taonga that we share. We have common interests in the resource whether we’re recreational fishers, farmers, people who grow things like fruit and vegetables or livestock, but apparently New Zealand’s different.

Well, we must be quite different, because if we look at the membership of the boards that will be established under this bill, the boards of water services entities, if we come to Subpart 6 of the bill, for people following at home or from their offices, it’s clause 57, “Membership of [the] board”. Now, there will be four water services entities set up—each one with potentially tens of billions of dollars’ worth of assets under management. And what clause 57 says, when it comes to the membership of the board, is what the board appointment committee—and that appointment committee, of course, will be the co-governance - based committee, the regional representative group—must have account for when they’re looking for board members of these corporations managing tens of billions of dollars of assets. I mean, Watercare alone is $11 billion. You add a few more councils on to it, and you’re probably getting close to $15 billion. Of course, they must have performance monitoring and governance experience—it’s very helpful—and network and infrastructure industries experience; for example, water services network and infrastructure industries. So I assume that means people who currently work for organisations like Watercare or Wellington Water or for other contractors who actually deliver the physical network services—very, very helpful.

And then we come on down the list, and I was looking for financial management. I mean, we’re talking about corporations that will have billions of dollars’ worth of assets under their management, and that potentially would have a million customers and will be generating revenues of billions of dollars per annum. But I was looking down the list under “Membership of [the] board” at all the skills: public health; environment, well of course that’s important; perspective of consumers and communities; of course, principles of Te Tiriti, Treaty of Waitangi. Financial management is not included. It’s remarkable. Financial management is not included. But when we consider the way this Government has treated taxpayer funds in the last three years, raising $40 billion more from taxpayers, hosing it out as if actually just spending money is an achievement in itself, it’s not surprising that they’ve omitted financial acumen from the requirements for members of boards of these large water services entities.

And that is why ACT has proposed an amendment to the bill. We’ve proposed in Supplementary Order Paper 294 to insert paragraph (g) into subclause 57(1). Financial management should be a requirement. We think it would be remarkable if the Government voted against this amendment. We assume that omitting financial management was simply an oversight, a design error, not intentional. So ACT wants to offer our Supplementary Order Paper 294, our amendment to the bill. And we also would propose that in addition, we add an additional subclause—57(3) we propose—that the board committee must ensure that at least half the members have knowledge of, and experience in relation to, performance monitoring and governance in network infrastructure industries. The ACT Party firmly believes that if we are going to deliver better water infrastructure and get better value for money and integrate infrastructure with growth in our urban environments, a majority of the people running water corporations should have performance monitoring and governance credentials and network and infrastructure industry experience and, in addition, financial management experience.

Now, it seems remarkable that in the design of this bill over many years—in fact, the first briefing I had from Department of Internal Affairs officials was in June 2020 during the election campaign, where they offered the ACT Party—David Seymour and myself—an insight into the thinking behind this reform programme. And the ACT Party’s engaged constructively with the Department of Internal Affairs. We’ve engaged with submitters, and we’ve tried to get the important aspects of infrastructure reform incorporated into this bill. But we haven’t been able to convince officials or the Minister to include financial management up until this point, and that is why we proposed this amendment. To the Minister in the chair, Minister Little, can I suggest that you consult with the Department of Internal Affairs officials who are sitting in the Chamber with us right now this morning and ask them if it is an oversight that financial management is not included in the criteria for board membership of these multi-billion dollar water services entities? Because it seems remarkable and it seems an oversight.

So what ACT would say is New Zealand is not different to the rest of the world. We are people who live in a country that is grappling with complex problems. We are growing. People come here to live here. We want to deliver better quality urban environments, cities that we can aspire for our children and grandchildren to inherit, and an environment that we expect to improve over time, taking account of all the mistakes we’ve made in the past, like putting waste-water treatment plants and foul sewage outfalls right where people customarily take shellfish or fish. We would never do that these days, but we don’t need a co-governance system imposed on infrastructure organisations to tell us that it’s a bad idea to put the sewage treatment plant outfall right on top of a shellfish bed, which is what councils and Governments used to do 50 or 100 years ago. We’ve moved on. New Zealand is no different to other countries. We’re grappling with the same complex problems. We don’t need co-governance. We don’t need allocation of special rights to groups based on who their grandparents were—their ancestors were—to tell us how to manage water.

What we do need are people who have experience in performance monitoring and governance of very large organisations of network infrastructure and the industries that support that, whether that be in planning, design, construction, maintenance of these networks. And we also need—it’s absolutely vital—financial management. One of the fundamental reasons that the ACT Party agrees we need reform in the way three waters is managed is because of the poor financial performance of some councils which have under-invested and instead chosen to spend ratepayers’ money on flamboyant things—like very expensive town halls and council buildings, for example—instead of actually fixing the underground pipes. Now to the Minister in the chair, Minister Little, I’d like you to respond to this. ACT feels very, very strongly that this is an important amendment that should have cross-party support, adding financial management into the qualifications for membership of water services entities boards. The ACT Party would urge the Minister and the Government to take this on. Thank you, Madam Chair.

Thank you, Madam Chair, and thank you, members, for your recent contributions. Can I start with the contribution from Simon Court, and his most recent contribution was to implore the committee to accept his Supplementary Order Paper (SOP) amending clause 57 to add a reference to financial management. As the member himself acknowledged in his contribution, clause 57 already provides, in the list of collective board skills, performance monitoring and governance. It is pretty obvious, I would have thought, that performance monitoring includes not just operational performance but financial performance too. It remains a director’s duty that those on boards of this nature must ensure that the financial decisions that they take and the obligations they enter into, the debts they take on, are consistent with the long-term survival, and therefore performance, of the entity. Likewise, a collective skill in governance means the full range of governance skills that anybody on a board of an entity has to engage in. So, with all due respect to the member, I think that his SOP doesn’t add anything to the clause as it is at the moment. His words would be otiose.

That member, and also Melissa Lee before him, spoke to the committee about the representatives on the regional representative groups and about a concern about the make-up of that representation, in particular representatives of mana whenua, or Māori. Melissa Lee raised the point: is the representation even adequate? Is it democratic? Simon Court raised the issue that we don’t need to specify the make-up—we’re all in this together and everybody has water and water needs. None of those contributions mentions what does distinguish the New Zealand constitution, and that is the place and status of Te Tiriti o Waitangi. That is a document that carries legal effect. It has been recognised now by generations of our most senior courts and judges, and is something that the Crown must take account of. It is right and proper that the obligations of the Crown in any endeavour are appropriately reflected in the legislation covering those endeavours—so, when it comes to the governance of water and ensuring the provision of safe drinking water, of the safe disposal of wastewater, of the safe management of stormwater, that the legislation reflects and represents the Crown’s obligations as articulated by successive and many judgments of our most senior courts, as well as the Waitangi Tribunal. And that is what the legislation does.

The regional representative groups set a strategic direction for the entities. They are not making operational decisions. It is a matter for the boards of those entities to do that. I would just say to the committee that as a consequence of hearing from local government, as a consequence of hearing from communities, considering the many submissions that have accompanied the passage of this bill through the House, very careful consideration has been given to the make-up of those various levels of representation and governance—the regional representative group and the board of the entity—to make sure that an appropriate balance is struck, to ensure that there is good quality governance focused on what we expect of the entities, and also effective representation of the local government owners and of mana whenua, in full discharge of the Crown’s obligations under the Treaty. The bill in its current state truly reflects that.

Oh, thank you very much, Madam Chair. I just want to return to a comment made by the previous Minister in the chair, Nanaia Mahuta, who disputed that Part 2 here that we’re talking about, the establishment of the water services entities—she disputed that this wasn’t a Government forcibly seizing ratepayer owned assets. She disputed that it wasn’t Government theft by stealth. I’d like to ask a question of the Minister that if they’re so confident that it isn’t those two things, then why not have a clause in Part 2 that would allow councils to opt out? Because, of course, at the start of this process there was good faith, and the councils were told that they could opt out of these mega water entities. So if the bill and the reform programme is such a good idea, as they proclaim, why would they not give the councils the choice to choose if they would join or not? Because, of course, if it was as good as their fake news ads proclaim, then councils would quite happily choose to opt in. Maybe there might be a mixed response. Maybe some councils do and some councils don’t. But why is there not the clause that would allow exactly what this Government promised councils at the start of this process—that they could opt out?

On the second point I’d like to make is just talking a bit more when the Minister, the previous Minister in the chair, talked about how it wasn’t a matter so much of ethnicity around co-governance obligations or co-governance structures in this bill; it was the obligations of the Treaty. I think it would be interesting to hear from this Minister, and he did somewhat talk to the point in his previous contribution, but I would like to hear—well, I suppose if we look at the Environment Canterbury (ECan) bill, there was some discussion whether the Treaty trumped democracy by undemocratically appointing two commissioners. So under the obligations of the Treaty in this bill, does the Treaty trump ratepayer-owned assets? It would be interesting to understand the interpretation of the Treaty in this bill as well.

Then my final point is the good Supplementary Order Paper (SOP) 287 by my colleague Simon Watts, which talks about replacing clause 27(2) to include at least one representative from each territorial authority covered by the entity. So what it’s saying is in those representative groups, every territorial authority within that grouping would have one seat. I would argue by the current bill, not having the ability for every council to be representative speaks to the heart of the matter that this Government fundamentally does not understand rural and regional New Zealand. Now, they sent out their Associate Minister, who went round every council and said “Look, you know”—doffed his cap—“we’re here to listen.” They all said to him, “You’re a great guy, but wrong party.” But they were left with the expectation that this Government was going to listen to them. The Prime Minister also made the statement when the three mayors got up in Auckland, Mayor Brown, Gordon, and Mauger, and the Prime Minister said, “We’re happy to listen.” So why would you not demonstrate you are listening with each territorial authority to include at least one seat, as described in SOP 287 by my colleague Simon Watts, that they can have one seat on every representative group as well as explaining to them, as they were promised at the start of this process, if it’s such a good idea, why can’t each council opt out, as they were promised?

What an excellent choice, Madam Chair. I just wanted to turn to Schedule 2, Part 1. As the Chair is probably aware, I represent the area of Port Waikato, half of which is in the Auckland City area, and the other half is in what will, obviously, become the Western-Central Water Services Entity.

Hon Louise Upston: Mighty Waikato.

ANDREW BAYLY: Mighty Waikato. But the first question I’ve got is about the issue around what happens if Watercare, or, actually, Mayor Brown, says no. What’s going to be the result? I don’t think we’ve canvassed this before. What happens if there is a revolt and Auckland Council says, “We’re not going to put Watercare into this new arrangement.”, and takes the Government to court? I’d just like to know what the Government’s Plan B option is.

Hon Mark Mitchell: Yeah, what is it?

ANDREW BAYLY: We don’t know—we don’t know, Mr Mitchell. That’s a real prospect. Actually, one might say it’s actually a call of democracy from the new Mayor of Auckland. And, of course, there’s other councils rebelling, as well—we know about Christchurch, etc. But that is the first question. I acknowledge the Minister stood up before, which is very good. What would be the outcome if Auckland Council chose not to proceed with this?

But the second thing is: if you take the Watercare area, which covers all of Auckland, the big issue I’ve got is, even in that big area, we’ve got competing priorities. Down south in my area, around Pukekohe and Drury, which is part of Judith Collins’ Papakura electorate—massive development going on; a whole lot of big developers doing thousands of homes, and the councillors love talking about the size of Hamilton being located in there in the next 30 years. And then if you go up to West Auckland and up towards where Mr Mitchell is the good MP, massive developments there. So, even in the city of Auckland, there are these huge competing priorities around “Do we put more infrastructure down south? Do we put it up over to the west?”

And, of course, Labour will assume that everybody can just borrow money and do everything at once. Well, actually, not. Particularly if you’re a board member, you have prioritisation; you have limitations around how much you can do. And, of course, what are the parameters for the prioritisation? So I’m just drawing on Watercare as an example. When you, then, expand it to include Auckland Council, Far North District Council, Kaipara District Council, and the Whangarei District Council, what a minefield about how this new entity will prioritise it.

I heard the Minister talking about, before, the representation group. But just going back to Matt Doocey’s point just before, even if one of these councils, like the Far North, doesn’t have a representative on that regional group, how, then, do we make sure that when the board comes together, it has a clear prioritisation of objectives? So one is that they will have this big kahuna of developments going on in Auckland, and then they’ve got obviously big social issues in places like Kaikohe, Kamo, all of those sorts of areas—how will the board take into account and prioritise that investment, particularly where you may not have a council advocate sitting on the representative board or actually have a direct influence in terms of who the board member is overseeing the affairs of the CEO?

I think that is one of the biggest things that we heard when Simon Watts and I were out going around the country, like all the members of the Finance and Expenditure Committee, hearing from people. The central issue that people had, and certainly from the mayors, was: “How do we have accountability?” When we asked them “What happens when you get the call, as the mayor, that you’ve got broken down water services in a small part of rural New Zealand, such as around the banks of the Kaipara; where do you send that person to and how do you make sure that that is dealt with in a timely manner?” That lack of accountability is one of the core reasons why so many councillors and mayors came to see us and say, “This is bad for our local communities.”

Thank you, Madam Chair. I want to bring the attention of the Minister, the committee, and those people watching at home, sitting in their offices concerned, to what the Government has proposed and whether it can be achieved. So I want to come back to some of the evidence that we heard at select committee, particularly around the status of water entities. If we go and look at clause 15 of the bill—15(1), “A water services entity—” it says—“(a) is a body corporate; and” (b) it’s accordingly a legal entity separate from the entity’s board members, the employees, and separate from the Crown. This entity is separate from the Crown. The Minister Nanaia Mahuta has said repeatedly that one of the objectives of this reform is to create balance-sheet separation. So what does “balance-sheet separation” mean for those people watching or listening to this debate?

Currently, according to the Minister, the water assets of councils are integrated with all the other councils’ assets—that’s their roads, their parks, their libraries, their swimming pools, and their buildings. And what this bill proposes to do is to separate out the water assets, put them behind a ring-fenced, new water service entity and say that they are separate now from the Crown and from council, and that if they’re separate, what that means is these water service entities won’t be hamstrung or handbraked by all of the debt that councils currently have; they’ll be able to raise new debt against these assets so that they can build more infrastructure.

In principle, that sounds fine. But what the Finance and Expenditure Committee heard was that the Department of Internal Affairs had Standard & Poor’s carry out an investigation into the balance-sheet separation and into the credit ratings of these water service entities. And what Standard & Poor’s told the Department of Internal Affairs, and the Minister knows this because I’ve asked her in written questions, is that if these entities are truly to be ring-fenced from the Crown and councils and have an independent balance-sheet—balance-sheet separation—then their credit rating is based on the amount of leverage and debt they’re going to take on. And let’s just start with the debt the Government’s going to dump into them on day one, that’s $2.5 billion worth of debt that this Government will have incurred through what they call a no worse off and better-off funding. In other words, the bribes they’re giving to council—not for three waters stuff right now—they can spend on swings and slides, or swimming pools, or parks, or whatever they like. That’s the bribe that this Government’s offered councils so that they will agree to participate.

But if we look at what Standard & Poor’s said, if they truly achieve balance-sheet separation, they’ll be so highly leveraged that these companies will be a high risk and their credit rating won’t be the A++ credit rating that councils currently have, it’ll be a B credit rating—a B credit rating. That’s one level above junk-bond status. Now, that’s in the Standard & Poor’s report that was given to the Department of Internal Affairs that was tabled at select committee. These entities will be one level above junk-bond status. So how is it possible that they can continue to access debt and continue to borrow and to fund infrastructure growth when this Government is going to dump a $2.5 billion debt straight on to them on day one without a single new piece of water infrastructure—pipe, manhole, or pump—being delivered? And it’s going to leverage them up with nine to 10 times their asset value in what’s regarded as a highly leveraged and high risk transaction. I’ve had advice from people who work in mergers and acquisition, who do this kind of financial transaction, and they say you shouldn’t do it.

Now, Minister, would you please tell us: can you achieve balance-sheet separation without these entities ending up with a B credit rating, one level above junk-bond status, or will they still be inextricably linked to the Crown balance sheet? Because you can’t have it both ways, Minister.

Thank you, Madam Chair. Thank you for the members who’ve made their contributions; I’ll address each of them seriatim.

I’ll start with Matt Doocey’s contribution, who, apart from quoting the Hon Nanaia Mahuta several times, asked the question, “Why not allow councils to opt out?” I think even Mr Doocey acknowledged that there is a range and a mix of views across local authorities in New Zealand.

In the end, this is about a coherent regime that allows us, as a country, to manage the extraordinary challenges that we face with underground water infrastructure and to make sure we have water infrastructure that meets the needs of a healthy future. That is to say, good water reticulation, where that is required, and good discharge and disposal of waste water and, most importantly, right around the country, is effective management of stormwater, because that is a growing challenge right now and has been the victim of massive under-investment for many years. In order to achieve that, we need a coherent, cohesive regime, and that’s what this bill sets up.

Mr Doocey also made claims about the Treaty “trumping democracy” or the Treaty trumping ratepayer-owned assets. I’ll just make this point: the Treaty is a product of democracy. The Treaty has been incorporated into the democratic constitution of New Zealand, not just by its mere existence, but by, now, recognition and acceptance by the courts, exercising their common law jurisdiction, and, now, of course, by this Parliament through successive legislation, principally starting in 1975, but pretty much since then.

The Treaty is not some sort of adjunct; it is infused with the obligations of the Crown, and, for that matter, this Parliament. When it is making laws and it is regulating, in this case, natural resources or regulating communities, there is no “trumping” of anything; it is a foundation on which we must legislate.

Mr Doocey then also referred to a proposed amendment, a Supplementary Order Paper, for clause 27(2), about the number of local government representatives. Clause 27(2) says, “Each regional representative group consists of a number of regional representatives that is provided for in the constitution”—that’s set out in section 91 of the bill, and is 12 regional representatives or—“any greater number of regional representatives.” That’s the end of it, so there is flexibility in representatives at that sort of level that I think addresses what I think was the implied concern from Mr Doocey’s submissions just now.

To Andrew Bayly, he asked, I think, “What would Wayne Brown do?” The one thing I know Wayne Brown would do is to comply with the law; that, I think, can be said without a shadow of a doubt. He asked about the parameters of prioritisation.

I think—the members I’m mixing up—of course, there is a deep political interest in what happens with urban, provincial, and other infrastructure, particularly of the infrastructure that this legislation will cover. There are political concerns about it, but in the end, what we need to be sure of is that there is a coherent way of managing those extraordinary challenges of the future. So we do have people who are focused on the long term—the long-term investments that are 50-, 100-plus year investments that we have to be thinking about. Because, with all due respect to local government and its history in this country, it simply has not been possible to have a local government cohort that has been capable of thinking 50- to 100- to 150-years ahead when it comes to these vital investments.

And finally, to Simon Court, who asks, “Can, under clause 15 of the bill, balance sheet truly be separated from the Crown?” Yes, it can be. It’s tied to these entities. There’s transfer of debt from local government to the new entities. The new entities will, just as we do with other local government entities and other Crown entities, we’ll also back them with Crown liquidity facilities to enable them to do their job. But the job of those boards discharging their performance and governance management duties will be to ensure that long-term decisions of amenities ensure their financial survival.

Thank you, Madam Chair. Look, it’s my pleasure to give my first speech on this bill, the Water Services Entities Bill, and in relation in particular to clause 27 and the co-governance arrangements. We’ve heard the Minister give a couple of speeches—

Shanan Halbert: Repeat.

Hon PAUL GOLDSMITH: —on this topic. It’s not a repeat; it’s my first speech—

Shanan Halbert: Your colleagues have been repeating the same issues.

Hon PAUL GOLDSMITH: Yes, and it deserves repetition because it’s an important issue. So we’ve heard from the Minister the Hon Andrew Little, who has said—and in response to what the Minister has said—“Well, the Treaty requires this, because the Treaty is a foundation or constitutional document.” Therefore, it follows, according to his logic, that, in the management of water in New Zealand, we should have regional groups to decide on things and they should have an equal number of representatives from the territorial authorities—the councils—and an equal number of mana whenua representatives, which is what we referred to as co-governance: the idea that there should be 50:50 decision-making between mana whenua—so iwi appointees—and representatives of those who have been democratically elected through our local government arrangements.

So the question I have of the Minister is: whereabouts in the Treaty, and in consequent arrangements, has he drawn the conclusion that it requires 50:50 decision-making in this area? And, if he thinks it does, how far does he think that logic extends? Should that extend, fundamentally, to how Parliament is organised? Should we have 50:50 decision-making between the Treaty partners in our parliamentary setting? And I ask this—and he’ll say, “Oh, well, no, no, we’re not suggesting that.” Well, that’s precisely the direction that his Government is taking us, in the local government context.

This bill is one; the other bill that we’ve just dealt with is the Canterbury regional council bill, which moved away from that principle—which is enshrined in our New Zealand Bill of Rights Act around equal suffrage—moved away from that to appointees by Ngāi Tahu in that case. And speeches from that side of the House indicated that it was the first step and that we want to go further, with a clear goal for a 50:50 arrangement in those places at local government elections. We’ve got some documents circulating proposing that that approach of mana whenua appointments to local councils should be extended—

CHAIRPERSON (Hon Jacqui Dean): Order! Order! Coming back to the bill.

Hon PAUL GOLDSMITH: Yes, well, a core part of this bill is the idea of co-governance in the arrangement of the three-water arrangements, and I’m talking about the context—

CHAIRPERSON (Hon Jacqui Dean): OK. Order! Order! We are addressing the committee stage of the Water Services Entities Bill—Part 2 and Schedule 2. While it is OK to give some context around the speech, the focus of any speech by a member is to focus on what is in the bill, not so much what isn’t. So I’ll ask the Hon Paul Goldsmith to come more closely to the bill.

Hon PAUL GOLDSMITH: A core part of this bill, which I am talking about right here, right now, is the 50:50 co-governance arrangements outlined in this legislation, and I am trying to explain my opposition to that, and that is what I’m trying to do—

CHAIRPERSON (Hon Jacqui Dean): OK, and so the member is welcome to do that, but he’s not welcome to reflect on the ruling of the Chair. So I am warning him that if he wishes to proceed, he addresses Part 2.

Hon PAUL GOLDSMITH: Thank you, Madam Chair. And so the question I have for the Minister is: where in the Treaty does it outline that there should be 50:50 decision-making in this role? And, if he can point me to that, where does he draw the line from that? Does it extend just to matters facing “natural resources”, a phrase that he used? Does he think that people of Māori ethnicity have a greater interest in water than other New Zealanders? And if so, please, I’d be interested to know why he thinks that. And, secondly, I’d also like to understand how he thinks the normal mechanisms of accountability will apply if we have 50 percent of the decision-making bodies appointed rather than responsible or accountable to the ballot box?

Madam Chair, thank you again. I’ll just respond to the submissions by Paul Goldsmith on this part and, in particular, his references to clause 27. So I think the member asked where in the Treaty it is; the member will know, through the jurisprudence on the Treaty, that now goes—good, in-depth jurisprudence developed at the very least since 1987, following the State-owned enterprises (SOEs) decision, but, actually, some decisions before then. One of the articulated principles of the Treaty is partnership—so a sense that, at least in many respects, and certainly on natural resources, the Crown doesn’t assume the sole right to make decisions about natural resources, given the other principle of the Treaty, which is the protection principle, protecting the taonga of Māori.

If the member is concerned about the jurisprudence—how it has evolved, what it actually means in practice—there’s a number of people whom he might want to talk to for a further elucidation. I could think of people like Sir Doug Graham, who very much led the way in the early settlements following the changes to the legislation in 1986; people like Christopher Finlayson; people like Sir Doug Kidd, as he now is—all very clearly articulate about the Treaty. They’re steeped in the Treaty and its jurisprudence. If he’s concerned about this reference to interests in water by Māori, he needs to go no further than the evidence that Sir William English gave to the Waitangi Tribunal at a time when he was the Minister of Finance, on the issues about water, and particularly in the challenge over the asset sale or partial sale of the gentailer SOEs. So there are sources of authority the member—

CHAIRPERSON (Hon Jacqui Dean): Order! Staying with the bill.

Hon ANDREW LITTLE: But, Madam Chair, thank you for that. In relation to representation on the regional representation groups and on the board, as I said earlier, I argue that a very good balance has been achieved—that the regional representative groups provide a level of strategic direction in their representation from mana whenua and from local government, and then the boards, who are making the operational decisions for the entities that must deliver the services we expect to deliver. They are boards appointed for particular skills and competencies that are needed to run the water services entities. In total, that level of representation achieves a good balance to achieve what we need.

Thank you, Madam Chair; you’re very kind. I suppose the question that the Minister didn’t answer that I want to get him to explain is how he has taken the step from the idea of partnership, in the broad context, to 50:50 decision-making, as outlined in clause 27 of this bill. Because it is not obvious to me, and to many New Zealanders, that a broad concept of partnership under the Treaty overrides what up until now in New Zealand has been a widely understood concept that all New Zealanders should have an equal say in matters affecting their lives, and who they elect to make decisions about matters affecting their lives. So this Government—this Government—has made a very significant shift in its interpretation of what partnership means to mean 50:50 decision making. That, in our belief, is totally contrary to the basic understanding of our democratic values, which is that all New Zealanders should have an equal say, either at the ballot box, or—primarily at the ballot box—

Chlöe Swarbrick: Unless they’re 16.

Hon PAUL GOLDSMITH: Indeed; all New Zealanders over the age of 18, and I’m glad that our colleagues in the House want to debate those issues, and that’s fair enough, but in this matter, we’re talking about New Zealanders over the age of 18. So I’d like to understand, from the Minister, why his Government has decided to take the leap from a broad idea of partnership to understanding that to mean 50:50 decision-making. If he comes back and says, “Oh, well, the previous National Government did it in relation to a few settlements.”, yes, indeed, we did, with a strict focus on matters before a settlement claim in a discrete issue in the management of something like the Waikaremoana park or a particular river. This is a much broader issue as it affects decisions affecting the lives of everyday New Zealanders of all ethnicities, so that is what I’m trying to get him to explain.

If his argument is that, “Well, we’ve decided that partnership means 50:50 decision-making.”, the second question I have, which he didn’t answer, was how far does that extend? Can he give the Committee an undertaking that it’s his intention and the Government’s intention to extend that to every part of Government decision-making?

Thank you, Madam Chair, for the call, and to speak, particularly on an area we heard a lot about in the submission period. I know from my own community, and all members around the House would have had discussions with their own electorates to hear feedback on the Water Services Entities Bill. The key themes, Minister, that have come up in my community are, one, around how do ratepayers keep up with the sheer costs—the 7 percent increase that Aucklanders saw introduced this year—and the potential rising of those costs.

The second one, particularly for the North Shore, was around the closure of a number of North Shore beaches and how do we protect our water from contamination.

The third one was around how do we ensure that local voice, that taxpayers, ratepayers, continue to have their say and have a contribution. In Auckland it’s quite unique, of course, because we are under Watercare infrastructure already. But as the Finance and Expenditure Committee travelled around the country to hear those submissions, very strongly that came through around how do local people have their say? How do they contribute to the issues around water infrastructure in their own areas, whether that be in Tāmaki-makau-rau Auckland or whether that be in more regional areas? I’d just appreciate if you just break that down a little bit more, Minister, to avoid any confusion and be very specific around how we are protecting local voice.

Thank you, Madam Chair. I’m happy to respond further to Paul Goldsmith and his contributions. I think, with all due respect to Mr Goldsmith, conflating what is a multi-layer level of decision making—strategic, with the regional representative group, and operational and entity-focused for the board—as somehow comprising 50:50 representation; it actually doesn’t. But as we have seen in other spheres—and he referred to decisions this Parliament has already made and legislation it’s passed—we have, at various levels, allowed a level of representation that reflects a Treaty partnership, and it is 50:50 representation. But when it comes to decisions—decisions about operations; decisions about extensions of networks, for example; decisions about incurring debt in order to carry out infrastructure construction—that is a matter for the board and the board making that with the repository of skills reflected in it. That repository of skills reflects the statutory requirements for appointments to those boards. That is not 50:50 representation, and given, Madam Chair, your ruling about the scope of the debate, I won’t engage any further on the particular points that the member has raised.

To Shanan Halbert, there is a very important challenge there for ratepayers, who are, ultimately, through their councils, the owners of these entities, who are there to manage these water assets and what have you. It is going to be through those bodies and through their representatives that are drawn from their councils to keep ratepayers informed about what is happening. Of course, ratepayers will take a very keen interest in ensuring they continue to enjoy the benefit of running water, where they are on a reticulated water supply, and for the discharge of waste water, and everybody—provincial, rural, metropolitan—will be concerned about stormwater and the management of stormwater. So it’ll be for those representatives and the councils from which they are drawn to make sure that their ratepayers are kept informed.

In terms of local voice, I refer the member to clause 29, which refers to the collective duty of the regional representative group, and outlines a number of duties and functions and powers which are described as wholly or mostly for the benefit of all consumers and communities in the entity service, taking into account the diversity of consumers and the community, and taking into account interests of the future as well. I think that is an issue that when we think about the life of infrastructure that we need, and the very long life that goes beyond many, many cycles of the electoral cycle of local government, and, indeed, of central government, it’s important that the decision makers at the time, whether at the board level or at the regional representative group level, take account of that long-term interest. I’m confident that in the framework that we’ve established in the bill to date, we will achieve that.

Thank you very much, Madam Chair. I want to move us to Schedule 2, which is part of Part 2 of this bill, and an area that I haven’t got in to substantial conversation to date on—but it’s pretty significant, because Schedule 2 outlines the water services entities and their service areas. There’s been a huge amount of conversation through the select committee process in regards to this; not only how many entities there are—which of course has been landed on before—but what Schedule 2, Parts 1 to 4 outlines is all of the councils and where they’re going to reside under this new model.

My questions for the Minister in the chair potentially may be quite applicable, because the Minister may be aware of other reforms currently under way by the Government that are also putting in place different geographical boundaries—I think, off the cuff, around health reforms, or the localities model; I think about the recent Resource Management Act reforms in terms of boundaries. So my question here to the Minister is, what consideration and what conversation was had with other Ministers in other portfolios, in terms of looking to try and align the boundary that aligns on the map of New Zealand in order to get some consistency in terms of how we are managing and operating specific services—in this case water services—across this country?

I’ll give you an example—and it’s in regards to Part 4 of Schedule 2, and you’ll see a little footnote at the bottom with two elements: Marlborough District Council and Tasman District Council. Both of those councils are actually part of Part 3, which is Eastern and Central, including Wellington. So in effect, the top part of the North Island has been cut off, and because they’ve used boundary lines that were through the Ngāi Tahu settlement process—and I acknowledge that that was some of the rationale. But why, then, is that potentially inconsistent with other reforms across other aspects of Government, and in particular—if I link back to clauses 11 and 12 of Part 2, which, if I remember off the cuff, are the objectives and functions of the water services entities. As the Minister articulated in her opening conversation on Part 2, the substantive aspect of this bill is around synergies and the achievement of financial synergies and other synergies, but particularly financial synergies in regards to operational expenditure and capital expenditure.

You can see where I’m going with this—Marlborough and Tasman districts are up the top part of the South Island and all of the remaining elements of the entity of which they are part of sit in the lower North Island. There are no water pipes across the Cook Strait—maybe I’m out of touch, but I’m pretty sure that’s the case. There are no synergies in regards to slicing off those two elements at the top of the North Island, but there’s a huge amount of synergy that they have with other parts of the South Island, and if I look at the boundary councils that are on the cusp of Marlborough and Tasman, there’s synergies there; we can’t argue with that. But why has the Minister, in this instance, in effect trumped the Ngāi Tahu boundary over and above clause 11 and 12—which is the pure purpose of this bill, to achieve more efficient, safe, and healthy drinking water—why has that been, in effect, deprioritised in this example? And based on that, how does the Minister foresee, in terms of the interaction occurring on waterways—particularly in the stormwater aspect, that in effect, spans both the councils that are in Schedule 2, Part 4: the Southern Water Services entity, and those that are part of the Eastern Water Entity. Because don’t forget, these two entities are going to be managed by two separate boards and two separate regional groups, two different call centres—one probably in Wellington, one in Christchurch. I’d appreciate it if the Minister could provide some context and some background to conversations in that regard.

Thank you, Madam Chair, and thank you to Mr Watts for that—I think, you know, a very important question. And I can tell him, too—there were considerations given to aligning regions, as we often do when we’re looking at organisations that span the country, looking at regions that might align with regions that have been established for other purposes. And the member is right; if you went through some of the big Government departments and operations, you will find New Zealand carved up in a multiplicity of different sorts of ways.

In relation to, and at the time of course, we were looking at this programme of work and this legislation. We were also doing the health reforms, and we’ve got four regions scoped out for that, and we did wonder whether there was some alignment. A couple of factors in this: first of all, in order to get the iwi Māori input along the lines that is provided for in the framework we’ve got on this legislation, it has to be noted that there is iwi Māori input, along the lines that is provided for in the framework that we’ve got on this legislation. It has to be noted that there are iwi who do straddle the Cook Strait—so iwi here in this part of the North Island rohe and also the top of the South Island. So it was about getting some consistency there. And the second factor was—in the end, this is about catchments, particularly when it comes to stormwater. This is about catchments and making sure that when the entities are making decisions about how best to manage water flows throughout catchments, they’re reference points for consultation and make sense in that respect. And on that basis we determined the regions as they are defined.

I move, That the question be now put.

Thank you, Madam Chair. I want to bring the Minister the Hon Andrew Little back to the comments that he made in response to my question about balance sheet separation. I think, Minister, you’ve laid it bare: there is no balance sheet separation. You stated that these water service entities will require Crown liquidity—a backstop lending function. That’s exactly the point that Standard & Poor’s made in their report to the Department of Internal Affairs that was tabled with the Finance and Expenditure Committee. So you don’t have balance sheet separation; you, essentially, have all of the debt and all of the liabilities that these water service entities will have, basically, recorded against the Crown’s balance sheet. What on earth is the point of that? Either you’re going to stand up water service entities, some kind of corporation, whether it be as ACT proposes, a voluntary amalgamation of assets and services—that’s what ACT proposes in our alternative three-waters infrastructure plan—which can be truly independent if they want to be, or you go through this charade, which is what this Government has done, of pretending these entities, by moving these assets out of local government control into a centralised entity, can somehow achieve balance sheet separation. Minister, thank you; you’ve made it clear that’s not going to happen. These entities will be backstopped by the Crown.

So what would be a better proposition? This is what ACT would do—and I want to test this on you, Minister. When it comes to funding and financing water services, water infrastructure development, if we think about all of the options that are available to the Government right now, we have the Infrastructure Funding and Financing Act. That allows for special purpose vehicles—essentially, a bond to be raised—to raise money to fund infrastructure. Right now, there’s an application sitting on the Minister for Infrastructure’s desk for an upgrade to the Moa Point Wastewater Treatment Plant, just here in Wellington. Now, the Infrastructure Funding and Financing Act, which was passed by Labour in 2020, actually says that, look, if you’ve got a piece of infrastructure that you want to develop, build new, renovate, you should be able to go and raise debt to pay for it now, to pay for the design and construction, as long as you’ve got a revenue stream out into the future—in other words, you can send people a bill, whether they’re ratepayers or commercial water users—and that revenue will then pay down the debt over time. It’s called a special purpose vehicle, to people watching at home or listening to this debate. The current Infrastructure Funding and Financing Act, which Labour passed, allows for that. Moa Point Wastewater Treatment Plant is the first cab off the rank—it’s the first project that’s been proposed under that model—and Wellington Water is waiting for a decision from the Labour Government on that. That’s one way to fund and finance infrastructure, and we don’t need the Water Services Entities Bill to do that.

Now, another way might be, if you’re a land developer, for example, or if you’re a big industrial water user, that you might want to go out and raise a revenue bond to fund your infrastructure. A local council could do this, too. In fact, up until the 1990s, one of the main ways that local governments raised money to pay for infrastructure, including things like the Auckland Harbour Bridge, was to raise a bond and borrow the money from the likes of super funds, institutional funds, pension plans—the kinds of places that people put their money for their retirement, and those institutions have money that they want to invest in long-term, safe assets that give a good return for people who need to collect their pension years down the track. That’s how local government used to raise money—through revenue bonds. That’s a great idea; ACT supports that. That was proposed by Dr Eric Crampton of the New Zealand Initiative. He said, “We’ve already got these tools, Minister. And, in fact, we don’t need balance sheet separation; we just need to let local government asset owners have access to more flexible funding and financing arrangements.” That’s what the ACT Party supports.

So, Minister, would you please respond to this question: why, simply, isn’t it that you let the Infrastructure Funding and Financing Act and these more flexible tools deliver the money that these assets need?

Thank you, Madam Chair. I’ll try to respond as briefly as I can to Mr Court’s points that he raised. So, in terms of balance sheet separation, the advice we’ve had is that, notwithstanding any credit liquidity facility that the Government has previously offered to local government and would continue to offer, that doesn’t affect the Crown’s credit rating, but it enables, as we do with local government when they get financially distressed, and we have had some in recent years—it simply means that that body can continue to do its job on behalf of its ratepayers as it stabilises and sorts itself out.

In terms of the ACT Party’s alternative approaches, the reality is that these entities will not be constrained in terms of the ways they may wish to raise finance. If they want to issue bonds, that will be a matter that they can consider. It is possible that the infrastructure investment facility may be available for water projects run by any of these entities, but my understanding is that, in terms of planning and preparation for these entities, it won’t necessarily be the most attractive option for them. They will find and work out their ways of financing their projects as they make decisions that affect their balance sheets in due course. In the end, they will be charged with making sure that the infrastructure they are responsible for is functioning and working, the long-term planning is happening, and they seek financing accordingly.

Members, the committee is suspended and will resume after oral questions this afternoon.

House resumed.

Sitting suspended from 12.58 p.m. to 2 p.m.