Water Services Entities Bill

Members, we now come to Part 3. Part 3 is the debate on clauses 115 to 128 and Schedule 4, “Operation of water services entities.” The question is that Part 3 stand part.

As we move on to Part 3, it’s important to remind the committee that core to the design features of this water reform was to ensure that we had a public model for water service delivery that would safeguard against privatisation, in the interests of all New Zealanders. In this particular part, we have protections against privatisation. However, can I say that there will be many around this House who will feel, and also to those who are listening, that we should have gone further, and the Government wanted to go further. We wrote a letter to every party in Parliament, seeking their support to entrench a clause within the legislation to give an absolute assurance that privatisation would not occur. That is certainly the view of members on this side of the House and the Government. However, National and ACT clearly did not want to give that type of assurance.

We regret that, because, when we stand in front of this House to progress this particular bill, we want all New Zealanders to know that the House, when they say they’re against privatisation, actually mean it—when they say they are against privatisation, they mean it. But some people want to create a perception that they don’t want privatisation; however, they are offering up ways in which you could better privatise the system, and we have already seen what happened in relation to the electricity reforms. So this particular part has a protection against privatisation as best as we could achieve. It ensures that contracts and joint arrangements are lessened from 35 years to 15 years, and there are members around the Finance and Expenditure Committee who are able to actually tell the story.

But just a little insight: Labour supported initially, within the context of local government contracts, 15-year contracts, because we knew that that would deliver local advantage. It was the National Party that changed the legislation to 35-year contracts, and some of those contracts now are not held by New Zealand companies. We want to see a return back to contracting locally. We want to ensure that those who are already in the service delivery space of the water sector, those small plumbers or those medium-sized enterprises, can grow and they’ll have the opportunity to do that. Part of the rationale of bringing the contracts back to a 15-year period will give a horizon of growth to those medium-sized entities, to be able to be strong contenders, to secure contracts within their local regions, and I support the select committee in their considerations on this front.

There are also employment provisions within Part 3 that are clearly outlined, and I am sure that there may well be members around the select committee who can add value to the conversations that they had around these provisions. But, insofar as a water services entity is concerned, it is actually our ambition to ensure, right from the get-go when these entities are established, that they will be good employers. So I welcome, again, the addition and the recommendations of the select committee in clause 120(2)(i) and (j) of the bill, where they said, in (i), we want to “recognise the importance of achieving pay equity between female and male employees” and, in (j), “recognise the importance of decisions about remuneration being free from bias, including, but not limited to, gender bias”, because we know, in certain sectors, across industries, and especially hard infrastructure industries, there is a significant difference. But, heck, let’s be real: we know that there’s a significant gender pay gap across a number of sectors. So I’m really glad they wrote that into the legislation. It makes absolutely clear our intent.

In terms of the role of the water service entity and the professional board that sits over it, let me just assure, for the sake of clarity—and I am impinging on the will of the committee—the professional boards that direct these water service entities do not have co-governance around the board; it is skills based, and it ensures that we have the very best skills to guide and direct the role of the water service entities. There’s a bit of conflation that’s been happening around the committee in relation to the role of these boards, but what we have learnt, in terms of Crown entities, is that we migrate many of the provisions of Crown entities to the professional direction of these entities that we are standing up. We know that we can continue to ensure, for the public’s interest, that the requisite skills will be there to direct these four entities.

Well, thank you very much, Mr Chair. It’s difficult not to reflect on some of the comments that the Minister for Local Government has just made in regards to Part 3, and particularly around the privatisation aspects. This is cynical, political spin. Right from the outset, the Labour Party have used every opportunity to bring up this concept of privatisation. And do you know what? The only ones talking about privatisation are those members on the other side of the House. At no stage throughout this process has this even been a conversation or a topic in which the National Party has entertained. Categorically, to that cynical spin that was being pushed into the market by whoever, we were very categorical and continue to be categorical in that there is no intention around nationalisation of such assets.

So the Minister’s playing out this conversation around “Well, you’re not supporting this.” Well, how the heck can you support it when it’s bound up inside of a bill that is fundamentally structured to fail? Well, you can’t. It’s not a bill standing out by itself or anything like that. So it is what it is: cynical, political spin, and Kiwis can see through that.

The clauses I want to get into in regards to Part 3 relate, in particular, to the contracting out of services. The Minister made some throwaway comments in her opening introduction around changes—and that’s great. She actually sent quite an interesting signal to the market just in her statement there, particularly to those private entities that have strong and long-lasting relationships with councils across this country. If you come from overseas, you’re not welcome in this country—that’s what the Minister has just said in regards to those organisations that may be based overseas or have head offices overseas that have been contributing and delivering water services in this country for decades and decades. The Minister has said, “You are not welcome and things are going to change, we’re bringing it home.” Well, that’s interesting. It’s interesting in a couple of facets. But it very much, I think, fundamentally goes to the heart of an ideological reform agenda driven by this Government that is not based on trying to get a bill that is going to be sustaining and outlast this term of this Government but a bill that is actually going to deal with the problems that we face in this country.

Every major party in this House acknowledges that reform and change and improvement and water infrastructure across this country is required. We’re all at that point, even though there’s a cynical, political spin that comes in and says that we don’t. It is absolute rubbish to have any other position around that.

But the point around this contracting out, in regards to clauses 117 and 118 in particular, relate to the comments—and I’m interested around the comments from the Minister in regards to can any organisation that isn’t New Zealand headquartered or a multinational that’s currently working in water services in New Zealand, can those organisations take from what the Minister has just said that your lifespan in this country is not going to last longer than 15 years? It’s all over, you might as well actually just pack up and head home with all of those skill sets and capabilities and values that you bring to this country, to try and improve our infrastructure. Is the message that you’re sending to all of those private multinational companies that are currently consulting and spending a huge amount of money on consultants who spend on this reform that we’re paying through the nose for—is the message to them “Go home”? That is, in effect, the statement that has been made around this Chamber.

If that is the case, my question to other Kiwis around this country is that what we need in this country in regards to achieving an optimal future State where we have best-in-class infrastructure, we have fresh and clean drinking water, is that what you’re saying? That is a market signal that couldn’t be much more categorical than what we’ve heard today.

So the question there—clauses 117 and 118; I’m interested in the Minister’s perspective on that. Also, the comments, obviously, around privatisation—115. And I’ll come back in another call in regards to some questions I have in regards to the employment matters in regards to the bill. Thank you.

Thank you very much, Mr Chair, for the opportunity to contribute to this debate, which I’ve been enjoying, as, no doubt, everyone else who’s following—some excellent interrogation by colleague and friend Simon Watts, as well as others. I acknowledge the Minister answering questions, I hope that she can give some guidance to the House—and indeed, the nation—on three specific points within Part 3.

The first is in relation to clause 116, “Obligation to maintain water services”. I note at clause 116(2), that the water services entity is specifically precluded from doing any of the following, and the one I do want to hone in on, which is at clause 116(2)(a), “use water services infrastructure as security for any purpose”. Of course, in the language, “security” meaning the ability to secure a loan, to offer as what is sometimes referred to as collateral.

In other words, we have a piece of legislation that specifically says that it’s not possible to use the value of these assets, which will be considerable—that much is common ground between all the parties; we all understand that these assets cost a considerable amount of money. And it will not be possible to borrow money, acknowledging the value and using that as security for it, which in orthodox financing arrangement terms is an extraordinary opportunity-cost. I just wonder if the Minister can explain some of her thinking as to why that is a feature of this legislation. In a context where the political explanation has evolved over time to be that ratepayers’ rates would go up were it not for the very specific form of these changes being made by the Government, it does seem extraordinary that they’re going to do things the hard way. So that’s the first point on which I would appreciate a response from the Minister.

The second is in the very next clause, clause 117, “Contracts relating to provision of water services”. This talks about the 15-year contract limit. My colleague and friend Simon Watts has already spoken about the implications of that and what kind of a time frame, and, actually, to be fair, the Minister herself has spoken in that general area as well in her previous contribution.

My question is whether it’s possible, given this clause, to have a contract for 15 years, or up to 15 years, but with the right of renewal for longer. So, technically, looking at the wording of clause 117(1), “a water services entity may enter into a contract for any aspect of the operation of all or part of water services for a term not longer than 15 years”—but that could be an initial term. So I wonder if the Minister can rule out the possibility that a water services entity enter into a contract, let’s say for 10 years, but with a right of a renewal with certain conditions being met for a further 10 and then a further 10 after that—so a 10 plus 10 plus 10 arrangement. I do see the Minister following along closely, for which I thank her.

I’ll just raise, within my remaining time within this call, my third and final question within this part—at least for now—which is at clause 127, “Method of contracting”. Others have well-traversed the make-up of boards; of being different kinds of board members, from mana whenua and more generally, from a local government context—or “territorial authorities”, I think they’re referred to within this legislation and elsewhere on the statute book.

I see that an obligation can be entered into in the form of a deed requiring at least the signatures of two board members, so possibly more. I wonder if it would be prudent, and if the Minister has considered saying—as would often be the case for joint-venture type arrangement, whereby at least one of those members who is a signatory to such a deed should be from one category of board member or other. The obvious point would be that if you had at least one board member from one side of the equation, so to speak, and one from the other, whether you’d categorise it as a joint venture or co-governance, etc.

Nevertheless, it does seem important, given what we understand the rationale of the legislation to be, that you would have at least one person from each of those different perspectives needing to sign off, otherwise it could be two from one side or two from the other, at a minimum, without the input of the other. That does seem contrary to the notion of partnership that’s being promoted as the rationale for this legislation, and, indeed, the changes as a whole.

Thank you, Mr Chair. So on this Part 3, the Minister noted that the Finance and Expenditure Committee had made several improvements to it, and one of the other improvements to it was to ensure that in clause 115, “Safeguarding independence of water services entities”, there was also no attempt at safeguarding the ability of territorial authorities to carry out their normal regulatory functions, so I’m making that very clear. But one of the key changes is around this contracting out, because there was quite a lot of comment in submissions, particularly from local communities and from the local contractors who might already provide some services to councils, around the importance of their businesses locally. And going back to the original provision in the Local Government Act, as the recommendation of the select committee was, to a 15-year term does provide some protection against contracting out to big overseas companies like Veolia. There is a strong opposition amongst the public to having our water services managed and operated by overseas corporates which are more interested in dividends going back offshore, wanting them to be managed locally. So that 15-year term, which is totally consistent with the Local Government Act before the National Party changed it and extended it up to 35 years, is something the Green Party strongly supports.

There is also Supplementary Order Paper (SOP) 285 in my name which really reinforces the obligation on the water services entities to continue to maintain and provide water services, because there was, again, from the Aotearoa water organisation and many individual submitters, a strong concern about privatisation and a desire for provisions which protected against that and for these to be entrenched, particularly in submissions also from the local government sector. As a departmental report noted, and I quote, “Many submitters noted that while there was no current appetite in Parliament for water assets to be privatised, this could change in future, as we saw under a former National Government with the privatisation of electricity assets.” So the Green Party supports—and the Government did explore and we explored in select committee—entrenching provisions in the bill.

So my SOP seeks to entrench clause 116 and Schedule 4, which relates to divestment, through a tabled amendment to the SOP so that there is an obligation to maintain ownership and control of water services and significant assets. This SOP would mean that this reserve provision, clause 116 and Schedule 4, couldn’t be repealed or amended unless a 60 percent majority of all members of the House supported that and that it had been carried by a majority of the ballot votes cast at a poll of electors of the general and Māori electorates. This SOP responds to that public concern that we avoid privatisation of water services and we maintain them and public ownership—with the public interest in ensuring that all New Zealanders have access to affordable water services of high quality. And that the significant revenue involved in operating these services, significant investment involved—we don’t want overseas companies taking the services and operating them primarily for profit. So while there was certainly advice to the select committee that normally entrenched provisions relate to constitutional matters, water is essential to life, so it is of sufficient importance that these services are maintained in public ownership. I hope that National will reconsider its opposition to entrenchment to signal that it does support maintaining public ownership and investment and support this SOP 285.

Mr Chair, on the matter of joint contracting, I really want to clarify statements that have been made in this House to try and position the Government, but wrongly so. On the issue of joint contracting, the justification for bringing the contracts down from 35 years to 15 years—which was considered by the Finance and Expenditure Committee—I think, had sound consideration. That was to open up the opportunity for local procurement to take place. Now, I have met with peak bodies of the water sector stakeholders every year since I have been a Minister of Local Government, and I’m really encouraged because that organisation is growing. I’m encouraged because even though there is international participation in that body, they understand the importance in the water sector to contract locally. Why? Because residents, ratepayers, need the ability to pick up the phone and know that someone who knows their community is on their way to actually fix the pipes. It’s that simple. So there is no conspiracy here about limiting big offshore providers, but there is every opportunity under these water reforms to ensure that local procurement takes place. And those are the interests that members on this side of the House that support the bill want to ensure. We heard the views of communities, they were pretty sceptical about whether or not local contracting will continue under reform and a model that looks to create these four large entities. It will continue.

On the matter of privatisation and prior to expressing a view on Supplementary Order Paper (SOP) 285 that Eugenie Sage has tabled in this House, there are a range of protections in the legislation on this instance. Seventy-five percent of the regional representative group need to agree on a matter of that significance, and if they agree, 100 percent of territorial authorities need to agree on that particular issue of privatisation, and if they agree, 75 percent of electors will need to participate. So we have worked as best we can to bake in protections against privatisation, because members of this Government do not want to see that happen in the water sector as we’ve seen elsewhere—such as in the electricity sector. On that basis, and it’s important to be able to respond in a way that puts into context why then we didn’t have an entrenchment clause, a stronger provision, in the legislation.

We accepted the advice of the Attorney-General, which says that there is a high constitutional threshold. And that came from the Crown Law Office—select committee members will be well aware of that advice. There is a high constitutional threshold to be reached in order to put such a threshold within legislation, and often it’s on constitutional matters—of which this bill is not—and it would be a novel approach to include an entrenchment clause. However, in saying that, I think that the member for the Green Party who has put up, still, and tested the will of the House in relation to having an entrenchment cause is a worthy matter to be considered, because at least the Government and the Greens are very clear about our position on privatisation: we don’t want to see it. Again, we wrote a letter to every party in the House. They did not agree. But if people who are listening to this debate are concerned about having maximum protections at every level, then it would make sense to have a novel approach of an entrenchment clause if it were able to be achieved. We know that while this particular SOP may not pass the constitutional threshold, there is a moral obligation of people who believe that privatisation should not occur to support that particular SOP.

Just in terms of ensuring, for completeness’s sake, we’re addressing the issues that were raised in the House, the member brought up concerns in relation to—forgive me—I think it was clause 127 of the bill. When I look back at the report of the committee, there were no actual submissions on that particular clause, but I may take the opportunity further on in the debate to actually come back on those particular issues. There were no submitters that submitted on the concerns that he’s raised, so I take it at face value that he read the bill and it raised concerns in his own mind.

Thank you, Mr Chair. Clause 118 in Part 3, I’m just trying to get my head around. Minister, you’ve made some statements about joint contracting realities, and they will stay in play. Again, I’m going through the lens of rural New Zealand, and you spoke of local procurement that’s existing and in place. I draw your attention to clause 118(2)(c), which says, “any other interested persons that the board considers appropriate.” In that instance, is there not the potentiality that existing contracts could be undone if there is objection at a board level by a person or persons that the board considers appropriate?

Again, when you actually think about that in a rural context, a lot of these contracts have been—I won’t say multigenerational but they’ve been in play a long time. Is there potential in this legislation to undo existing agreements at catchment level, local drainage board level, and have it taken over to one of the major entities? You can see how this is quite convoluted. Can you please explain that for rural listeners in New Zealand who are deeply concerned about where this goes and how it affects their local assets?

Thank you, Madam Chair. A changing world, isn’t it? It’s a fast-moving world. Hey, I think we just heard it from the Minister that we’re going to have a clause put up by the Green Party that there will be no privatisation—I think we’re going to find out, what, in another couple of hours? I don’t know—when we get through this next part. But if you’re listening in, you’ve just heard it; you heard that there will be a clause.

Hey, look, it is absolutely unnecessary. The chances of privatisation, as laid out in this bill, are virtually nil, because it’s got to go through the board, it’s got to go through the regional representation group—75 percent—and then it’s going to go back to the council, they’ve got to sign off, and then you’re going to go through the public, and they’ve got to sign off—a super majority all the time. There’s not a hope in dickens that that’s going to take place. And so you don’t need the clause, Minister; it is a waste of time, because it is never going to be able to be privatised under the current arrangements.

Anyway, I want to turn to this issue about contracting, because aw—that’s another form of privatisation, isn’t it? And I’m referring to clause 117 if you’re just looking at the bill. Gee, it’s horrible having those foreigners, those experts from overseas! You know, “Nice that you come here for a bit of tourism, but don’t ever have anything to do with managing us or telling us what to do in New Zealand, because we don’t like you! We only like to suck your money out of you if you happen to come to New Zealand as a tourist from overseas!” That’s the view—that’s the weird view—that you get from the other side: “Don’t tell us what to do with our water assets.”

So I look at this clause—117(2). It reads: “If a water services entity enters into a contract … it must—(a)”—and this is for Mr Shanan Halbert from the North Shore, because he’s had a bit of difficulty listening to this—

Hon Member: Northcote.

ANDREW BAYLY: —Northcote—“continue to be legally responsible for providing the water services;”. So even if you contract out, the water services entity is still legally responsible. The second thing: “(b) maintain ownership of the infrastructure and assets relating to the water services;”. Well, that means you can’t sell it. So that’s the second requirement if you’re contracting out. The third one: “(c) retain control over”—guess it—“(i) the pricing of water services; and (ii) developing policy related to the delivery of water services.”

Well, hey, don’t you think that’s a pretty comprehensive sort of restriction on what you can do under the contracting model? And yet—yet—the Government is so fixated on this issue about contracting out because we don’t like these people from overseas; they’re bad people! They’ve now reduced the contracting period from 35 to 15 years. So the first question is: if we were to get some expertise in—and, gee, don’t we need it in New Zealand, particularly with the way that these guys do infrastructure projects, or the lack of them? Maybe they should get some people in to help—I’m talking about the Labour Government—and get some experts in from overseas to help them actually do some infrastructure projects, like a road, let alone doing any water projects.

Has anyone actually asked what is the optimum, if you did want to get some expertise? We’ve got experts in doing the tunnelling in two projects in Auckland right now, but we could not contract them for more than 15 years. Has anyone actually asked what are the standard terms for people to take on contracting periods, and particularly if you want to bring in someone with expertise? These are the types of contracts that they will need scale to actually be able to do. And yet, for some reason, and I’d love the Minister to explain why, we’ve got 15 years. Where has that evidence come from that 15 is the optimum? And, in fact, if you wanted to go down that route of trying to get some experts in, and 15 years is the maximum period that you can get away with, I would suggest there are many examples of people wanting to do it for longer.

Thank you, Madam Chair. I’m interested in taking a look at clause 119 and clause 120, particularly, in Part 3. So clause 119 is the “Employment of chief executive”, and clause 120 is “Water services entity to be [a] good employer”—and I note that the Minister spent some time on this, about being a good employer. Now, in my time as—what I hope was—a good employer, two of the key parts to being a good employer were acting in good faith and not indulging in pre-determination.

So I’m quite interested to see, or to hear from the Minister, around how the appointment of a chief executive of a water services entity in clause 119 “(1) is to be appointed by the entity’s board”; (2) the terms and conditions of employment [are to] be agreed between the board and the chief executive.” And then there’s a range of factors there—“(3) … (a) the legal, commercial, and operational context of the entity … “(c) public interest and prudent stewardship of public resources”, and, importantly, “(d) relevant market information.” So I’m interested to know how these positions have been advertised already before the legislation has been passed. And is that a good employer acting in good faith, and is that a good employer not showing pre-determination? Because you would have to wonder about the consultation that’s going on, particularly as we sit here hour upon hour, trying to work through clause by clause where we might be able to improve this legislation that the Minister—as she did with the 88,000-plus submissions, actually has no intention of taking any notice of, because it has been pre-determined. So a consultation period, a consultation process which actually isn’t going to have anything taken from it because the positions have been advertised; the employment conditions haven’t taken into account anything that might possibly change as we work through this process. So I’m very keen to hear from the Minister, who was at pains to say how important it would be to act as a good employer.

Now, I know I keep harking back to the purpose about efficiencies, and I know that is in Part 1, but of course the matters in here around employment and being a good employer also impact on that purpose of being more efficient, more affordable, and more of a better performance. And so I’d like the Minister to explain—and this has come from a regional council, where they have talked about their staff being pinched already for these entities and being paid $30,000 more a year. I’m just interested to know—and again, because I’ve seen it happen so badly in the failed merger of the polytechnics and the international training organisations, that they’ve taken reasonably, moderately-paid people and they’ve increased the head office with, hugely, what I would consider are overpaid people. And so it looks to me like this is starting to happen already, before the legislation is through. If employers are being pinched off the regional, local authorities now, and those sort of offers of $30k more—I’m really, really struggling to see how this entity is going to be more efficient, more cost-sustainable, and perform better by paying more for people to do the same jobs, and at the same time, we’re going to cut down on external contractors.

Thank you, Madam Chair, and congratulations and thank you for stepping up to be a temporary Chairperson given the sickness on our side of the Chamber. We thank you very much for that.

I want to respond very briefly to Andrew Bayly’s comments on clause 117. I know he has directed the question to the Minister and she may respond to that, but my concern with that is that Mr Bayly was part of the select committee process that actually made the decision to make this amendment from 35 years down to 15. So he’s asking the Minister what were the considerations the select committee went under to get to this point, from 35 to 15. The Hon Eugene Sage also spoke to that in the Chamber earlier today, so some good listening skills would really be appreciated because then we wouldn’t have to repeat what we did at the select committee and what we did here in the Chamber.

So let me say again, for the purposes of the Chamber—because it was the select committee that recommended it. It was also in the commentary on the bill, which, again, the member can read. The time limit set for the term of contractual arrangements represents a balance between flexibility and enabling long-term assessments that support cost-effective procurement and service delivery, especially given the long-lasting nature of water services infrastructure. That, again, was part of the select committee process. I remember that member asking a particular question and saying, “Why have we gone to 15 years? We agreed to 35.” And, again, officials answered it on the spot. So I ask the member to go back to the commentary on the bill and have a good read of it, because this particular change, from 35 to 15, was something that the select committee took a cautious approach to, and that’s the reason why it’s in this bill.

What I did want to ask the Minister about were clauses 120 and 121. The select committee did spend a lot of time reflecting on what could be a good employer, and we received a number of submissions on what could be a good employer. That included training and development. But at the time the committee thought we would balance it and allow the entities to put in some of those extra recommendations from submitters. But what I note is that the Minister looked to clarify some of the parts around the Public Service Act, so I ask the Minister if she can just take the committee through what she intends and what is the policy intent of a water services entity to be a good employer. Again, we were really fortunate to have a number of employment lawyers on the Finance and Expenditure Committee. We spent a lot of time on making sure that we covered most bases. There were some elements that didn’t make the revised tracked version of the bill, and I’d just like the Minister to come through about what her policy intent is around those clauses.

I welcome the member’s clarification of the discussion that took place at the select committee in relation to the joint contracting arrangements and the lessening of the period from 35 years to 15 years. Upon further investigation of the submissions, what I also noticed is that many submitters themselves felt that 35-year contracts were effectively a type of privatisation, and I don’t think they were casting aspersions on who the contract holder was. I just think they expressed a preference that if there could be local procurement, it would be a preference and it would be an advantage to New Zealand and it would have a local advantage. That’s the first thing.

Back to the question from Barbara Edmonds, and back to the point in relation to water service entities being a good employer. Well, part of the guidance, really, is around the formation of the policy, which is set out in clause 120(1), (2), and (3), but actually the guide is section 73 of the Public Service Act 2020, with the addition, as I pointed to in my opening statements, of paragraphs (i) and (j) in that particular clause. Overall, though, when we go through each consideration, line by line, of what it takes to be a good employer, what we said was that the schedules of the Act is the application of how that can happen. So, for example, in Schedule 1 we see how there is good employer protection of those currently in the workforce, and how they will transition through into the water service entities. And if we can give any clear direction and certainty about being a good employer, it is to stand up legislation that gives certainty to the employment of a chief executive and then the chief executive’s role is to make sure that the transitional arrangements can be given effect primarily with staff, but then going through to infrastructure and architecture. The member on the other side of the Chamber talked about IT and the IT platform, and a lot of work’s gone into that. And you know what? We’ve learnt a lot from other big transition programmes, like for example—

Hon Member: I hope so.

Hon NANAIA MAHUTA: —if the member wants to listen—the Auckland reorganisation. In a practical sense, that is a comparable type of transition where a number of councils were brought together to create the super-city, and in fact that was policy led by the then National Government. And there were a lot of learnings at that time about what you can do better and the mistakes not to repeat, and, effectively, the key areas to prioritise in a big transition programme such as that was. So we brought that learning forward. It is in the local government sector—we brought it forward but we’ve applied the very best elements of the learning in this particular context.

In terms of the questions around the employment of a chief executive, the approach taken in clause 119 aligns to sections 117 and 118 of the Crown Entities Act, and, as I say, we’ve tried to ensure that we’re not reinventing the wheel unnecessarily. We’ve taken the very best elements of what we know to work and adopted it within the context of the legislation. Why? Because we want this to succeed, notwithstanding the comments on that side of the Chamber. Why? Because we know that being responsible and finding a solution means we get to seriously contemplate every eventuality that could arise. Why? Because we know that at the end of the day, if we do this well, and we will, all of us will benefit because we’ll have a more sustainable way of financing water infrastructure, and we will give our communities, our kids, and our families the assurance of safe drinking water. It doesn’t matter whether they come from a big community or a small community—that assurance alone means that those people in Te Kao who’ve had boil-water notices don’t have to go down that track. There have been many other places around New Zealand who have been in that instance.

Coming back to Part 3, Madam Chair—and thank you for your indulgence—there are other elements that I think are worthy of comment to the extent that we want to ensure, again, on the point of privatisation, that that is prescient in the minds of people who believe that change is necessary and believe that we can have a public model of water service delivery. We know that in the UK, for example, that private model of water service delivery doesn’t deliver the best advantage to their communities.

Thank you, Madam Chair. Minister, going back to Part 3—we’re in Part 3, obviously—clause 116 again, can I seek your clarification if you’d be so obliging. Clause 116(2): “In order to perform or exercise its duties, functions, or powers under this Act, a water services entity must not do any of the following: use water services assets infrastructure as security for that purpose”.

So obviously that’s balance sheet separation. And to your words earlier today, it gives council oversight over its asset and yet this entity decides how those assets are adjudicated and where the monies are spent and where contractors, services and/or procurement is directed to. How do you reconcile that?

Again, going back to the rural ends—and I’m sorry I’m going to bang on about the rural ends, but it’s dear to my heart as it is to many, many, many parts of the country. When there is no need for balance sheet separation because local authorities working hand in glove with local contractors have a continuing reality where asset management and health standards—i.e. we’re talking about Food Act health standards for freshwater consumption—are meeting the necessary standards. Do you want to clarify that? Because again, you’ve spoken about how councils will own their own assets and yet the water services entity decides how those assets are managed.

I’m trying to reconcile that, as are many rural New Zealanders, when we currently don’t have a lot of problems.

Thank you very much, Madam Chair. Just a short call from me on this one, as I think we’ve traversed quite a lot. I’d like to reflect back on the Hon Eugenie Sage’s Supplementary Order Paper that the Minister has noted they are going to support, and it’s quite interesting where, in effect, against the recommendations of the Attorney-General, we’re going to now imply this new trigger point, which is our “moral obligation”! Who cares what everyone else thinks; we’re just going to come up with a new position! No major party in this House has ever indicated an interest in privatisation. This is political spin by both the Greens and Labour to try and rark up a story that doesn’t exist. That is a real disappointment, but that is what is going on here—and against the advice of other players. They know it’s not a practical mechanism—that, even in an eventuality, which would never occur, this would be effective. It is cynical political spin.

The clause I want to talk about is in regards to clause 128(2)—a little addition that was made, and you have to go right to the end of the bill to find this—“The head office of a water services entity must be located within its service area.” Interesting. Interesting little clause, that one. I cast my mind back and I was remembering, in the select committee deliberations, as we were talking about a whole lot of issues of substance, this little one just slipped through the gaps. I’m wondering what was going on there. What was happening? What was the thinking? I’m looking at my colleague across the way there from the beautiful Hawke’s Bay. So my question, Minister, is as follows: I’m particularly interested around—and we go to Schedule 2; I know that’s part of a different part, but I’m using that for clarity and contrast just to ask this question—the Eastern-Central Water Services Entity, in Part 3. So we’ve got mighty councils in there like Hastings District Council and Napier City Council—I could go on and on, but I think we all know who they are. And then we’ve got other councils which are equally deserving: Wellington City Council and Porirua City Council, and Palmerston North City Council. The clause 128(2): “The head office of a water services entity must be located within its area.”

So my question, Minister, is quite simple: what advice, if any, have you had from your officials or officials in the Department of Internal Affairs around where they believe the head office should be located for Entity C? Is it the Hawke’s Bay or is it Wellington, or is it somewhere else? I’m interested to know if you’ve had any advice in regards to that. I mean, I would expect so, because we’re advertising for the CEO roles for these entities, which are noted in clauses as part of this part. So the conversation really has to be: so where are these head offices, and what constitutes a head office? Because we know—and my good colleague Andrew Bayly—what constitutes a head office in a tax sense, of course. Is it a centre of management, or is it where the majority of staff are, or is it where the decision-making is made?

The point I’m making here is that it’s pretty challenging to see how a head office could be located in any other location in Entity C that is not Wellington, because the reality is, with the co-location of Government services and entities and all of that, the decision making is happening in Wellington. So, on that basis, I’m interested in a little bit of context on that. And, while the Minister is on it, it would be good to get a little bit of advice around where the head office is going to be—where it’s going to be in the South Island, as well. And I’m appreciating, Madam Chair, I’m not sure about protocol—

Andrew Bayly: Madam Chair?

SIMON WATTS: I’m not sure about protocol in the House, but I’m still talking—

CHAIRPERSON (Barbara Kuriger): Mr Bayly, Mr Watts hasn’t finished yet.

SIMON WATTS: Yeah, thank you very much. Crikey! Sorry, Minister—oh, a new Minister—crikey. You close your eyes and you open them again and we’ve had a change! So let’s have a little bit of context around that point, and that’s all I’m going to say on that.

Thank you, Madam Chair. Work—we’ve been talking a lot about work in the Chamber today, and the regional economic development and opportunity for regions. I can refer to the region of Hawke’s Bay, and water infrastructure—additional local employees to upgrade and deliver these services is estimated at an additional 246 to 367 full-time jobs; and the economic development, growth, and potential increase: $577.2 million to $866.7 million. Now, that is a huge economic benefit, and that is why it is so important in this legislation that we’re seeing about growth and opportunities for the region.

I turn now to the question around addressing where the location of a head office should be in an entity and why it is so important when delivering services—whether it’s Hawke’s Bay, whether it’s the Wairarapa, whether it’s Wellington or Nelson; where operational services, regional operational services on the ground are delivered to create economic development and opportunity, a pipeline of work for the future, growing greater skills and opportunity for the future.

I asked the Minister to respond on where the opportunity growth and things like the head office location of an entity are and why that is part of the legislation. Thank you.

Thank you, Madam Chair, and congratulations on your temporary elevation.

CHAIRPERSON (Barbara Kuriger): Thank you.

Hon KIERAN McANULTY: To address the points made by Mr Cameron of the ACT Party, it’s the second time you’ve asked that question. I heard the Minister address it the first time, but I’m quite happy to go over it again. Rural communities that currently have a relationship with their local councils face a choice. They can choose to go it alone or they can choose to go with the entity. If they choose to go with the entity, then the relationship they currently have with their councils will be replicated with the entity. They will continue to have a say, usually through a joint committee. They’ll continue to make joint decisions on the way in which water services are delivered in their area. But I would encourage those communities to think very hard about the prospect of going alone. If they were to go alone, then they are faced with the responsibility by themselves to meet the water standards and cover the costs of those maintenance and upgrades by themselves. And for many of them, that is a prospect that is beyond their ability.

In regards to Mr Watts’ comments, again, a bit of repetition there. In fact, I’ve actually already addressed the issue around head office when we discussed Part 1, I believe, but I’ll just repeat the answer that I gave. Ultimately, whilst the provisions do require a head office to be within the service entities, each area within that will also continue to have the services placed there where possible, and that actually touches on a lot of what Anna Lorck—

Andrew Bayly: How do you know that?

Hon KIERAN McANULTY: —touched on. The question is, how do we know that? Because that’s what’s required, Mr Bayly. Well, ultimately what I think we’re seeing here is an attempt by the Opposition to drag this out. They’re asking the same questions over and over. A bit of scaremongering from Mr Watts as to asking questions such as “What does a head office mean?” Well, that’s clearly described in various pieces of legislation; trying to trip us into saying “Have you seen advice as to where the head office will be located?”, where he knows full well that the entities themselves decide where the head office will be.

So I think that covers it—I think that covers it.

Thank you very much, Madam Chair. I would just like to respond to a few comments that National members have made about the entrenchment provisions, because I think they are saying there is no need. But it was the National Government that, despite a major public campaign to keep our assets, passed the mixed ownership legislation that allowed for the privatisation of part of Meridian Energy, Mighty River Power, Genesis, and Air New Zealand. This was despite a massive public campaign in 2012 to gather signatures on the referendum to keep those energy companies and Air New Zealand in full public ownership.

So while members of this House may say there is no intention now to privatise any of the water services entities, they showed, back in 2012, that they would ignore more than 300,000 people who signed the referendum to keep our assets. And that’s why this entrenchment provision in this Supplementary Order Paper (SOP) is so important, because it highlights that it would require a 60 percent majority of the Parliament to change the fact that water services entities should maintain the provision of water services and maintain their assets. There may be no intention at the moment, but things change.

As the Minister noted, when the Electoral Act was first passed in 1993, provisions in that were entrenched. Even though Parliament can’t bind future parliaments, it is that moral power that an entrenchment provision has—that it’s a strong signal in this bill, that it represents the will of New Zealanders. There were a lot of submissions very concerned about privatisation, and, on this, in the Green Party and in the Labour Government—it’s through responding to those concerns that we ensure that water services assets and infrastructure and the operation of those services are maintained in public ownership.

The way the bill is structured, with local authorities having those shares in proportion to every 50,000 people, is signalling that they remain publicly owned, and this entrenchment provision further underlines that. That’s why it’s important. And if the National Party really had no intention of privatising in future, then it would support this SOP.

I move, That the question be now put.