Estimates Debate — Local Government

Thank you, Minister. Members, we now have the Minister of Local Government. The Minister is available from 4.08 until 5.08 to respond to your questions.

Thank you, Madam Chair. Look, it’s a pleasure to kick off the debate on the Estimates for Vote Internal Affairs and, specifically, looking at local government, as deputy chair of the Governance and Administration Committee. I just note that our committee is small but mighty, and I look forward to some excellent contributions from all sides of the committee of the whole House this evening regarding the work that we’ve been doing to examine the Estimates for the Budget.

So I just note that there are rather a number of ministerial roles and allocations within this particular vote, including some that are very relevant to local government but also others that have other interests that will be covered off at various points in this debate, including the digital economy and communications; diversity, inclusion and ethnic communities; and the ministry for racing—so the very important work of this committee. But, look, I’m going to focus my contribution—particularly because we have the Minister of Local Government here—with regard to some of the future work within the local government space, and I just note there is a significant amount of change occurring within local government. That change is critical to ensure that our local government is set up for communities.

I do want to indulge just for a moment and say that we’ve seen, in my electorate of Nelson in the last week, just how critical the role of local government is in our communities when we have the significant events like we’ve had. I just want to acknowledge the work of the Nelson mayor, Rachel Reese; the Tasman mayor, Tim King; and all of the staff from Nelson City Council and Tasman District Council, who have been doing an outstanding job, and our neighbours across in Marlborough also have been facing a very challenging situation.

We heard from the Minister and had a lot of discussion around the three waters reform. There were some specific discussions that I think would be really useful to hear about from the Minister around the better-off funding and how that will be released over the coming months, and around time frames.

One of the questions that came up during the Estimates hearing was around the transition—particularly around the use of technology—and I think that would probably be an area that the members of the committee of the whole House here may well find useful to hear about from the Minister. One of the areas we examined was the review into the future for local government, and I just want to note that this is actually a critical part of the work for local government going forward. We know that many of our councils are facing constrained funding environments, they’re facing increased complexity in the work that they’re doing, and they’re looking at how they can continue to be connecting with their communities as well as making the necessary investment in infrastructure that’s so important for housing, for adaptation around climate change, and for all of that work so that we are continuing to get the right people sitting around our council tables and so that councils are enabled to be able to do the work that they need to do with their communities.

I just also want to note that partnership between central government and local government, which is so critical, and this is one of the areas that we spoke about. Again, we’ve just seen that in the last week in my electorate—that critical relationship of the National Emergency Management Agency at the centre alongside local government to respond to the events that we’ve had.

Just a final note—before, I hope, that we’ll be able to hear from the Minister—around the importance of Māori representation in local government and what plans may be going forward. We’re about to have elections, where a number of our councils across the rohe have included Māori wards. If the Minister has got any plans around work to enable councils to bring our Māori voices to the table and also that work in partnership between our councils and iwi—any progress around that particular issue.

So we’ve had a detailed examination of the Estimates at select committee, and I look forward to the debate and look forward to hearing from the Minister. Thank you.

Can I thank the deputy chair of the Governance and Administration Committee for opening the debate and acknowledge the select committee for its consideration of what is a very dynamic and changing space in the area of local government. It is important to note that because local government affects the day-to-day wellbeing of our communities, the depth and range of issues that are confronted in local decision-making are significant, rapidly changing, and evolving to address not only the mainstay of what local government is about—which is democratic representation of community wellbeing across your social, economic, environmental, and cultural domains—but, increasingly, when we look at the natural disasters that are being addressed in the moment, local government also has to make a contribution in areas such as civil defence, natural disaster management, and, indeed, recovery, in a way that they haven’t experienced ever before. The point was made that, yes, we spent a lot of time discussing the three waters programme because it is a significant reform impacting on the sector, but we also discussed other aspects that local government want to see further evolved and that is in the area of future for local government. So I look forward to discussing both those areas in depth.

If I could point to the select committee report and their consideration of the Estimates, we spent a lot of time discussing aspects of the three waters reform, which I think should be further fleshed out in this debate. The better-off funding, for example, in our conversation around its intent, which was foreshadowed at the local government conference in July last year—in order to ensure that councils would be able to better participate in the reform programme, the better-off funding was intended to ensure that we could support local communities to transition to a sustainable and low emissions economy, including by building resilience to climate change and natural hazards. The funding could be used to enable housing development and growth, with a focus on brownfield and infill development opportunities, where those are available, and could support local place-making and improvements in community wellbeing.

I want to make really clear that the process for councils to participate was an open one. There’s no prescription on the way in which councils would be penalised—and I’ll characterise the use of the term very liberally—because of their stance on three waters. I made it really clear at select committee that the process would enable all councils to be able to access the better-off funding package for those purposes, as I’ve outlined in the debate.

In so far as the focus on the ICT component of the three waters reform programme—again, this is quite critical to the implementation of three waters reform. We discussed at length the business case that is currently being undertaken to set out what are the key components of a strategic shift in this area. And if I could just, I guess, make the point that where we have 67 councils currently delivering water services, what will be absolutely key to the strategic shift of moving water services into a different space will be the ICT capability. What we heard and what I responded to at select committee is that data and digital capability and system records functionality will form the core architecture of the business case that is being undertaken. I’m happy to respond to questions in that area. But when we think about the business case and what it will cover—a system of records, operational technology, modelling and reporting, corporate systems and systems of differentiation. If we look at models where there has been a system shift towards improved water service delivery—we might look north to Watercare and the components of that systems shift—you will find elements of that ICT functionality absolutely at the core of the service delivery improvement.

I do want to say that a lot of time was spent on costing in this area, and that is why it’s so necessary to undertake the business case so that we can get better modelling around cost. But, again, I make the point that this is an area where I anticipate that we will need to invest in for the long term. And I do want to make the point that, in the whole reform programme, we didn’t have a comprehensive data set of information from councils about the health of their water infrastructure network, about a range of data that would be necessary to do a thorough analysis around cost, existing costs, ongoing maintenance requirements, and new costs with a higher regime in place until we undertook this programme some four years ago.

We did spend a bit of time also—and that’s evidenced in the select committee report that there is uniform support for Taumata Arowai, which is the drinking-water regulator that is responsible for setting drinking-water standards and has oversight for waste water and stormwater. I think the most important point to highlight here is the role of Taumata Arowai as the dedicated drinking-water regulator, that, further on down the track, as higher drinking-water standards are being enforced unilaterally on the sector, there will be compliance costs. And, again, a lot of reports and research and information have gone into that aspect of the reform.

Can I now move briefly to the Review into the Future for Local Government. This is an exciting area, again supported by the local government sector, and it outlines a number of key pillars of expectation around what to expect in terms of the future fit aspect of local government continuing to contribute to our community. I just want to outline them as they’ve been highlighted in the report.

The panel have identified five key pillars: strengthening local democracy, which will be at the heart of ongoing system change for the sector; a stronger focus on wellbeing—and if I characterise how the sector talked about that, it is not just about roads, rates and rubbish; it is about people, it’s about place, and it’s about ensuring that place-making occurs in a way that helps to support regional growth and opportunity. It’s about authentic relationships with hapū, iwi, and Māori. In this regard, because Treaty settlements are now a growing reality of the fabric of our democracy, how they contribute to the broader wellbeing of communities becomes a conversation point, which is why local government, central government, and community alongside iwi talking about what the long-term investment into community wellbeing should look like is the conversation space we need to be in. Genuine partnerships between central and local government—and I take that feedback very seriously from the sector because it has been higgledy-piggledy in the past. What we know is that for an effective working relationship to occur so that local government can work effectively in the space that they are contributing to—that dynamic partnership between central and local government can continue to improve and that’s what we’ve been working on.

And then the big challenge for local government, which is an equitable source of funding for them to undertake the role that they’ve been tasked to do. Again, I’m really pleased that the Review into the Future for Local Government panel are looking into this space, off the back of the Productivity Commission’s recommendations, and, in terms of being in front of the issue, hearing other views from the local government sector about where further revenue could come from to enable councils to undertake the task that they are there to achieve on behalf of ratepayers.

Let me just briefly come to the issue of improving Māori representation in Government and actually acknowledge the work of Local Government New Zealand and the diversity strategy going into this next local body election. By the next local body elections this year, we will have 35 councils in total who will have the creation of Māori wards. That will see an increase of Māori representation around the table, and it will see a more dynamic representation and inclusion of issues that, for a long time, have been shut out of the local government space. I see this as an evolving area that will make a positive contribution to community wellbeing and ongoing investment, as I say, from Treaty settlements into the regional growth aspirations that exist across the whole of the country. Only good can come from that.

Thank you very much, Madam Chair, and thank you to the Minister for being here today to answer some questions in regards to local government. I want to start, firstly, by following on from the MP from Nelson, Rachel Boyack, to acknowledge the good work that local government have undertaken in Nelson, in Marlborough, and also in Tasman in regards to the response to the flooding and the natural disasters that have occurred there and, obviously, the broader team in regards to local government executive, but also civil defence and other first responders within those communities. I also acknowledge those in Northland and also in Taranaki who have also faced similar aspects. That really personifies, I think, the importance of our local communities and our local government in our country, and only those based locally can respond in the way in which we’ve seen in the past week to deal with local issues, and the importance of us making sure that we maintain and strengthen that is so very important.

Today, I’ve got a number of questions for the Minister, and I’ll run through in, hopefully, some groupings around that, and I’d be keen to get some good dialogue in regards to that. But the Minister articulated it in her opening statement in terms of the scale of reform that’s currently under way within the local government sector, and much of that we touched on when we went through the Estimates conversation in regards to three waters and other elements that have been touched on. But the scale of the reform in regards to the Resource Management Act; in regards to three waters; in regards to the future of local government, which was just articulated; in regards to civil defence; in regards to all elements—it’s all come at the same time. And it’s come off the back of COVID as well. So the implications, really, and what we’re hearing from local government across the country is that that is a significant weight of pressure on them, on their people, and they are now seeing concerns—or real reality—of high levels of turnover within their entities. I’d be interested, firstly, for the Minister to be able to articulate whether she is concerned in regards to the scale of turnover that the local government sector is, and has been, seeing in the past period, primarily due to the result of the scale of reform that is currently being undertaken by this Government, and what effect, if any, that has on the ability for local government to maintain a degree of continuity in terms of service delivery.

The second aspect, and probably the most fundamental aspect, of reform within local government—again, that we touched on in the Estimates conversation—was in regards to three waters, and I want to start, firstly, by really getting right back to the start of “What’s the problem we’re trying to fix?” I think it would be fair—and no major party is standing here saying that the current state is fit for purpose and perfect. I think everyone acknowledges that improvement is required in this space; the conversation is, really, how best to undertake that. But, if we get back to some of the key costs and benefits statistics that have been articulated, we’ve heard numbers bandied around of $120 billion to $180 billion of infrastructure cost. But I want the Minister to reflect in terms of that, because that was the basis in order to say why the scale of cost is required. When Castalia, who is one of the independent third-party assessment agencies, had a look at the financial data that was prepared by Scottish Water, or the Water Industry Commission for Scotland (WICS)—and I quote—“The reform scenario was based on faulty assumptions and flawed analysis.” Well, I can’t be much more categoric in terms of that statement, but that’s in regards, as I said, to that $120 billion to $180 billion fiscal number. Farrierswier, also another independent agency appointed in order to have a look at that financial modelling, said—and I quote—“WICS’ analysis cannot be used to definitively conclude that the amalgamation in and of itself will lead to material efficiency gains in New Zealand.” Those are both significant statements that underpin the fact that the whole basis of this fundamental reform in regards to three waters is based, and using Castalia’s words, on faulty assumptions and flawed analysis.

So, on that basis, I want to know from the Minister: how is she confident that we are embarking on such wide-scale reform and change in regards to three waters, when the underlying costs and benefits on which this whole reform process has been built is, as I’ve articulated, flawed? [Bell rung] I appreciate that was quite impactful! I will carry on for another period of time while we give the Minister a little bit of time to come up to that, because they are challenging questions, I acknowledge.

I also want to get on to—and it’s another element that we talked about as part of the Estimates process. It was in regards to the expenditure, particularly around consultants, on advertising. Again, the basis for this reform that was hammered home to Kiwi households across this country was a wide-ranging advertising campaign that was absolutely, as articulated, borderline in terms of what it was portraying in terms of the problem that exists in the country. Last week, as a process of select committee hearings in regards to the three waters reform, we heard time and time again: “Is your water broken in your district?”—“No.” “Do you have an issue with your toilets or your taps, all that?”—“No.” The issues that were raised in regards to challenges that communities and households across this country have are that, yes, at times there have been issues, but the overarching premise that our system is fundamentally broken and that we’ve got green slime coming out of our taps is absolutely materially flawed, and that analysis and that advertising is not accurate. So what I want to know from the Minister is, given the enormous problems that have recently been uncovered by the Auditor-General, does she feel that this money in regards to consultant spend and advertising spend on three waters reform was money well spent?

The second aspect—and it relates back to the comments I made in regards to the Scottish water commission, who were consulted extensively and at significant cost, I must also add, on three waters. Many councils have raised objections to those numbers. So what is the quality of assurance—and this is a question for the Minister—and independent review of those numbers that has been completed that gives her confidence that the underlying basis for this, one of most significant reforms in local government’s history—what assurance and independent review has she had that gives her assurance that what we’re undertaking is built on a strong platform of substantiated facts and costs and benefits? Because, as I articulated, I’ve given two independent examples which have been very clear in regards that this has not been the case.

And, lastly, in regards to the spend, does she believe that all the costings done by contractors on three waters—and there was a wide range of costings undertaken in regards to the reform—does she believe that those underlying costings undertaken by those consultants are accurate? And, if so, what scrutiny has she applied on those numbers to make sure that, when we’re hearing time after time after time from councillors saying, “The numbers that have been tabled are not materially accurate for my district”—and I don’t know, I lost count of how many times we heard that last week. I’ve told, and we’ve told, officials time and time again that these numbers are wrong; they’re inaccurate, they’re materially misstated, and words even stronger than that. What scrutiny has this Minister undertaken to make sure that the costings that have been undertaken by officials in regards to three waters are accurate? And how can she have any confidence that what the councils are saying when they’re arguing that these numbers are inaccurate—what confidence can she have in regards to that?

I’d like to just acknowledge the questions that have been asked, and given that the Finance and Expenditure Committee are currently considering the Water Services Entity Bill, I know that much of this information is being traversed at committee level, as well.

Firstly, to the broader question of the range of reform. I acknowledge that we are a progressive Government that have a number of priorities that we’re trying to address in a way that local government, in particular, will be feeling the burden and the weight of a range of reform expectations. But when we think about the challenge that we inherited— which was, effectively, for example, the lack of investment in social housing—and then trying to look at some of the challenges that we would need to address in order to ensure that councils, through the resource consent and planning process, could make that whole process better to enable housing, obviously the Resource Management Act reforms become the topic of focus. We know that the planning and consent system was very slow and needed to be improved to enable greater spatial planning and urban design to be able to be implemented for that purpose. It’s not an easy fix; I accept that.

Also, integrated investment in infrastructure becomes another core area of focus when we think about roading, we think about connectivity with rail, communications, and also water infrastructure to underpin what is going to be a necessary objective for New Zealand to unleash regional growth potential. We know that the system needs to be improved there.

So I’m not saying that any of the reform programme enables us to have an easy fix, but it’s a necessary set of objectives and challenges that the Government are confronting to better ensure that regional growth can take place, we can enable greater investment in housing, smart urban design, we can look at resilience factors, because we need to look at what’s happening with natural weather events—and, actually, when a natural weather event happens and stormwater, waste water seeps into your stormwater system and then into your rivers, streams, and oceans, that’s when you know that we don’t have a resilient network. These are the challenges that we’re trying to fix.

In terms of working with local government, that is the reason why I’ve established an oversight group to try and bring some of this reform into focus and look at those critical areas where we need greater alignment so that we can have the conversation with local government.

In terms of service delivery, I really want to focus on the three waters area and bring it all back to the Estimates debate. That is why we’ve invested funding to enable councils to engage with the transition support funding to help them work through some of the necessary aspects that will be critical to enable them to better ensure that standing up water reform in their favour is done in a way where they can assure themselves that their staff that their committing to working alongside the national transition unit are supported to help, in very practical ways, smaller councils, for example, being able to reap the benefits of the reform that we’re engaging in.

Now, the member asked—and he probably characterises a lot of what the public ask—“What is the problem that we’re trying to fix?” It’s simple: an unsustainable model of financing infrastructure. The situation that councils are dealing with right now is always having to make trade-offs between what they’re funding in their long-term plans. Often, because pipes under the ground aren’t as attractive as museums, as libraries, as community centres, and as pools, and the like, councils are always having to make a compromise in terms of what they’re funding. Quite frankly, the under-investment in infrastructure over a long period of time—over a long period of time; at least two or three decades—has led us to the point that we are at, which is: unless we find a financially sustainable way of investing in infrastructure, we are going to continue to under-invest in a way that will only mean more pipes bursting and busting in our communities, and I don’t want that to happen.

The other inefficiency of the current regime is that you’ve got 67 councils delivering water services, and, in and of itself, it’s not efficient, but, probably at a more granular level, not all councils can afford the types of experts that you would want for a high-performing system.

If we look at the reform that the Government is promoting, a high-performing system means that we can consolidate and professionalise the workforce in a way that everyone can have access—and by “everyone”, I mean the whole country can have access to professional peak bodies that are geared towards being able to enable a better focus on water infrastructure. Now, other countries do that but we can’t, because of the state of the current situation that we’re in.

The member also points to the figures of $120 billion to $185 billion required over the next 30 years to invest in water infrastructure, and that was a result, yes, of a study undertaken by the Water Industry Commission for Scotland (WICS). Now, this isn’t just any tinpot organisation; it is an organisation that has been looked to by European nations, many across the EU, many northern nations, certainly Ireland, and many countries, as an expert in their area. Now, when they put out the $120 billion, they also identified that this figure came from councils themselves and what information councils could offer up. That’s a really important point. You’ll recall, in my initial contribution, never before have we had a coherent, comprehensive set of information in relation to water infrastructure; now, I cannot say that we do now, but we know a hell of a lot more now than we did four years ago. Because we have got an international expert organisation helping us to better understand the state of our water infrastructure network, we can continue to do better in terms of the information that we gather, and the like. The $185 billion is if you factor in, for example, the unique features of our geography, the fact that we’re on a tectonic plate.

But some of the challenges—and it will be evident, as the member and members of the select committee investigate, those reports like farrierswier and GHD that peer-reviewed the WICS study, they will say that some of the shortcomings are, for example, in the area of climate change. How can you fully cost the impact of climate change in relation to a resilient water infrastructure network, when you’re starting from a very low baseline of information? That isn’t information you get. But we shouldn’t fear it; what we should so is say, “OK, if our long-term objective of going down the path of reform is to build a more resilient water infrastructure network for the whole of New Zealand, where everybody has the right to have clean, safe water, and then we’re improving our investment in our plants, our waste-water treatment plans, that will have a positive impact on our environment, our stormwater systems, smart urban design using the natural features that we have in the area, we can then continue to get more information around a resilient network.” That’s where I hope we get to.

I also want to come back to the question around consultancies, because there is an assumption that we have a range of consultants at our disposal in areas where, actually, we haven’t ventured into the level of system reform that other countries have had. So one of the things that we have to balance up—one, the public sector doesn’t have access to all of the requisite skills that are required to help us through the analysis, neither does local government, so we do, in some key areas, have to get consultants. I wish we didn’t; I wish we had a strong public service that includes central and local government where the experts are all there. That is not the reality. So we have had to go out to market in some critical areas to help us along the way.

The other question that the member raises is in relation to the public information campaign. I do note that assumptions have been made that the public knew about the state of their water system or perhaps had access to more information than in fact they did. A lot of people, to a large degree, don’t really know the health of their water system until they don’t have access to water or the water is brown or it tastes funny or there’s a leak outside of their house or when they turn the tap on, nothing’s happening and it’s not happening for a long time. That’s the extent of the public knowledge around their water and the health of their water infrastructure network. So we’re kind of faced with trying to ensure that we’ve got good communications going to people who, at a very surface level, that’s the extent of knowledge they have of their system. To elected representatives who we would believe would have greater knowledge, but, actually, around a lot of council tables, they contract out the decision making in this critical area to consultants. So even many of our elected representatives didn’t have the granular level of knowledge that we’re debating in this Chamber today. [Bell rings] Madam Chair?

I’ve already given you two calls; I will come back to you, Minister, after I give Simon Court a call. Thank you.

Thank you, Madam Chair. I have a number of lines of questions—firstly, this concept of Te Mana o te Wai statements. Te Mana o te Wai, for those who don’t know, is a concept that puts water as a spiritual entity, the value of water, above the needs of people and communities. That’s what it says if you go on to the Internal Affairs website and look up Te Mana o te Wai—water is a spiritual concept that is more important than the people and communities that it serves. I know, it’s amazing—2022, hundreds of years since the scientific enlightenment enabled us to grasp concepts such as the Earth going around the sun, not the other way around, and yet this is the spiritual nonsense which is being forced on New Zealanders and councils and communities rather than the obvious problems to solve, which is to fix water pipes, pump stations, and waste-water treatment plants.

So, Minister, I want to ask you, in relation to the Estimates: the Government has spent millions on engaging with Māori, with iwi, with hapū, with mana whenua groups, about three waters, and in the Estimates there’s even more budgeted. Now, with these Te Mana o te Wai statements, the way they will relate to the water services entities under the three waters reforms is that anyone of Māori descent will be able to submit a Te Mana o te Wai statement to a water services entity, these new corporations, giving their thoughts about the water, what it means to them—and clearly that’s a spiritual dimension, based on the testimony that we’ve heard at the select committee hearings—and these water entities will be required to not only engage with them but to respond to and give effect to these statements. In answers to written questions, Minister, you have confirmed that.

So, firstly, how much money is going to be spent by water services entities giving effect to spiritual, essentially, animist, religion-based Te Mana o te Wai statements? And will these water services entities give the same rights to communities and to councils who want to ask the water services entity, “Will you please fix the pipes in my local neighbourhood? Will you please stop the sewage pump station overflowing next to my boat ramp?”—which is what’s happening at Te Wai-o-Pareira / Henderson Creek, right next to the waka ama club and the multi-sports club. Waste water over flows on a regular basis. Will they be allowed to put in a statement to their water services entity asking them to fix it, or does this apply only to people who are of Māori ethnicity or descent, which is what it says in the bill, Minister? I think New Zealanders deserve to know whether that is true and, if it’s true, whether communities will be given an opportunity to ask their own questions.

The second thing I want to ask the Minister is about the $2.5 billion three-waters support package. It’s a slush fund that councils can apply for to bankroll all kinds of projects. They don’t need to include three waters; they could be for anything. They could be for a dog park or a set of swings. Treasury has warned the Minister against this slush fund. They said it was intended to increase local authority goodwill toward the reforms. Now, in any other country, that could be described in a very negative way, and I want to know why the Minister has decided—

💬 Simon Watts: Sounds like a bribe.

Sorry, what was that? Did you say “a bribe”, Mr Watts?

💬 Simon Watts: Sounds like a bribe.

It sounds like a bribe. I don’t know. Could the Minister, please, explain that, because, if the Minister has got $2.5 billion to use to fund swings and dog parks, and then apply $1.5 billion of that money, the debt, to the water service entities without building a single waste-water treatment plant or fixing a pipe, what is the justification for that, Minister? Aren’t we here to solve the problem of three waters—of waste-water over flows, sewage pump break downs? If that’s the case, why won’t the Minister simply apply the funding that is for swings and slides and dog parks, used to bribe councils, to actually fixing three-waters infrastructure?

So I would like to hear your response to my questions about Te Mana o te Wai statements. Why can’t communities and councils have the same rights as iwi, hapū, Māori, anyone of Māori descent? And why on earth, if there’s $2.5 billion the Minister thinks should be spent on making councils feel better about the reforms, couldn’t that $2.5 billion be spent on actually fixing three-waters assets, Minister?

Before I call on Simon Watts, I do want to warn both Simon Watts and Simon Court that we cannot make allegations of a bribe in this Chamber.

Thank you very much, Madam Chair. I want to pick up on my previous questions in regards to the Minister on three waters, and the Minister actually mentioned an interesting point in regards to the key problem that that is trying to be solved by three waters. She referred to unsustainable finance, which I read into being around the funding and financing mechanisms in regards to this infrastructure. That itself is actually quite a change in terms of the narrative because—if we go back to that advertising campaign of actually, you know, slime coming out of the taps—maybe it was just me, but I think the Government was saying that this is driven by a health issue and it’s actually driven by, maybe, the issues that happened with the campylobacter outbreak in Havelock North in 2016. But we’re now hearing from the Minister that actually, “No, no, actually, the issue is in regards to unsustainable finance.”

I think, on that basis, my questions for the Minister are quite simple: why did you, as a bottom line in regards to these reforms, dictate that there had to be four entities in regards to the way in which the three waters infrastructure, or the reform, would be structured? It was it was quite clearly stated that that needed to be a four-entity model. And the other bottom line that came in from Government was in regards to the 50:50 co-governance.

But I’m more interested, at this point, around the four entities, because if the issue and the problem statement is, as the Minister articulated, in regards to unsustainable finance, then why are we leading with a solution that we need to create four entities to solve that problem? Why do we not simply look at the underlying problem statement, as the Minister’s articulated, around unsustainable finance and deal with that? Because there’s multiple mechanisms, and ways in which, and alternative models that can deal with the way in which you fund and finance infrastructure over the long term.

I acknowledge, as with the Minister, that we as we need to do more in regards to how we fund and finance infrastructure over the long term: plan, commission, and actually, importantly, deliver that infrastructure. But if that is the problem, and if that is the one thing that we’re trying to fix, why are we going about creating these mega-entities—centralised bureaucracy, hiring of all name of things. Leading into that point that I articulated right at the start around the fact that that there’s huge levels of turnover at local government; central government entities, are, in effect, poaching staff out of local government at the moment, sometimes with 30 percent premium on salary. And so, therefore, those staff coming out of our local communities and local government is weakening our local government capability. So why did it have to be four entities and why was it dictated around that?

The second aspect around the financing mechanisms is: why are we not simply just utilising existing mechanisms for funding and financing of infrastructure that are already in play and in the Minister’s disposal today in regards to matching long-term assets with long term funding? Because when you look at Auckland specifically, part of the challenge there is that we’ve got assets that last, you know, maybe 50 years or so, yet the way in which they’re currently financed is maybe between three and five years. Well, I don’t know. I’ve got, you know, my nine-year-old son at home who probably could work out that—that sounds like a mismatch to me, right? So why are we simply not matching the duration of funding to the duration of the asset? Quite simple. Because if we did that, then we would be able to sustainably fund and finance this infrastructure. We don’t need to create—and maybe I’m being simplistic, but we don’t need to create a mega-entity model, mega-bureaucracy; try and centralise 67 councils into four big entities; create a governance model which means that within these entities there’s only seven seats at the table for 22 councils, and again, I didn’t do too well at maths, but I can work out that actually that means that two-thirds of the councils won’t have a voice. Why are those two elements bottom lines when we went into this process, which means now we’re dealing with a bill and a piece of legislation on the table, and all the costs that we talked about through the Estimates process that have been spent, and we’ve got hard-working taxpayer dollars out of the pockets of taxpayers in this country—why have we got to that point? Because of those underlying bottom lines.

Just a point of clarification, because I inaccurately referred to GHD, in terms of peer reviewing the Water Industry Commission of Scotland study, when it was in fact Beca Group and farrierswier so I just wanted to clarify that as a point.

If I go to the Estimates-related components of the questions that have been asked, can I just continue to highlight that the better-off component of the support package—which comprises of a $2 billion fund that territorial authorities will be able to use to support the three waters service delivery reform objectives and other local wellbeing outcomes in a manner consistent with the priorities of central and local government—is the case and it is in relation to the matters that I outlined earlier in terms of the criteria; that’s supporting communities to transition to a sustainable low-emissions economy, including by building resilience to climate change and natural hazards, delivery of infrastructure and/or services that enable housing development and growth, and support local place making and improvements to community wellbeing.

Now, the member from ACT asked, “Well then why don’t we instead spend the $2.5 billion of the incentive directly on three waters infrastructures?” Because there is a burgeoning cost to three waters. The $2.5 billion—and if we look to the figures that we have identified as the ballooning cost required to invest in infrastructure, it is between $120 billion to $185 billion over the next 30 years. This would be just a drop in the bucket.

Can I say that many of the questions that members have pointed to are issues that will be dealt with by the Finance and Expenditure Committee as the Water Services Entities Bill progresses through its stages at select committee. But there are a few inaccuracies that I really do want to highlight.

There is some perception that has been promoted by the member that Te Mana o te Wai is just a spiritual aspiration. In fact, when Māori talk about water, it’s the whole complete cycle of water. And perhaps that’s the challenge that we have when we think about our board objectives of protecting source water to be able to drink so that everyone can drink good water. When we’re thinking about returning water into its receiving environment and the health of how we treat water, to be able to go back into the receiving environment to do no more harm, actually a Te Mana o te Wai whole-of-cycle perspective around the treatment of water would do us great good. The reason why I say that is because many of the examples in the past about how three waters have been responded to is about pipes under the ground. But when we look to natural solutions and using our wetlands; using the contours of land, which is so critical when we think about stormwater solutions and the like; and Te Mana o te Wai in an applied sense, then we will come up with really smart—in my mind—urban design solutions that are not just about pipes under the ground. It is about ensuring that the whole cycle and life of water can better work to both the health and the environmental benefits of communities.

In terms of sustainable financing and the challenge that we’re facing—and again, I raised this with the select committee when I sat in front of them to outline the reason and the proposition for reform during the Estimates—it is not one singular ambition that the Government is trying to ensure that it meets. If we look across a broad range of objectives of the Government in the three waters reform programme, which I spoke to at select committee, it is about sustainable financing, it is about—through scale and aggregation, but that’s not the only benefit. It’s about ensuring that there is ultimately a model that ensures affordability for ratepayers. It’s about ensuring that in terms of both health and environmental standards, the looming costs by meeting a burning platform of higher standards can be met in a sustainable way. It’s about ensuring that the Crown is able to uphold its Treaty of Waitangi obligations, because substantially when we think about the whole-of-cycle system and we think about the way in which Treaty of Waitangi settlements have a number of provisions which touch on the natural resource area in relation to water. Those are all the elements that are featured within the system reform that we’re promoting.

What I regret is that much of the myth-making that has occurred within this committee continues to distract from the broader benefits that communities will get from the three waters reform programme.

Thank you, Madam Chair, and thank you, Minister. I do appreciate the forthrightness of your response, and I know we’re debating something that’s very important to all New Zealanders.

I just want to come back to your proposal that the costs of improving the three waters infrastructure will be between $120 billion and $180 billion. Last week, the Finance and Expenditure Committee went to Hawke’s Bay—a majority of Labour members on the committee and a couple of Opposition members—and we heard from mana whenua groups, from rūnanga, from iwi, and we also heard from the Hawke’s Bay councils who were at the epicentre of the Havelock North water quality issue, which is supposed to have led to many people becoming ill and potentially some people dying. So this is very important to them. This is what they told us: after that event, they got together with Government, and Government said, “Could you form a regional alliance to work out where the weaknesses are in your water system, and then come up with a plan to fix them, and we’ll fund it.” And that’s what they did. They engaged with mana whenua, with iwi, and hapū, and they worked out exactly what were the values to the community, including to Māori communities, to individual marae, and they’ve addressed their water quality issues to address community needs as a whole.

What they told us was they’ve spent $85 million already, and Hastings District Council staff took us—including Labour members on that committee—to look at the new reservoirs and water treatment system that have been built to address just those risks, Minister. For $85 million, they’ve built all the baseline infrastructure, and they’ve got plans to spend up to $200 million in total over 10 years on asset renewals and allowing for growth. Yet under the Minister’s reform package, they’ve been told they need to spend $2 billion over 30 years—that’s $600 million, or three times as much as they need to allow for growth and fixing the network in Hawke’s Bay.

So how can New Zealanders have any confidence in a three waters reform proposal when even the councils at the epicentre of the Havelock North water quality issue—where Labour members were happy to show us the good work going on in their district; that the problem’s fixed. How can New Zealanders have any confidence, Minister, that this reform proposal, based on these enormous and outlandish costs—tripling the spend on three waters infrastructure over 30 years—firstly, that they could be achieved; secondly, that they’re value for money? Because what they told us was they don’t need the money, Minister. They don’t need co-governance imposed. They’ve already got good relationships with mana whenua in Hawke’s Bay. What they want is their communities to thrive and their local economy to grow without central government interference. Minister, I’d appreciate if you’d answer that question.

I’ll take the opportunity, just in case the debate closes. Look, I’m sure, as they told you about their regional study, they would have also informed you that the Government helped pay for that regional study, and that part of the rationale for paying for a regional study at the early stages of our analysis as to what would be the best model to achieve the broader overall outcomes that the Government was seeking is to see whether or not a regional approach could work. What we found along the way—and it was a helpful study that the region undertook—is that there would be regional variance in terms of the benefits of going to a regional model. That would then mean that the Government in some shape or form would have to contribute. That then meant we had to ask the question around scale and aggregation and the separation of balance sheets, because if we separated balance sheets it would create more headroom around the way in which we could better fund—albeit at a multi-regional level—into the infrastructure space. I’m sure you heard all of that.

What you might not have heard is one of the difficulties with a regional model was the internal challenge that councils were having amongst themselves around cross-subsidisation. So you had Wairoa, for example, in that region, and the extent to which Napier ratepayers would cross-subsidise benefits to the Wairoa community became an underlying challenge within a regional model—it became an underlying challenge within the regional model. So I’m not dismissing that we needed to investigate the merits of a regional model, but it also came with a number of challenges: cross-subsidisation within a region, and across regions the level of variance and therefore the level of contribution that a Government would have to make.

Then the other challenge became whether or not we would get equity of outcome for ratepayers in the more vulnerable parts of those regional areas. So I’m sure, as you investigate those elements of considerations with officials, you will get a flavour for why a regional model—and I think at the time when Hawke’s Bay was undertaking that particular study, the considerations were regions aligned to their regional council groupings; 16 or 12 regions, I think, was the domain of the regional consideration—you should also ask what level of Government contribution would have been required. Again, the issues of cross-subsidisation: very real challenges. And then it would have been the impact in terms of affordability and the variance across regions. I’m sure that that will provide you with the other part of the challenge that has been responded to in the Government’s plans going forward for three waters reform.

So I want to make one final comment. I know this is really difficult, and I acknowledge that there’s a lot not only for the Finance and Expenditure Committee to get their heads around but also New Zealanders. But from a ratepayer perspective, I must be really frank about this: one of the overriding drivers for me was to think about the system change that is absolutely necessary to be able to assure ourselves that the most vulnerable or those on fixed incomes in our society don’t miss out because of those who are well-heeled and say, “We’re going OK here; it’s the other folk over there.” We can’t get inequity as an outcome of the system reform that we’re trying to steward through, because everyone needs clean drinking water and affordable services. Everyone needs the assurance that we’re going to do better for the environment than what we’re doing now. I think our kids want us to absolutely make the kinds of decisions that will see livable cities that look for natural solutions as well as smart design solutions, but actually that we put that long-term aspiration in front of our minds when we think about a way forward. And that’s why I continue to believe, unless there’s an alternative that’s been put up by the Opposition, we should continue along this path, hard as it is.

Are we ready to move on to Police, or do you want to? [Interruption] OK. I’m asking the committee. If the member would like to take a call, he may—Simon Watts.

Thank you very much. Yeah, I think we’ve got about 2 minutes, per my clock. So I thought we’d just come in with a final closing point. The Minister articulated a statement around myth-making just here in the committee now. And it’s interesting she makes that statement, because it was only a couple of weeks ago when the acting Minister of Local Government used the statement of “mischief making” in the House, which was basically directed at anyone that was coming up with critique around these reforms. I guess, as I go back to that statement of what Castalia said in regards to the underpinning costs and benefits of these reforms: “The reform scenario is based on faulty assumptions and flawed analysis.” That is a third-party, external agency reviewing data that the Government have used to base these reforms, and they make statements like that. Yet the response from the Minister back to those on the other side is myth-making and other responses from other people around mischief making. So I really, really ask—and, I guess, off the back of the fact that overwhelming numbers of Kiwis oppose this reform, over 32 councils have continually said they oppose this reform before this Government had not listened, you can just categorically see it right now, that the Minister continues to use the same old lines to attack those that are trying to be constructive in regards to how we create sustainable water and three waters infrastructure in this country. I’d like the Minister to reflect on those statements and make sure that she still stands behind them.

Police