Water Services Entities Bill

Members, the committee is resumed on the Water Services Entities Bill. When we suspended earlier today, we were considering Part 2. Once again, the question is that Part 2 stand part. I just will indicate, before I give a call, that the presiding officers do communicate between sessions and that we do keep a very close eye on what is happening, to ensure the continuity.

Thank you very much, Mr Chair. It’s good to be back after lunch to get more into this bill, because I think we would all acknowledge there’s plenty of content here, and I do acknowledge the other members around the Chamber who have contributed, from both sides of the House, to questions as we go through.

My questions are in regards to Part 2, specifically on clauses that we haven’t touched on to date—clauses 42 and 54. While the clauses, in those regards, are both part of different subparts and relate to different groups under the governance model, I think it is appropriate there is some correlation between the points. This is around co-chairpersons and co - deputy chairpersons.

The questions that I have in regards to this point are—look, we’ve traversed the conversation around co-governance and the challenges and that around the make-up of the groups, but the point around the introduction of the concepts of co-chairpersons and co - deputy chairpersons, I think, raises a number of questions in terms of the ability to try and simplify the governance of these groups, or, actually, does that actually introduce more complexity.

So the questions I have for the Minister, in regards to that, are: what was the rationale in regards to putting in place, through legislation specifically around those roles—how does the Minister see those roles, in terms of co - deputy chair and co-chair, actually working in practice? And does the Minister believe that that model is going to enable these governance groups—which I think we would all agree are new and are going to be finding their feet in regards to undertaking this role; is the addition of that co-element going to help or hinder the effectiveness of those governance groups? Because the reality is that these entities are going to be managing significant assets. I refer to Schedule 2 of Part 2 which refers, in four parts, to all of the different council territorial authorities that will form part of these groups. I think, in regards to that, that would be helpful.

The second question I’ve got is in regards to the points around clauses 56 to 59, specifically around clause 57, which is in regards to—this is Subpart 6 of Part 2, “Boards of water services entities”, again an area that we haven’t traversed to date this morning.

💬 Shanan Halbert: It sounds the same as your last speech.

My question in regards to the—sorry, I didn’t hear that question from the member on the other side, from Northcote, but I’m happy to answer. Maybe you could take a call and let the Minister answer the question. But I do acknowledge that members on the other side do have a number of questions about this bill, which is probably quite reasonable.

But let’s get back to that. Clause 57—there’s a lot of enthusiasm on questions all around the Chamber on this—is around the membership of that board, and, in particular, the overview in terms of the skill sets and aspects that have been determined there. I think it was raised, potentially, in an earlier contribution, not in relation to this clause, but of another, around the mechanism in which it has gone through to determine that that is going to fulfil and suffice the requirements that will be required for overall governance of this—because, again, this is a new concept. It is a concept in which these individuals—and up to 10 individuals, if I’m right—will have significant influence and control over the success of these entities. And it’s success, actually, that is outlined in clauses 10, 11, 12, and 13 of Part 2—obviously in relation to the objectives, functions, and operating principles. I’m keen to understand a little bit of the rationale around that and also in regards to the interrelationship between that board entity and the regional representative group, which, again, there is some detail in clause 59, but I think some clarity around how that actual overall governance model is going to work would be much appreciated.

Thank you, Mr Chair. Now, I thought I might look at something new—

💬 Shanan Halbert: Oh, throw something different in there, Bayly.

Can the member repeat himself?

💬 Shanan Halbert: Throw something different in there—new points.

The member obviously wasn’t listening when he asked me to talk about something different—

CHAIRPERSON (Greg O’Connor): Could members take their conversations outside, if they need to have them.

—because that’s exactly what I’m about to do. The member for Northcote obviously doesn’t listen very closely.

I want to talk about clause 114, “Duties to provide funding and information”, and it does slightly relate to what my good colleague Simon Watts here has just been talking about. Here we have these new entities that will have not only co-chairs but co - deputy chairs, so it raises in terms of governance structures what is a very, very unusual structure. In fact, in all my years of commercial dealings, I don’t think I’ve ever yet come across an entity, a board, or suchlike that has co-chairs and co - deputy chairs.

💬 Penny Simmonds: It’ll get co-leaders too, for sure.

Oh, co-leaders too, Penny Simmonds has identified. It’s unbelievable. It’s a very, very, very complicated structure, and of course clause 114—which I know the Chair is reading very closely—relates to the funding of this. This is about how much do you pay these people. So I was just doing some sums there in terms of the cost that this might be, and of course we’ve got the Minister who said that this is all about reducing costs and delivering bigger value. But reducing costs, even though I understand that we’re going to take on more employees in these four entities, certainly at a governance level, we will inevitably end up with more people.

Now, I was just working the numbers. If you assume you that you have a board of 14 and you pay them $30,000, that’s about $420,000. But, of course, if you have a co-chair—well, chairs normally get paid more than $30,000, they normally get $50,000, so it’s $100,000 between the two of them. And if you have a co - deputy chair, well, what would you pay them? I’m looking at my good colleague, the Hon Louise Upston, and she has a good view on this. I reckon you’d pay them, what, $45,000, $40,000, or—I don’t know—$80,000. So hey, just for this one board we’re over $500,000, and then of course, as the Minister who was in the chair before lunchtime was saying, “Well, of course you’re going to have more people on this board if the people on the initial board decide to have more representatives from council.” Hey, I can see this blowing out to a million bucks, eh?

Of course, the middle one has, what, 22 councils—22 councils. Well, I’ve heard some very strong arguments from my good colleagues, who have said that those people need to be represented on these boards. I subscribe to that view because of course that’s what we’ve heard from the mayors who turned up in places like Hamilton and Nelson to say, “We’re not getting adequate representation on these entities.”, and that’s right—they’re not. But to say, “Oh, we’re going to reduce costs.”, well, I can say that at a governance cost, I reckon we’re looking at the best part of 3 million bucks, because of course clause 114 not only talks about the regional representative group but it talks about the regional advisory panel, and we’ve got lots of those, haven’t we? Then we’ve got the board costs, which, I think, are 3 million bucks.

So my question to the Minister is: what is the framework for the payments of these, what will be paid, how will it be determined, and will the cost be nearly $3 million? I think that is a pretty good calculation of what the overall cost will be for these entities, and so I think that if you look at it, that’s going to be per entity, given the scale of this for each regional advisory board, regional representative board, and the board itself, let along what we’re going to pay these CEOs, because these CEOs are now going to be based on a payments system that’s probably different from what they’re getting paid now. Because they’re going to be big shots running big entities, I’ve no doubt they’re going to be on lots and lots of money, right? We’re going to see them right at the top of the public sector, aren’t we—the top of the public sector—in terms of their payment rates.

I move, That the question be now put.

Thank you, Mr Chair. Following on from my colleague Andrew Bayly, and I know—I was going to say yesterday but it might only have been this morning, Mr Chair; it seems so long ago—you called me up once when I started to look at the comparisons between the centralisation of the polytech sector with this centralisation. But Mr Chair, I would contend that it’s absolutely relevant because the sort of cost escalations that my colleague Mr Bayly was talking about are what is worrying me enormously around—

CHAIRPERSON (Greg O’Connor): Your contention and my determination may differ, but carry on for the time being.

Thank you, thank you very much. So if I can give you the example of just on the radio this morning, Minister Hipkins has confessed that there will be somewhere between low hundreds of millions to mid hundreds of millions being needed to be spent to get commonality around the software applications needed to consolidate that many entities together.

I guess what I’d like is some assurance from Minister Mahuta that, in fact, that’s been thought about this time. Because for the centralisation of the polytechnics, it obviously wasn’t thought about and it’s coming up now that this centralisation isn’t costing the $200 million that was budgeted for, but in fact half a billion just to get the operating systems there to allow it to actually work together—centralised, working together.

I’m sure we will find the same thing within the local authorities—that they will have different operating systems; they will have different IT systems. So I’d like some understanding that the Minister has worked through that, has thought about that, and actually has costed that in. Because saying that there will be savings is easy to say, but it’s very hard to take when after the fact—now we’re talking perhaps half a billion more costs.

Just also, the other part that I want to ask about with the Minister—so looking at Part 4 in Schedule 2, which is the lift of the local authority entities. There are 20 different entities there, with Marlborough District Council and Tasman District Council, that also have part of their area within the Southern Water Services.

So my understanding is that there might be 12 or 14 representatives. With 20—possibly 22—different district councils, it would appear that the majority of these district councils will not have a representative on the boards. And we’ve talked about these smaller councils being worried about: one, their loss of millions of dollars’ worth of assets; and secondly, having no voice at the table when decisions are being made about what happens with their assets.

So we’ve talked a little bit also about the mana whenua appointments, and I don’t believe it was addressed by the Minister when I asked about the process in terms of an iwi like Ngāi Tahu that covers such a big geographic area, that if there are no conditions or requirements about those mana whenua appointments, they could well be from only one geographic part of the southern region—i.e. Christchurch—and so there may be no mana whenua representation coming from the bottom one-third of the South Island. I don’t believe any assurance was given around that.

I know with other iwi it won’t be such an issue, but for Ngāi Tahu, they are covering a huge part of our land mass in New Zealand and I don’t feel we’ve been given any assurances there. So how many of the 22 councils are going to miss out on having any voice, and how will those mana whenua appointments occur?

I move, That the question be now put.

The question is that the Minister’s amendments to Part 2 set out on Supplementary Order Paper 306 be agreed to.

The question is that the Hon Eugenie Sage’s amendment to clause 13 set out on Supplementary Order Paper 307 be agreed to.

The question is that Simon Court’s amendment to clause 13 set out on Supplementary Order Paper 292 be agreed to.

Simon Court’s amendment to clause 13 set out on Supplementary Order Paper 305 is ruled out of order as being contrary to a previous decision of the committee. Supplementary Order Paper 305’s Part 1 amendments were voted down; substantive amendment in Supplementary Order Paper 305 is clause 6, part 4. Amendments are consequential.

The question is that Simon Watts’ amendments to clause 27 set out on Supplementary Order Paper 287 be agreed to.

The question is that Simon Court’s amendments to Part 2 set out on Supplementary Order Paper 293 be agreed to.

The question is that Simon Watts’ amendment to clause 45 set out on Supplementary Order Paper 288 be agreed to.

The question is that Simon Court’s amendments to clause 57 set out on Supplementary Order Paper 294 be agreed to.