Local Government (Water Services) Bill

I present a legislative statement on the Local Government (Water Services) Bill.

DEPUTY SPEAKER: That legislative statement is published under the authority of the House and can be found on the Parliament website.

Hon SIMEON BROWN: I move, That the Local Government (Water Services) Bill be now read a first time. I nominate the Finance and Expenditure Committee to consider the bill.

This bill is the third part of this Government’s work to deliver comprehensive reform of New Zealand’s water service delivery. It gives councils a range of innovative new structures for the delivery of water services from which they can choose. The bill does not impose a one-size-fits-all solution. Councils and voters resoundingly rejected Labour’s expensive and bureaucratic three waters approach, which wasted $1.2 billion, stripping local communities of control over their water assets while failing to address New Zealand’s water infrastructure deficit. The bill gives councils flexibility, recognises that they know the needs of their communities best, and supports council-driven change. The bill also reduces the regulatory burden on councils by ensuring that regulation is proportionate and its costs do not outweigh its benefits. It also introduces economic regulation to local government water services.

Local Water Done Well gives councils the tools they need to do the basics brilliantly. It provides appropriate accountability mechanisms for ratepayers and communities to be assured that water services are being delivered effectively in their local communities. These changes provide greater certainty and improved efficiency to benefit all New Zealanders. We know that Local Water Done Well works. We have delivered on our election promise to provide a financially sustainable model for Auckland under our Local Water Done Well plan. The plan, which has been unanimously supported and endorsed by Auckland Council’s governing body, sees Aucklanders retain local control of water assets and avoid a 25.8 percent water rate hike, which would have been piled on to Aucklanders already struggling with a prolonged cost of living crisis.

We fixed that issue. We did a deal with Auckland Council, and, while I’ve heard commentary from other members of Parliament trying to say that they would have done a better job, the reality is that under their plan, they would have lumped another billion dollars of establishment costs on to their three water entities model. They would have had higher water rates increases in Auckland, causing further cost of living constraints and also limiting the capital expenditure on Auckland Watercare and the important work that they’re doing in Auckland. This Government has fixed that issue because the last Government’s approach did not stack up, which is why New Zealanders rejected it.

This bill establishes a new central piece of legislation for the delivery of water services and amends several other Acts. I intend the bill will be split during this legislative process into a stand-alone Act and one that amends and repeals other pieces of legislation. As this is the third stage of the Local Water Done Well process, the bill is built on the foundation set in the Local Government (Water Services Preliminary Arrangements) Act 2024. This Act requires councils to prepare water service delivery plans by September 2025. The plans will lay out the current state of water services in their districts, which will show how councils will deliver water services in the future in a financially sustainable way and meet economic, environmental, and drinking water - quality standards.

This bill provides the enduring settings for the delivery of local government water services. It will inform the development of councils’ water service delivery plans, and I encourage councils to submit on the bill while they work through these plans. I’m also going to be asking the Finance and Expenditure Committee to accept submissions from councils up till the end of February, so that councils can consider their submissions at their first meetings of the new year and have enough time to submit on this bill.

The bill gives councils flexibility and discretion to determine the optimal structure for water service delivery arrangements that will work for their communities. It is not prescriptive but sets the requirements and parameters to guide council decision-making. The bill also establishes a new class of water service provider, water organisations based on existing council-controlled organisation (CCO) models. Councils can combine or establish solely owned water organisations, they can continue to provide water services in-house using the improved regulatory and service delivery settings in the bill, or they can come to other arrangements, including third party contracting or joint arrangements with other water service providers. A new model of water organisation owned by consumer trusts is also set out in the bill. This model is similar to energy trusts which own electricity distribution businesses, such as Entrust’s ownership of Vector in Auckland. Councils can establish a consumer trust to act in the interest of consumers, run by trustees elected through free and fair elections.

A series of core principles will apply to all water service providers, which includes financial sustainability, revenue sufficiency—requiring that revenue from water services is only spent on water services—and restrictions against privatisation. The streamlined consultation provisions provided by the preliminary arrangements Act, as a temporary measure to support councils in creating CCOs, carry across to this bill. These efficient consultation and decision-making processes will be a permanent feature.

This bill will implement our new economic regulation regime, which will be overseen by the Commerce Commission, to ensure water revenue is ring-fenced for investment in water infrastructure and not diverted to other council pet projects. This will promote efficient, high-quality drinking- and waste-water services, with the ability to regulate stormwater services at a later date if necessary and, importantly, as I said, allow requiring councils to ring-fence that funding so that the money that’s raised for water isn’t spent on other things—it’s spent on water. What a novel idea, and a critical part of fixing the issues we’re seeing up and down the country.

The regulatory tools available to the commission will include information disclosure, revenue thresholds, and powers to monitor and enforce the requirement that revenue from regulated water services is spent on water services. The Commerce Commission will also have a role in consumer protection. It will monitor how consumers are treated by regulated suppliers through information disclosure. If issues exist, the commission will be able to issue guidelines to the suppliers, and a mandatory service quality code if necessary. The Minister of Commerce and Consumer Affairs may also recommend consumer protection regulations be made. The water services regulator will also be renamed the Water Services Authority, and the legislation will put the English name first.

The bill reduces the regulatory burden of the drinking water quality regime. It ensures that the authority’s regulatory approach is proportionate to the scale, complexity, and capability of the regulated suppliers. Low-risk, shared domestic suppliers are excluded from direct regulation under the Water Services Act for that reason—an important thing for many of our rural communities. The bill changes the operating principles of the authority, requiring it to consider the costs of regulatory compliance for suppliers. The authority must also work proactively with suppliers and network operators. This is to ensure that compliance requirements take into account the risk profile and capacity of each supply.

There’s also a number of transitionary arrangements and exemptions for Watercare, which, as I said earlier, was financially separated from Auckland Council by the preliminary arrangements Act, making Auckland water services affordable, saving households about $899 million over four years while ensuring improved service quality and record infrastructure investment. This bill includes several exemptions for Watercare agreed with Auckland Council, recognising the work that is already well under way for Auckland.

In conclusion, our Government is now delivering the enduring components of water services through our Local Water Done Well plan, giving local council the ability and the clarity it needs to invest in local infrastructure, while delivering economic regulation to minimise costs for ratepayers. This delivers on the coalition’s promises that we took to the last election from the National Party, the ACT Party, and the New Zealand First Party to repeal Labour’s disastrous and expensive co-governed, bureaucratic three waters approach and replace it with Local Water Done Well, which restores councils’ ownership of their assets and allows councils to invest sustainably in their local infrastructure. I commend this bill to the House.

The question is that the motion be agreed to.

Thank you, Madam Speaker. This bill is a crock. It is an absolute disgrace—a disgrace of a bill introduced by a disingenuous Minister. The reason I say that is that he stood up yet again in this House and promised New Zealanders that this bill would work: “We know that Local Water Done Well works and we have fixed the issue.” That is not true, and he knows it’s not true. This is what is so disgraceful about this entire process. This isn’t a solution; this is a political PR exercise. This is the result of a Minister who promised the country that he would deliver a water services system that would be cheaper, knowing that it won’t be. At no point throughout this entire process—a process that concludes with this bill tonight—has he ever produced numbers to demonstrate that it adds up.

Hon Peeni Henare: And he knows it.

Hon KIERAN McANULTY: He knows it doesn’t. This is the thing that I find so egregious: he knows this won’t work, and yet he stands up in the House tonight and promises, yet again, empty promises—promises he never intends to keep; if he did, he’d be able to prove it. Every time we have asked him to, he’s deflected or denied; he’s never provided evidence.

Let’s look at the facts. From councils’ own numbers, over the next 30 years they need to spend $185 billion. If this proposal is set up against that figure, it doesn’t add up. So they’ve made up another figure. They haven’t used $185 billion; they’ve used the long-term plans—only 10 years’ worth of expenditure—but they know that many of the large pieces of infrastructure are not included in those long-term plans. They know that, but they’ve chosen to do it anyway. It is a fraction of that $185 billion. The only reason they’ve done that is to try and make their system add up. It is dishonest and it will result in unaffordable bills that this Government is setting local councils up to take the fall.

Listen to their language: the Prime Minister turning up to the local government conference and saying that mayors and councillors need to stop doing dumb things, when up to 90 percent of council expenditure is spent on water and roads, as it is. They know that; they don’t care. They know that there is disgruntlement in the community towards local councils as a whole, and they are manipulating that to suit their political agenda.

I think it’s disgraceful, because this is only going to make things worse, it’s not going to fix the problem, and when that inevitably arises, what is this Government going to do? “That’s the responsibility of local government.” We’ve heard that before. “Local government is accountable to their own communities.” We’ve heard that before. Why are they saying it? It’s to wash their hands of any responsibility. But it is their responsibility, because this is a massive issue facing this country. It’s not just the local government sector, this obscure thing we can kick when we want to; it’s ratepayers and it’s renters, because when rates go up, household income goes down. When rates go up, rents go down. That’s what’s going to happen.

This Government was elected, in part, because they promised that they would fix it. Tonight’s bill is not a solution. This is going to lead to higher rates—the credit rating agencies have said it. The credit rating agencies have said, because of this bill and because this Government repealed affordable water, councils’ credit ratings will go down. That is a direct result of their policies, and it’s out there in the public domain.

They don’t care because they are looking New Zealanders in the eye and telling them that they have made it cheaper for them, but they haven’t. I’ll tell you who they have made it cheaper for: the Government—that’s all this is about. All this was about was getting a political issue off the table.

The member’s time has expired.

Point of order, Madam Speaker. Ah, I apologise—never mind!

DEPUTY SPEAKER: Apology accepted.

Tēnā koe, Madam Speaker. Water matters to every single one of us, and I really get sick of stating the bleeding obvious like that, but, unfortunately, we forget. We forget how foundational water is to us as human beings and how foundational water is when it comes to a functional planet. We need progress so badly in this water services space, because these challenges that we have across Aotearoa are so very real and they’re not going away without significant intervention—but not progress like this; progress that takes us backwards rather than forwards.

Sadly, Te Pāti Kākāriki will not be supporting this bill tonight, and there’s three initial reasons why. Firstly, the health of our people: we don’t support the narrowing of the scope of who does and doesn’t need to comply with the regulatory standards. Now, this is under the guise of reducing regulatory burden of the drinking-water quality regime, but the inequities when it comes to access to clean, healthy water and access to waste-water and stormwater networks that don’t unnecessarily pollute our environment and ourselves is staggering.

I recall just over a year ago when Tāhuna Queenstown was wrestling with its cryptosporidium outbreak. That absolutely got headlines and attention, and even international attention. We should all be well aware of the Havelock North tragedy that this country experienced, but what needs as much attention is the thousands of Kiwis who experience this rolling risk profile of ongoing boil-water notices and the like in places like Ward in Marlborough, in Waimate in South Canterbury, in places like Te Kao in Te Tai Tokerau, and so many other places where our people are throwing a dice every time they turn on the tap for a drink at their home, on marae, at their school, on their farm, at their place of work. We need strong protections when it comes to protection and regulation of these small and rural water supplies in place, particularly in light of the recent Ministry for the Environment report on rural drinking water, which found concerning levels of E. coli and nitrates in schools.

Secondly, the health of te taiao: it’s incredibly disappointing that this Government is continuing to not recognise the importance of te mana o te wai in water services, considering we literally cannot have human health improvements without the improvements of te taiao.

Thirdly, if the Government’s going to make any changes, especially foundational changes, to the governance and delivery of water services here in Aotearoa, then the Government actually needs to act like they live in Aotearoa, where Te Tiriti o Waitangi is our foundation. That means what some have called co-governance but what more appropriately is just called governance—it’s actually partnering with iwi and hapū in appropriate governance over wai and water service delivery.

I want to acknowledge our councils and councillors in the context of this bill. They’ve had to spend the last few months tasked with the unenviable task of working out their water service delivery plans and talking about partnerships with councils around them in the absence of the full legislative framework, and it’s made it hugely challenging, if not impossible, to actually meaningfully engage with communities and get their views. It’s so important that they submit on this bill, and it’s so important that they engage with their communities.

We’re really concerned about the plans to push the full cost of the regulators on to local communities. We just heard from Palmerston North City Council that they’ve estimated that to be in the realm of $400,000 a year and, no doubt, much higher costs for smaller councils.

We’re really happy to see the protections against privatisation, but of course we want to make sure that these are really strong. Healthy drinking water is and should be recognised as a human right, and we want strong local voice and control at every stage of this bill ahead. Kia ora.

Debate interrupted.