Local Government (Water Services Preliminary Arrangements) Bill

Members, the House is in committee on the Local Government (Water Services Preliminary Arrangements) Bill. Members, we come first to Part 1, and Part 1 is the debate on clauses 3 to 7, Preliminary provisions and Schedule 1. The question is that Part 1 stand part.

Madam Chair?

CHAIRPERSON (Barbara Kuriger): The Hon Barbara Edmonds. I just about took a vote then, so members need to know to be on their feet quickly, but the Hon Barbara Edmonds.

Thank you, Madam Chair. I also want to acknowledge the Minister in the chair, who is not the Minister for Local Government but I understand that she is more than capable—

💬 Hon Member: Better.

—of being able to answer questions—and, yes, better, and I learnt that from experience, so I do want to acknowledge you, Minister.

Actually, my general question is, first: Part 1 of this particular bill contains the preliminary provisions of the bill, such as the purpose, the overview, interpretation. I’m going to have a couple of questions as we go through but to the Minister—and I’ll ask the question now in case officials can provide some advice, and that’s in relation to the regulatory impact statement, in particular, because the Minister is the Attorney-General as well and would understand this particular area of law quite well, which is the Official Information Act.

This particular regulatory impact statement was drafted on 14 March 2024, so it’s been a number of months and as I travailed through the regulatory impact statements there were a number of parts of the regulatory impact statement which refer to the purpose of the course because it sets out the root causes of the problem, which is why we’ve gotten to the point that we have today, which is the bill. It sets out various parts of analysis and what I notice is during parts of those analysis, there have actually been parts that have been redacted under the Official Information Act under 9 (2)(a), (b), subclause 12, subsection 1.

For members of the House who are not aware, that particular part of the Official Information Act advises that you can refuse the release of information if for any particular reason it has some sort of commercial sensitivity or other sort of sensitivity, which is why officials have taken that particular position to redact it. My quick question to the Minister, and then I can go back and continue the speech while the Minister gets some advice, is that there are particular elements in relation to paragraphs—the end of paragraph 98, 99, 100, 101, paragraph 102, 103, and, obviously, other footnotes—which have all been redacted under that particular provision of the Official Information Act.

My question is: has there been a revisiting of this particular advice, whether officials are able to release some of that information because we have had additional time since March when it was first drafted. The reason why I’m pointing to that particular information is because it goes to the root cause as to why we have got in to this bill in the first place, which is around funding constraints. The funding constraints of local government are well known and understood. I was really hoping the Attorney-General could answer my question—so, the Minister of Local Government, the question I had is just whether officials or yourself have revisited a number of the redacted clauses within the regulatory impact statement because it does go to the funding constraints.

For members of the Finance and Expenditure Committee, the funding constraints for local authorities was very much a pivotal reason as to how we got to the affordable water reforms in the first place, which have now been repealed by Local Water Done Well. The funding constraints are the reason why councils up and down the country are having double-digit rate rises and the double-digit rate rises have come from the funding constraints that councils have been put in because the Government decided to remove affordable water reforms. I will go into asking the Minister a few more questions about some comparisons in relation to that, because that does go to the purpose of this particular bill.

The funding constraints: those paragraphs on pages 27 and 28 of the bill set out some of the growing debt ratios and caps, and also talk about the increasing number of councils that receive credit downgrades and a reliance on rates or user charges to increase the revenue required to support their networks. I think in the fullness of time, given it has been a number of months since this regulatory impact statement was first drafted, it would be really good to understand whether the Minister—if we are able to have a bit more information about what has been withheld as part of that regulatory impact statement, particularly around the funding constraints, so that the members across the whole House are able to have a bit more of a debate around those funding constraints because I understand why officials and why the Minister has to keep that commercially sensitive, however we are now in a position where the Government has introduced a bill which requires local authorities within the next 12 months to provide a plan as to how they’re going to deliver water in their area and then how that plan basically needs to be also part of the public record.

I just want to finish this last bit of this speech because I know the time has gone out, but it’s just to check with the Minister—

CHAIRPERSON (Barbara Kuriger): The member’s time has expired.

Tēnā koe, Madam Chair. Thank you for letting me take this call on the Local Government (Water Services Preliminary Arrangements) Bill. It’s been a real pleasure to be sitting on the Finance and Expenditure Committee for the proceeding of this bill through the House, but I wanted to start my questioning for the Minister of Local Government on the purpose section of Part 1, because I am really concerned, and I’d love to hear the Minister’s thoughts, about how truncated the process was.

Where this comes into question with the purpose is that it says, “The purpose of this Act is to establish a framework for local government to manage and deliver water services.” Now, my concern about the purpose of this is that because it was such a truncated process for submissions, not all councils were actually able to submit and have their voices heard in the development of this bill. It meant that many councils, because the time frame was only 10 days to submit, were unable to submit because they couldn’t go through the normal processes to actually get sign-off for their submissions. So we really had to rely quite heavily on, more, the joint submissions from the likes of Local Government New Zealand or Taituarā. But I’d love to hear from the Minister about any risks he sees about that council voice, and especially our smaller councils, not being able to be adequately considered in the progression of this bill.

I also want to ask the Minister if there’s any concern about the urgency and the truncated process around this time frame, because as the Law Society and many other submitters pointed out during our public hearings process, they considered the use of urgency was not demonstrably necessary or appropriate. So I’m interested for that in terms of the purpose of the bill, because is it really for local government? Who is this really for?

I did want to mention as well that of the councils that did end up getting their act together and being able to submit within that 10-day time frame, it was summarised in the official advice that all councils submitted that “The cost and resource implications are [both] unclear [and significant] for councils, making it challenging to plan or fund the reform[s].” Now, obviously, there’s so many clauses throughout the bill which will highlight this, but I’d really invite overarching comment from the Minister about this overarching concern where local government voices haven’t been able to feed in, and whether he feels like the purpose is still upheld.

I also wanted to point to one of the regulatory impact statements that informs the development of the bill, where it says, “A detailed comparison or analysis of all councils [has] not been included” and that “The Department [actually] relied heavily on evidence that has been collected from media reports due to time constraints.”, and whether the Minister’s concerned that because there isn’t that strong foundation of this bill actually being developed and thrown around by councils, is it really a strong purpose and foundation for progressing?

Why did the Minister consider it unnecessary to adequately consult councils and have this truncated process, and why did so few of the suggestions submitted by local government actually get incorporated into the bill? Now, we’re going to be able to step through those, but I’d love to hear any overarching comments from the Minister. Thank you, Madam Chair.

Thank you, Madam Chair, for the opportunity to take a call in this debate on the Local Government (Water Services Preliminary Arrangements) Bill in the first part here, which deals with the purpose, overview, and interpretation provisions of this legislation.

There’s been a number of questions in relation to, I guess, the time frame and in terms of the purpose of this legislation. This Government recognises the need to act quickly when it comes to this critical issue for councils in regards to their water services and the provision of those services. It’s a simple piece of legislation, which, effectively, requires councils to put forward water service delivery plans. It provides their ability to be able to set up council-controlled organisations in a far more efficient manner, and it also has some provisions in relation to Watercare in Auckland. Of course, there’s always going to be questions around the speed and the time frame, and I thank the 55 councils that submitted, which is actually a significant number of councils—listening to the previous member who just took her seat, it sounded like no one submitted; actually 55 councils submitted. So even within the short time frame—I acknowledge it was a short time frame—55 councils submitted, and we thank each one for submitting on this piece of legislation.

It’s really important that, though this legislation does act with pace, as this Government is acting quickly to put in place Local Water Done Well, we have further legislation which will come later this year which will have more detail around the financial arrangements and also the structures for these new water entities, and work is under way on that, at pace, at this stage. But there is an urgency to this issue. I’ve heard comments from the previous member, the Hon Barbara Edmonds, who was saying, “Well, actually, this is a really big issue. We need to act urgently.” So she was saying, “Act urgently.”; a member from the Green Party was saying, “Why do we act so quickly?”.

💬 Hon Barbara Edmonds: We are separate parties.

I know they’re separate parties, but you’re also part of the Opposition, and so—but my point there—

💬 Hon Barbara Edmonds: The same way you’re a separate Government.

We’re a great Government, and the point I’d make, though, is two Opposition members had two different perspectives. One was saying, “Act really slowly.”, and the other one was saying, “Act really quickly.”. As a Government, we are acting with urgency on this particular issue. I’ll leave them to decide amongst themselves, between the different Opposition parties, as to what their particular concerns are. Questions made around the—

💬 Hon Barbara Edmonds: We’re in for a fun night.

There was a bunch of other—I’m looking forward to it. There were questions around the redacted portions of the regulatory impact statement. This is required to be redacted to preserve the confidentiality in relation to credit rating agencies to ensure that we do not impact the ability of Auckland Council to gain a credit rating for Watercare. So there’s very good commercial reasons for the redaction of that information.

Thank you, Madam Chair. I have two main areas of questioning in this call for the Minister in regard to Part 1 of the bill—one carries on directly from the contribution he’s just made when he talked about the Government’s desire to act quickly. Of course, this is the second stage of a trilogy or a trifecta of legislation that is coming before the House. The first stage, of course, was repealing. The purpose of the Local Government (Water Services Preliminary Arrangements) Bill comes here, which is putting the transitional provisions, which my colleague Barbara Edmonds has talked about. But, really, it’s not until we get to the third bill, the Local Government Water Services Bill—where we get to a lot of the very substantive measures—which is not intended for introduction until, I believe, December 2024, and not for implementation until 2025.

Just in terms of the time frames and the Minister emphasising the desire to act quickly, I wonder if the Minister would like to outline to the committee in this committee stage why it is he’s not bringing the more substantive piece of legislation—the stage three that will do the things around the long-term regulatory settings for sustainable water delivery, the long-term requirements for financial sustainability, which I think we’ll have much discussion on as we progress different parts of this bill through this evening. That, of course, will include the establishment of the new classes of council water organisations, providing for the complete economic regulation to be developed by the Minister of Commerce and Consumer Affairs, amending the legislation for the regulation of water services, establishing the new regulatory backstop, and providing refinements to water services. Given the Minister has spent a lot of time talking about the need to act quickly, I’d like the Minister to explain to the committee why it is that we have to wait until next year until we can have the implementation of the full lot.

The other question I’d like to put to the Minister in regard to Part 1 relates to clause 3, the purpose clause, and that’s 3(2)(b) which is “providing for the Minister to assist or intervene if territorial authorities find it difficult to prepare a water services delivery plan;”. Now, the Government has made a lot—and indeed the regulatory impact statement picks up on that—about how this was part of the coalition agreements and it was campaigned on, that this was a part of “[prioritising] … a policy programme to improve water services delivery to New Zealand through localism and flexibility”. I think we’ve heard that word being bandied out a lot in the election campaign and certainly in the first nine months of Government.

What I would like some more discussion on, in this committee, while we’re on this purpose clause, which does introduce the idea that the Minister can assist or intervene and come in if there is a failure to prepare a water services delivery plan—is where the Minister sees the red lines around when he will intervene, when the Minister will come over top of local authorities, when it will be decisions made in Wellington about local water services, and exactly where he sees that evolving into the third piece of legislation. I think that this piece of legislation that we’re debating in the Chamber is not probably quite as local as members on the Government benches would like to sell to their communities. There is certainly through this clause here a very strong ministerial override which does amount to a centralised control of water services, and I think we need some extensive conversation around that. It’s introduced in the purpose clause, and we’ll have a number of questions around what the triggers will be, what the levers are.

So they’re my questions for the Minister. It’s around why so long for the third part of the trilogy—I think everyone always wants the third part of a trilogy sooner, and it’s no different when it comes to this legislation. But also, what are the triggers where the Minister is going to come in over the top of local authorities—override them and impose his will—and where does he see that red line?

Thank you, Madam Chair, and I thank the member for her questions. I think the member, in terms of the question of urgency, should note some of the significant things which this bill does. Firstly, the significant changes it makes for Watercare in Auckland, providing a financially sustainable approach to water infrastructure in Auckland. That is something which has been talked about for many years and it’s been delivered in this piece of legislation. That ensures that Aucklanders won’t face—well, they were going to face a 28 percent increase in water-rate increases from 1 July this year. That has been significantly reduced to well under 10 percent because of the provisions in this piece of legislation, and that is an urgent change being made in this legislation.

The other thing this Government is doing is it’s allowing councils to set up council-controlled organisations far more quickly in a streamlined approach—that takes place because of this legislation which has been put in place. Now, the last Government—I love hearing them talk about localism because they forgot about it for the last six years; they forgot all about it. In fact, their approach was to mandate from the Beehive and tell councils how they strip away their assets, strip away their control, and put in place a whole different system. So this allows councils the ability to put forward those decisions.

In relation to clause 3(2)(b) which was put forward by the Hon Megan Woods, the question there in relation to ministerial interventions, we have been very clear there is a role for the Government. Obviously there is Taumata Arowai which has a role around the health regulation, water-quality regulation. This is about economic regulation to make sure that there is a financially sustainable approach, and we also want to ensure that, as it says very plainly, if territorial authorities find it difficult, there is a role for Government to intervene. But that is a backstop rather than being what the previous Government did, which was the first, the second, the third, and the only intervention.

Thank you, Madam Chair. First of all, I want to just get a point of clarification from Madam Chair, if that’s OK. If we’re also currently debating Amendment Paper 65 as well, because the previous Chair—OK. I’m seeing not. That’s excellent. Thank you.

My question to the Minister around this is also around purpose, so we’re looking at clause 3(1) first—that’s my first question. Now, my question is around the points of legality and inconsistency within the legislation, because clause 3(1) talks about establishing a framework for local government to manage and deliver, but an important part of this, if we’re looking at the commentary on pages 2 and 3, is about separating Watercare away from local government, and in terms of the fact that we are shifting the obligation but also prohibiting Auckland Council from providing financial support to Watercare. So I kind of wanted to see if the Minister wouldn’t mind clarifying whether the separation of Watercare from Auckland Council actually is contradictory to the purpose of the Act in subclause (1), because numerically (1) precedes everything else. I do actually genuinely want to know that, because we have seen that in other legislation as well, where that level of inconsistency could be arguable.

The second question I have in terms of purpose is around clause 3(2)(d), and this is in reference to the Amendment Paper that the Minister has put forward, Amendment Paper 65, where it talks about replacing (d) with “processes for territorial authorities to use”, whereas the previous wording is “may use”. This is also in relation to the amendment that the Minister put forward in terms of clause 4, but we can talk about clause 4 a little bit later. Now, “for territorial authorities to use” and “may use” can be vastly different in terms of legislative interpretation and statutory interpretation, so I want to get clarification from the Minister if the amendment that the Minister put forward where it says, “providing specific consultation and decision-making processes for territorial authorities to use” should be interpreted as a “must” or should maintain the current version we have and be interpreted as a “may”.

Those are the two questions for the Minister. The first one is whether the separation of Watercare and Auckland Council, which I’m sure will be discussed later on as well, overrides the overall purpose under clause 3(1) and whether the Amendment Paper that the Minister put forward for clause 3(2)(d) should be still interpreted as a “may” as opposed to a “must”.

Thank you, Madam Chair. I have some questions—and I will go through clause by clause—a range of questions. First of all, there’s a lot of questions here that I think it would just be very useful to be in the Hansard. As a former lawyer, it’s very useful, always, for the Minister to be able to explain what the legislation is supposed to be doing for both lawyers and law students and anyone else who has to come across a bill—judges as well.

The first question comes from clause 3, the “Purpose”, and it’s to, at (1), “establish a framework for local government to manage and deliver water services.” I’ll just note the term there: “local government”. Then we get to (2)(a), and it’s talking about “requiring territorial authorities to prepare water services delivery plans;”. I think it will be useful for the Minister to make a contribution about why it is different in (1) using the term “local government” and in (2) using “territorial authorities”. I presume that it is because the framework is for all councils—that is the idea. Then these delivery plans are council by council or perhaps subsets of those councils as well. So that would be useful clarification.

Of course, also, we just had some conversation then about the fact that central government can approve these plans and that they have some control over them, and the Minister made some remarks about how he laughs at the previous Government talking about local councils. But that seems highly ironic, given, in this case, there is a requirement from central government to make these plans. I can’t see—certainly in Part 1—that there will be any funding from central government for those plans. So, again, a comment on that would be useful.

Going down then to (2)(e), we see that we’re “providing a financially sustainable model for Watercare” in Auckland Council. Of course, we all know, in this committee, that where there are terrible problems with water services is in the area north of Auckland Council. So how does this bill and how does this purpose help those councils that are not part of Auckland Council and won’t be part of Watercare? That, I think. is also quite a fundamental point. I agree, and I haven’t heard any answers yet from the Minister to Hon Dr Megan Woods’ points about what are those red lines for interventions when central government is going to intervene?

I’m particularly interested in clause 4, the “Overview”, and subclause (5)—which is all changed; it’s all underlined—because it is to do with the requirement for Taumata Arowai to not have regard “to the hierarchy of obligations contained in the National Policy … for Freshwater Management when making wastewater environmental performance standards.” What I am very interested in—and I raised this in my second reading speech as well—is why this is necessary when section 138 of the Water Services Act doesn’t mention the Resource Management Act (RMA) or any instrument made under the Resource Management Act, such as the national policy statement for freshwater. So why then do we need to specify that something in another piece of legislation, made under a regulation under that, a particular part of that, shouldn’t apply to this other piece of legislation? That really makes no sense to me.

Then, also, not only do we have this incongruous situation but there’s a King “Henry VIII” clause that goes with it. This will come later in the debate, as well, around Part 5. I’ll signal now that the need for a “King Henry VIII” clause is outrageous at the best of times. Ministers really need to justify why they would be using that. But they don’t even need to have this clause in the first place, which makes it even more mysterious.

Moving on to the “Interpretation”, which is in clause 5. I have a question around the definition of “price”, and there is some commentary from the select committee about why this new definition of “price” has been included, and it says that it’s related to the Commerce Commission, and there’s some commentary at page 5 of the bill from the select committee report. It would be useful to know if the Minister has an opinion on this definition and if it does just relate to the Commerce Commission or if it goes wider than what the select committee report back refers to.

Another question is about the definition of “urban area”. The definition “means an area identified in a district plan or proposed district plan”, and these are Resource Management Act instruments, district plans and proposed district plans. I wonder whether or not the Minister has considered or would consider an amendment that actually refers specifically to the Resource Management Act, if that would be the normal drafting style when referring to district plans. I’m interested in any advice that he might have on that. Again, of course, this is all useful for the Hansard when people are coming and looking at these definitions of “urban areas”.

Finally, on Part 1, my last question at the moment, is about Schedule 1. Clause 6 is “Transitional, savings, and related provisions”, and Schedule 1 is attached to that, so it’s part of this debate. It is a little bit curious, because it just says, “There are no transitional, savings, or related provisions in this Act as enacted.” So, again, if it’s the Parliamentary Counsel Office, this might be a style-guide issue or some such. I’m interested to know why—

💬 Simon Court: “Some such”. That’s a lawyer’s word.

I’m allowed to say “some such”, Mr Court.

💬 Simon Court: Who says “some such” in 2024?

I apologise to Mr Court who’s taken offence at “some such”. I will say it may be because the Parliamentary Counsel Office have some guidance around what happens with schedules when there are, in fact, no transitional, savings, or related provisions and why you need a schedule to say that there are no transitional, savings, or related provisions. Of course, it’s always useful to hear from the Minister as to why there are no transitional provisions as well.

So I’m particularly interested on commentary around that “Purpose” in terms of local government, the difference between local government as a whole, those councils individually and, also, if there’s any provision for funding from the centre given that we’re talking about “localism”, benefit for Northland Taumata Arowai, and why that needs to include a reference to an RMA document, and those questions around the “Purpose”, “urban area”, and Schedule 1. Thank you, Madam Chair.

I thank the members for their questions. There was a question initially around the Watercare provisions. Watercare remains owned by Auckland Council but this, obviously, provides that they have a prohibition for financial support that enables a council-controlled organisation to be financially separate, but it remains owned by the council. So, hopefully, that addresses that question.

In relation to the question of “must” versus “may”, that was a request from councils as part of the select committee process, and so we’re responding to their submissions.

In relation to the questions from the Hon Rachel Brooking, and the question around Northland councils being required under this to put forward a water service delivery plan—in terms of intervention thresholds, that’s a question for Part 2.

In terms of waste-water standards, it’s a question for Part 5. In terms of the definition around “price”, as it says in the report from the select committee, that is the reason why that has been inserted. It is in terms of aligning language with the Commerce Act. In terms of “urban area”, that’s the definition, and it’s a common definition. It can always be amended later via changes to any other legislation.

In terms of Schedule 1, that’s a style guide, apparently. So I have had that question asked on previous legislation, and a Schedule 1 is inserted in order that if changes are made or something happens, then there is a Schedule 1 available for that to happen.

Thank you, Madam Chair. I just would like to return to clause 3(2)(b). The Minister of Local Government, when I asked what his red lines would be, said that councils would find it difficult. This is, of course, the language that is already in the bill that we have before us, if I just read 3(2)(b): “providing … the Minister to assist or intervene if territorial authorities find it difficult to prepare a water services delivery plan”. What I’m interested in at this committee stage, while we’re on Part 1 and we are going through the purpose of the legislation, is for the Minister to elaborate to the committee around what “difficult” means. I think that we’ve got the word in front of us, “difficult”, but no clear direction from the Minister where his red lines are. For example, the regulatory impact statement (RIS) for the bill has got a large section on councils being forced to increase their expenditure and raise rates to address funding challenges, and it goes through there. I mean, “difficult” is a relative term, so I’d be keen to understand, in the Minister’s thinking, what does “difficult” mean? Is it difficult in terms of funding? Is it difficult in terms of the politics? Is it difficult in terms of the social licence? Where is the Minister’s thinking on this?

If we go through what the RIS does, I think in a very clear way, on page 29 of the regulatory impact statement, it puts a comparison of the proposed rates rises linked to water infrastructure costs and goes through a number of the then long-term plans (LTPs)—understand that a number of councils have made decisions around those LTPs since the publication of the RIS. But if we look at Ashburton council, 11.5 percent rates increases because of the increased cost of needing to account for waters infrastructure. Auckland Council: around 25 percent rates increases. Buller District Council: 31.8 percent rates increases. Clutha District Council: 20 percent for one year. Gisborne: 11.4 percent. Hamilton City Council: 25.5 percent, followed by 14.1 percent for four years. Hutt City Council: 16.9 percent. Wellington City: 13.8 to 15.4 percent rates increases. Then, the RIS helpfully goes through why it is and which particular piece of water infrastructure, because the previous reforms are being repealed—why that is putting more pressure on councils.

When the Minister says that councils will find it difficult, is it these kinds of double-digit rates increases that councils are going to need to impose and are, indeed, as we’ve seen through the latest round of LTPs that councils are imposing on ratepayers? Is that what, in clause 3(2)(b), the Minister has in mind for “difficult”, or are there some other kinds of difficult, other than double-digit rates rises that this is imposing on ratepayers around the country? That’s just a small subsection of councils. I’m sure there’s many other regions around the country which members will want to raise through the course of this debate as we get into the night on this legislation, and what that means for ratepayers around the country.

I’m still not clear, and I think this committee deserves to be clear, to know where the Minister’s red lines are. Where does he see the triggers that are laid out in the purpose statement of this clause for abandoning the much-vaunted localism in terms of this waters legislation and instead imposing the will of Wellington in the form of the Minister? If it’s not double-digit rates rises, I’m keen to know what difficult means in clause 3(2)(b). Simply the Minister repeating the words that are already on the page in the legislation I don’t consider adequately addresses the questions that this committee has put to him. There was a very short select committee process for this, and I think this is an issue that this House, in the committee of the whole House stage, needs to fully tease out.

Thank you, Madam Chair, and I appreciate the questions from the member. I mean, ultimately, the detail of that and thresholds are in the clauses in Part 2, and that is where that debate will be had in more full.

Thank you, Madam Chair. I’m pleased to be speaking to this for the first time, and I’ll begin with Part 1 also.

Given, Minister, that this legislation is replacing the Water Services Entities Act—or is the beginning of replacing that Act—one question I’ve got is to understand the decisions to exclude certain key things in the purpose of the bill. The purpose of the Water Services Entities Act was to enable long-term sustainable improvements in the safety, quality, resilience, accessibility, affordability, efficiency, and performance of water services and water services infrastructure.

Now, there are some very pertinent and important terms captured by that purpose, things that most New Zealanders think would be a good thing to expect of our water service providers. So my question is why would you remove so many of those things, such as the obvious one being safety of water or quality of water in your purpose of the bill, which simply states, “The purpose of this Act is to establish a framework for local government to manage and deliver water services.”—no reference to safety, to quality, to resilience, to accessibility, affordability. That’s my first question.

The second question is that glaringly absent from the purpose is any mention of Te Tiriti o Waitangi, which was of course in the Water Services Entities Act, in its purpose, requiring those entities to give effect to the principles of Te Tiriti o Waitangi, the Treaty of Waitangi, and Te Mana o te Wai.

Now, I understand we will speak about Te Mana o te Wai later, but Te Tiriti o Waitangi is glaringly absent from this legislation. It was one of the points that was raised in submissions by the Pou Taiao Iwi Chairs Forum: “The bill’s proposals lack any acknowledgment of the Government’s Te Tiriti obligations to iwi and hapū, despite this Government maintaining that it continues to hold the position articulated in the affidavit of the Rt Hon Bill English, which acknowledged that Māori have rights and interests in water and geothermal resources, and there is no reference at all to iwi and hapū participation in the delivery and decision making in respect of the mechanisms proposed.”

It is quite an extraordinary thing to remove any reference to Te Tiriti, given the very significant importance, of water, of wai, to tangata whenua Māori. I would like the Minister to explain why that has been removed entirely from the purpose of the bill.

Further down, we see other purposes providing for monitoring and oversight arrangements. We have to understand in the context, and I will speak to this later, of the disaster that happened in the Hawke’s Bay with contamination there, ensuring water services infrastructure is retained in public ownership—I wonder if the Minister can give us an assurance that water services infrastructure will be retained in public ownership, and why that would not be kept or included as a purpose of this new bill, ensuring that water services infrastructure is not operated for the purpose of generating profit for shareholders. That seems to be a thing that most New Zealanders, given that water is a human right, would agree with. I wonder if the Minister can please give an answer as to why he would not keep that as a purpose in this new piece of legislation. Thank you.

Thank you, Madam Chair. I want to follow on from my colleague Rachel Brooking’s previous contribution where she had a good look at some of the definitions and some of the quite detailed clauses in Part 1. There’s one particular phrase that has caught my eye, and I’ve looked for a definition of it and I can’t find it, but it’s sitting there in Part 1, in the purpose cause. So I want to direct the Minister’s attention to clause 3(2)(c). The particular phrase that I’m interested in there is “specified foundational information”.

Now, “specified” is possibly neither here nor there. It’s the sort of phrase I would expect to be defined, because it’s kind of meaningless in itself. So we don’t quite know what “foundational” is, and that’s the word that’s doing the work there, so what is this foundational information?

Typically, in order to work that out, we’d just sort of pop through to the definition section of the bill. Sitting in clause 5 is the interpretation, and so I looked for the two obvious phrases, “specified foundational information”, and that’s not there. So I looked for “foundational information”, and that’s not there either, so there’s a little bit of a mystery as to what that phrase means.

Now, looking further through, because, again, the obvious thing to do is to look for some definition further through in the bill, and without foreshadowing the debate on Part 2, Subpart 3 of Part 2 does talk about foundational information, so I scanned through there to see if I could find some sort of definition there. It may well be that by the time someone has worked all the way through the bill and has gotten to that particular part, they understand what foundational information means. But here it is sitting right up in the preliminary provisions of the bill, where we would expect at least some signalling as to where that foundational information is defined, as to what it is.

That’s, I guess, quite a technical little point, but it goes to exactly what my colleague the Hon Rachel Brooking was talking about in terms of information sitting there for the benefit of lawyers, for the benefit of law students, so it is sitting there in the Hansard, so that people coming to this bill actually understand what it is trying to achieve and understand the technical detail of it without having to go, as I’ve just had to do, trying to track down little bits and pieces like that.

Of course, my particular background is in tax law, and there’s a lot of definitional work that goes on there and I know where to find stuff. Typically, we can find our way through bills, but I could not find that particular definition. I suspect it’s easily fixed. It might just be that I’ve just missed it, because I couldn’t find where it’s defined, but even then, I would expect to see it where that phrase, which is a little bit unusual, first pops up. Again, I think it’s the word “foundational” that’s doing the work there. If it was just “specified information”, I’d go, “Oh yeah, whatever.”, but it’s that particular little word, “foundational”.

I think, if we could have some advice from the Minister or even just saying, “Actually, maybe we’d better fix this up and we’ll just find a wee bit of a way of signalling where we’re saying what that foundational information is.”, so that right up the front we can understand the structure of this bill and what it is trying to achieve, I’ll look forward to hearing that from the Minister, or perhaps his officials. It is a somewhat simple question, but, hopefully, there is a simple answer to it.

Thank you, Madam Chair, and I thank the members for their questions. In relation to the member Steve Abel’s questions, there was a range of things which he highlighted as to signalling why they are not in there. In relation to water quality, water safety, there is significant water regulation that Taumata Arowai is responsible for in terms of drinking-water standards. Those provisions which are under, obviously, separate legislation continue to apply to water service providers and so those don’t change.

There are questions in relation to the Treaty of Waitangi. Ultimately, councils will still be required to meet any specified obligations that they have under the local government legislation. This doesn’t change any of this. This bill is about a framework for councils to determine how they wish to deliver water services in their communities, and they’ll continue to operate within existing obligations during that process.

In relation to the question around foundational information, I found that five minutes of my time leaving me very quickly, but I would just point the member to, potentially, a dictionary for the word “foundational”, and another one, a dictionary, for the word “information”, but also there is a Part 2. Again, I’d point the member to Part 2. It goes into a lot more detail around that particular issue and so I’m happy to have further discussion around that question at that point.

Thank you, Madam Chair. I am going to push the Minister a little bit here. We are in Part 1, where we do have the purpose clause for the legislation, and for the Minister just to say “That’s the bit we’ll talk about.”, where his red lines are around where it is in terms of ministerial intervention for a council’s inability when they’re finding it “difficult” to provide a water services delivery plan—we do need to talk about this in the purpose clause of the bill. This is the part of the legislation where people will go and will want to find some very clear direction from this House, and I don’t think it’s adequate for the Minister to say that he doesn’t need to talk about it under this part. It is very clearly in clause 3(2)(b).

Now, “difficult”—I’d asked the Minister if it was double-digit rates rises that would equal difficulty for the council, and if they’re the kinds of things that would trigger the need for shattering that much-vaunted localism and having ministerial intervention, or whether there was some other thing. One of the things that we heard very clearly through submissions from a number of councils, in particular, was what have been termed orphan concerns, and I wondered if this was one of the difficulties—where there is an orphaned council or a territorial and local authority (TLA) that the Minister would see as being a difficulty under the purpose of the legislation in this clause that would trigger a ministerial intervention.

What we heard was that under the previous Government’s legislation, obviously, there were 10 water entities, where there was a mix of councils that could come together, and what we heard under the regime that this Government is putting in place is a concern from some councils that they were going to be left on their own—hence the term “orphaned councils”. We heard from the Far North Deputy Mayor, Kelly Stratford, and she told the select committee that none of the models offered by the bill ensured affordability for her district if Auckland was not part of the equation. So how is it that we account for those small councils that are going to be left on their own? Is that the kind of thing that’s going to constitute difficulty? She went on to tell the committee that her district struggled with having enough skilled people to comply with the higher standards that were being legislated in this bill. So how are they going to do that?

One of the things that we saw submitters make a point on—and I think it was a very interesting point and I want to understand how the Minister sees this interacting with clause 3(2)(b)—was that this is set against the Local Government Act and the provisions of the Local Government Act, which encourage councils and territorial and local authorities to focus on their immediate place. It is their job under that piece of legislation to be accountable to the ratepayers of their district, yet this is looking for these voluntary kinds of groupings to come together that will provide that mix so that we don’t get orphaned TLAs. But how does that mesh with the provisions of the TLA and how does it mesh with the purpose statement of this legislation?

I think one of the submissions that I was most concerned about—there were many of them—was the submission about how Buller could really be left as an orphaned council. Over three years, the ratepayers in Westport could see water charges rise from $2,300 to over $4,000 in just four years from now, under the provisions that we’ve got in front of us. That’s the kind of cost that the people in Westport would need to bear because of this fear that they would be orphaned and left on their own. As to the idea that councils would band together to spread the costs, we heard from a number of mayors that under the framework that’s been put forward by the Government, that’s just not going to happen.

So the question for the Minister in the chair is to give us some more clarity around what “difficult” in clause 3(2)(b) means. Is this what would constitute difficulty—orphaned councils? Is this the type of scenario that would see the Minister come in and force groupings to come together? Is that the kind of thing that he’s seeing in terms of the purpose of the bill, or is he prepared for the residents of places like Westport to face that rise from $2,300 to $4,000 over just four years and for them to absorb those costs? Is that the kind of thing that he sees as difficult and warranting ministerial direction? I’m still unclear, and I think this committee needs to understand that.

Thank you, Madam Chair. I’ve got a question for the Minister. I’ve got a number of questions, actually, relating to Part 1 and the purpose of the bill “to manage and deliver water services.”, and I’m wondering if he can explain to me, in a number of scenarios, what those words “manage” and “deliver” mean. My first reference point would be the Clutha District Council, which could quite well be one of those orphaned councils. Originally, the residents of Clutha in my electorate of Taieri were looking at an up-to 20 percent rates increase. The council has opted to do less than that, but that is not going to fix the water problem, so we’re going to end up with a scenario where the councils are trying to keep the rates down to allow quite a senior population to potentially stay in their own homes and yet the water infrastructure will not be fixed, and they will have difficulties and they will be probably very likely orphaned.

This has been an absolute headache for the small councils down in the lower South Island, and I’d like to hear what the Minister’s solution is for Clutha, in particular. Would he be requiring it to join forces, say, with Dunedin City Council or with Christchurch City Council, or does he have another scenario? Would there be a bailout, or is this going to be the collapse of that council? Because there is no way that the people of Clutha can afford the rates rises that they would have needed, which would minimum be in the 20s—and we’re looking at the 30s—going forward, if they were to actually manage water infrastructure. And would it be “difficult” under the scenario that my colleague the Hon Dr Megan Woods raised in the previous question?

My second one relates to the people in Eastern Bush in Invercargill, where they haven’t had a significant rates rise. It’s only about 10 percent, but they’ve just been issued a three-year boiled water notice. So that’s three years of boiled water because the water is deemed dangerous. There has been no incentive, I guess, for that council either to increase the rates, because the councillors know this is the end of their political life. If there’s not going to be a bailout by the Government, then I don’t know what’s going to happen. But they are looking at three years of boiled water. Is this a difficult situation in the scenario that was raised by my colleague the Hon Dr Megan Woods?

The third situation is a little bit more complicated and goes to the situation in Auckland. When I look at the purpose of the bill and it talks about managing and delivering water services and then I go to the definition section to see what that includes, it talks about “stormwater”, and then when I go to the definition of “stormwater”—this is in the definition section—it refers to streams that could be related to the infrastructure. Now, under the bill as it currently stands, we had a really nimble solution to be able to resolve some of the problems that happened with flooding in Auckland, because what happened was that many properties suffered significant damage and cost as a result of badly managed stormwater systems. There are in fact 3,000 kilometres of streams in Auckland, and the way the law was being applied, prior to the legislation of the Labour Government, was that individual councils could determine whether they required those water systems to be cleaned out or not and who bore the liability; it was really a patchwork.

What happened was we had some very perverse outcomes where some people in Auckland, who, maybe, managed the stream going down by their property, ended up having to face liability for stormwater overflows due to the—I would say—negligence of councils or perhaps even the bad behaviour of neighbours, where they had allowed build-up in the streams, and there was no consistent application of the law. What happened under the legislation was that we were able to say, “This needs to be uniform. There is a duty of care, where it makes sense, on the councils, or they can put homeowners on notice, and if the homeowner doesn’t reasonably clean up the stream, then they will be accountable.”

When I look in this repealing legislation, it’s silent on whether, in those scenarios, the streams in Auckland are part of the water infrastructure system and who would bear the liability in that case. The words “related to” are quite ambiguous, so I’m keen to know how the Minister would see resolving that and whether he intends to do anything, because if he doesn’t, and this piece of legislation remains silent on it, then that is going to be a real headache, because there will be events. We know that these one-in-100-year events are happening every year. This scenario will come up. We had costs estimated up to $14 billion as a result of weather-related events and storm water and flooding across particularly Hawke’s Bay and Auckland. So that’s not a minor issue that I’m raising. It is technical, but it’s very, very important that we have clarity about what constitutes the stormwater network, what constitutes waterways being related to the infrastructure and where that line is drawn, whether the scenario had even been envisaged, and whether there is going to be certainty for the water entities and for homeowners as to who bears the liability and what the accountability is if they do not keep these streams and rivers clear.

Look, I thank the members for their questions. In terms of the question around the definitions of “manage and deliver”, ultimately, this is about making it clear that local government is responsible for managing and delivering water services in their community. I know that’s a fundamental change from the last Government’s approach where they consolidated and took the assets off local government and imposed their approach on local government. That was rejected resoundingly at the last election. We believe that local government should be responsible for managing and delivering water services, and that is the approach this Government is taking.

The questions raised by the Hon Megan Woods in relation to the word “difficult”—that is in relation to the water services delivery plans, that is not in relation to delivery and managing of water services. As I said, there is in Part 2, obviously, a lot of fulsome criteria around that—

💬 Hon Dr Megan Woods: We’ll get to that, but this is the purpose.

—and in relation to the—

💬 Hon Dr Megan Woods: We’ll have a more fulsome discussion then, but you need to answer about the purpose.

About the purpose, yes. So, in relation to the word “difficult”, there may be a range of scenarios in which councils have challenges in relation to putting together a water service delivery plan. As is outlined in Part 2, there are a range of potential interventions or supports that councils can have provided. One of those could be that the council actually even writes to the Government and says, “Can you assist us?” So there is a range of different levels of what that may mean. It is a broad term which is deliberately used, but it is something which—ultimately, our expectation as a Government is that all councils will follow the law and will put forward a water service delivery plan on how they’re going to manage and deliver water services in their community.

Now, members have raised a range of potential examples around challenges that councils may face—I’m not going to pre-empt any of that. What we’re saying here, though, is there is a range of tools and mechanisms in place which can be used if there is difficulty. I’m not going to preempt any of that because my expectation is that councils will work effectively and work together to put forward water service delivery plans for their communities.

Thank you, Madam Chair. My question actually goes back to a previous issue that I asked the Minister to address, and it might have got lost within the transition between two different Ministers, and it was in relation to the information that had been redacted within the regulatory impact statement. I was listening hard to understand what it was, and I think the Minister can address it shortly.

The reason why I ask that is because, actually, part of the regulatory impact statement is around what the root causes are that led to this bill. For me, it goes back to purpose clause 3(2)(c), which is around the public disclosure of specified foundational information in relation to delivery of water services. Now, it doesn’t take too much effort, because in the redaction within the regulatory impact statement, they fail to redact footnote 35 on page 28, which references a Newsroom article on 20 February 2024 that “Councils [are] placed on negative credit watch due to three waters repeal.” So I’ll wait for the Minister to confirm it, whether that particular part that had been redacted was actually around the credit rating of the different councils which are subject to the framework in which this Part 1 sets up. I’ll wait for the Minister to, basically, respond to that shortly—if the Minister would like to, basically, allow the committee, for officials or the Minister to table the advice that has been redacted in those elements of the regulatory impact statement.

The reason being is the failure to table that information—under the Official Information Act—totally contradicts, which is part of the purpose clause in Part 1 of this bill, because it requires the territorial authorities to publicly disclose specified foundational information, which I know we will go through with Part 2, to have a look at a couple of elements of that. But what I don’t understand is: why doesn’t the credit rating information need to be redacted from the regulatory impact statement? It was drafted in March; it is now August. Why can’t that information not be released, given, as well, we know that a number of councils have gone through credit rating assessments. For example, in Porirua, where I live, our council rates are 17 percent as of 1 July—that’s 17 percent. They have gone through a credit rating assessment with Standard & Poor’s and they received a downgrade in part of their very most recent credit assessment. Again, my assumption is just because, based on the footnote that’s in the regulatory impact statement, this does talk about credit watch, and perhaps his officials’ assessments of what councils throughout the country will be under credit watch or have a potential for a downgrade—why can’t that information be tabled?

I believe that we will get to the point as part of this bill where that information needs to be disclosed anyway, if that’s the purpose of subclause (c), which requires territorial authorities to publicly disclose specified foundation information. Again, that’s for the purpose of supporting economic regulation. Well, the supporting economic regulation is because you know what the debt limit is of those councils, you know what the credit ratings are, and you know what the risks are. I think that ratepayers—and taxpayers, because, ultimately, they’re two in one sometimes—need to be able to understand: is this what the Minister is intending or Parliament is intending as part of that purpose clause and subsection (c)? That’s the sort of information at a framework level that should be disclosed for ratepayers and taxpayers, in order for them to be able to hold their councils to account.

I think that’s important because this information, unless you ask for it to be released, will remain redacted until somebody else does it through an Official Information Act request, but yet we’re here in the Chamber tonight, we are debating making sure there is foundational information for the purpose of supporting economic regulation. But I think a key part of why this is a problem—the root cause of it—is the analysis that sits under it hasn’t been released. So I’m just really keen to know whether the Minister would consider releasing that information, if, again, I think it is about negative credit watch and assessment of it; if not, I’m just trying to understand at what point would a taxpayer or ratepayer, given that territorial authorities will need to provide foundational information, where can they find that information from in the future, and what sort of information we should be trying to table here to make a considered assessment on behalf of ratepayers.

I addressed this question earlier, in relation to these redacted portions, and the answer given was that it’s redacted to preserve confidentiality of credit rating agencies to ensure we do not impact the ability of Auckland Council to gain a credit rating for Watercare.

I’m going to take some more calls but I just want to make a note that the question around “difficult” and the question around “specified foundational information”, as the Minister has said, is in Part 2. So if the Minister is going to answer that in Part 2, maybe we could have some questions on some different things, and we could return to that in Part 2.

Kia orana. Meitaki maata, Madam Chair. Thank you. Can I thank the Minister of Local Government for his response around the redaction. I wonder whether, though—I mean, it was almost feeling like a sense of déjà vu; in his other portfolio, transport, there are regulatory impact statements that also have redacted information that we often don’t get some information about. But the Minister, as I understand it, has informed the committee that it’s for reasons of confidentiality. I would be interested in his thoughts—given that’s the first response in that space—about whether there is a weight in favour of, effectively, waving some aspects of the confidentiality, given that this will have significant implications for local communities all around the motu. I think he’s seeking advice around that, so perhaps we’ll get a response.

If I can turn my remaining thoughts to the purpose section, which is clause 3, I do want to touch on clause 3(2)(b), not around the difficulty aspect but around the preparation, and the question to the Minister is: what stage does that preparation relate to? The Minister, I know, comes from a background of local government, like myself. There are many aspects in that particular sector that preparation can sort of entail. Is it around that development phase when a council may seek some support or advice or guidance or help or whatever it might be, whether it be from Government or elsewhere, or is it that there needs to be a well-defined and constructed delivery plan in place and signed off by the council and that’s what triggers that aspect of preparation?

So my question to the Minister is: at what stage in a preparation process for those involved in the local government sector would that actually kick in? Is there a requirement for a signed-off delivery plan to actually be on the table of the local government or of the council itself—or, actually, no, can councils engage at a much earlier level because they’re in the process of preparation? The Minister knows, given his background, that there’s a public consultation process. There is a process where elected members may make some of these calls themselves. There is a process where expertise, whether that be within the council organisation or outside of the council organisation, would be brought to the table. Where in the process, at a high level, can councils, basically, effectively, hit that button where they’re saying, “Actually, there is a sense of difficulty”, whatever that might mean, and how might they go about it?

My other question relates to the purpose clause 3(2)(c). It’s not about the nature of the foundational information, but it is the change that has been suggested by the select committee, which is around the public disclosure of that information and what that actually means. Now, what was originally in the bill was around the provision of the information. OK. That can be very transactional. This is actually taking it to a different level where it’s saying, actually, there would be a requirement on the territorial authorities to disclose that information, but they would have to do it in a public way. So is that just that being on a council’s website, for example, would be sufficient? Or is it actually that there needs to be something further in that space?

I have some other questions that relate to my specific area of Palmerston North City Council and the rates rises that have already been announced that flow from that, but I’ll come back to that once the Minister’s had a chance.

Thank you so much, Madam Chair. My question is around clause 5, “Interpretation”, particularly around the definition that has been given for “financially sustainable”. Now, looking at the commentary, one of the things I noticed is what should be expanded in terms of this definition and what we’ve heard in terms of submissions from local government—oh, firstly, I also want to thank the Minister for so clearly answering my previous two questions. Thank you so much. They were super, super spot on.

In terms of what local government has suggested in this case, one of the things that it talked about is integration of the plan, but integration with the existing plans and processes and future development strategy that they’ve had. That then leads to one of the Amendment Papers that my colleague Lan Pham has put forward in terms of adding a subclause (c) to what is “financially sustainable”. I really implore the Minister to consider this amendment and these additional three things, because these additional three elements that have been touched on in Lan Pham’s Amendment Paper 69 address some of the concerns that have been raised.

The first thing I want to speak on in this case is the fact that, when we’re looking at the existing definition of “financially sustainable”, it talks about long-term investment and also talks about being financially able to meet the regulatory standards, but what it doesn’t mention is the consideration of debt and future borrowing. I think that is a really, really crucial element of the financial sustainability and financial viability for local government when they are considering the work that they need to undertake for this.

The second part of the Amendment Paper talks about “affordability for communities”. This is, again, something that my colleague Steve Abel has mentioned previously in terms of that level of affordability, and, again drawing attention to the regulatory impact statement, paragraph 108 and Table 2 also specify the risk and caution on the increase in rates for that. So that is the second part of that Amendment Paper.

The last part, albeit one of the more important elements that haven’t been addressed at all in this “financially sustainable” definition, is around environmental sustainability—because of the fact that this is also a concern for local government. I won’t mention too much around it, because it has been mentioned in terms of the environmental sustainability that, for example, Auckland faced last year due to the flood. So in terms of the Amendment Paper, I would ask the Minister to seriously consider it, particularly since it does affect Part 2—which I won’t mention, but I will be coming back to it later in terms of clause 8(1)(b)(ii).

If the Minister could consider those three elements of this Amendment Paper, which are not currently within the definition of “financially sustainable”—and that is around “debt and future borrowing”, “affordability for communities”, and also “environmental sustainability”—that would be really great.

Thank you, Madam Chair. I want to pick up on something the Minister of Local Government said in response to one of the previous speakers. We were worrying about the difficulties, and so on—so I take your point about us going to discuss that further. He said that he’s going to assume that councils can do their job. But I do want to draw the Minister’s attention to the regulatory impact statement and to really question that comment that the Minister made, because it runs up against some of the stuff that we were told in the Finance and Expenditure Committee about how many of the councils were going to struggle with some of the requirements. It also runs up against some of the stuff that is sitting in the regulatory impact statement.

Sitting in paragraph 30 of the regulatory impact statement, it says that councils are already struggling to fund deferred maintenance and replacement of water services, and they’re facing increasing costs in their operation of their water services. Then, the very next paragraph, paragraph 31, says, “There are fixed costs associated with delivery of water services that are challenging for councils with very small populations to fund, as councils consider vary considerably in … size.” So this problem is already signalled loud and clear. I do take the Minister’s point, but I’m also going to say that perhaps some foresight could go a little way here. Then, sitting in paragraph 40 of the regulatory impact statement, it talks about the five root causes that contribute to the persistent systematic problems with the delivery of water infrastructure. In paragraph 40, it offers five root causes—cause (c) is “varied decision-making quality”, and cause (d) is “funding constraints”. So, with respect, Minister, I find it puzzling that then you could also say that you’re going to assume that councils can do their job.

Now, I take it that councils want to do their job. I know that many of the councils who spoke to us during the select committee process, either as individual councils or via Local Government New Zealand—the people presenting talked about their commitments to their communities, talked about why they were in local government, and talked about how they wanted to do a good job. So everyone wants to do a good job. And I take it that the Minister, of course, would agree with that too—that the locally elected members want to do a good job. The problem is whether or not they are able to do a good job.

Sitting in the regulatory impact statement prepared by the Minister’s officials, which he would have gone through himself and sent on to accompany this bill, there is an absolute contradiction to his statement that he is going to assume that the councils can do their jobs. As I said, there’s a distinction between “want” and “can”. It goes absolutely to the purpose of this bill—something that, you know, sits right in there about whether or not councils actually can do the job. The funding constraints, the varied decision-making capabilities, the huge contrast between some of our councils—you know, comparing the incredible resources of Auckland to the very small councils like Buller and so on. And we haven’t even talked about the Far North yet so far—

💬 Hon Rachel Brooking: I mentioned it.

Oh, thank you, Rachel Brooking—I hadn’t realised you had done that. So there are real difficulties that councils face. I just want the Minister to comment a little bit more on that assumption that he’s made that councils can actually do their job.

Thank you, Madam Chair. The member Tangi Utikere talked about the redactions again. I would just mention this is not my document; this is the Department of Internal Affairs’ document, the regulatory impact statement—

💬 Hon Dr Megan Woods: You’re responsible for your commentary on your bill.

Well, please feel free to put an Official Information Act request in if you wish.

In regards to the question around public disclosure, this is, of course, part of the disclosure requirements that are being imposed here around economic regulation and, of course, transparency requirements. And that is why that is being put in place.

Also, there was a question around, I think, the word “prepare”. And so this is obviously a thing in terms of clause 3(2)(b): “prepare a water services delivery plan”. Ultimately, again, Part 2 deals with all of the criteria in relation to those interventions.

There was a question from Lawrence Xu-Nan from the Green Party in relation to Amendment Paper 69. The current definition is broad enough to capture these matters. There is a risk that by adding further matters, we limit the application of the definition to identify and assess financial sustainability.

And the second question he asked around debt talks in there in terms of the words “long-term investment”, and that obviously requires the consideration around those investments and decisions, and, obviously, debt will play a part in terms of that.

The questions from the Hon Deborah Russell—effectively, she just outlined the difference between the Opposition’s perspective and our perspective in relation to this entire issue. And her question was: can councils do the job? And that’s why the last Government decided they couldn’t, and so they came in, took away all their assets, put in place these 10 mega - co-governed entities, and, effectively, New Zealanders rejected that at the last election. So we’re putting in place the foundations for councils to be able to manage and to deliver water services in their community. We’re putting in place a regime here which supports them to do that, and it’s something which many councils campaigned for.

Thank you, Madam Chair. I would like to move on to clause 3(2)(e)—far be it for me to deal on “difficult”. I’d like to thank the Minister of Local Government very much for the answer that he gave to my colleague the Hon Barbara Edmonds about why it was that there’s so many redactions in terms of the questions around the funding constraints. I accept the Minister’s answer that that’s because there are some commercial sensitivities while Auckland Council establishes its credit rating and works through those things.

One of the questions I have for the Minister, and I’d be keen to know, is that, of course, credit ratings are something that are continually monitored by the ratings agencies, so, therefore, does the Minister foresee that this information will never be made public, that this isn’t something that we can have some transparency around? I would argue that you could put the argument that you’re continually and perpetually in a state of the credit rating agencies considering commercial sensitivities. So I’m keen to hear from the Minister around that and what his expectations in terms of the public disclosure of that information would be, if that is indeed the rationale that he sees as underpinning the withholding of that information. I think it is important for the committee to understand that, in terms of the expectations going forward, around how much information can be in the public domain.

The other question I have for the Minister is in terms of the purpose clause, which says very clearly that “The purpose of the Act is to establish the framework for local government to manage and deliver water services.” and “delivers that purpose by” and we go through (a), (b), (c), (d), and (e). But one of the things that I would like to ask the Minister, and it has been noted in commentary on the bill, is that one of the key things that is identified from submitters is actually around how we are going to pay for this. What is not in that purpose clause is—there is nothing about how these new water entities may be funded. The closest we get is the one that I asked about in here, which is clause 3(2)(e), which is “providing a financially sustainable model for Watercare to be financially separate from Auckland Council and an interim economic regulation regime for Watercare [and] is administered by a Crown monitor.”

Let’s take that up a level, because I think that fundamental issue of how it is that these entities are going to be funded, in other parts of the bill—and I don’t want us to get into bits that we are going to debate far more fulsomely as we proceed through this evening, but at that very purpose clause, why did the Minister not think of including, as part of the purpose of this legislation, one of those core issues that is raised by submitters and that, indeed, I think everybody, including the Minister, accepts is at the crux of this matter: who’s going to pay for it? How is it going to be funded?

We’ll get into issues about balance sheet separation and debt ceilings for a number of the entities. They’ll come in different parts of the bill, so I’m not trying to traverse those areas. It’s really that fundamental question that if we’re considering why it is we’re here in this Chamber considering this legislation, having this debate, that very, very core issue is not included. So I’m keen to hear from the Minister on those two things.

Given that he has cited commercial sensitivities, does he see that there is an end point for those commercial sensitivities, or does he see that the perpetual monitoring by ratings agencies will mean that we can never fully put that information out into the public arena? And, secondly, it’s why, when we’re considering this legislation, we’re not considering the most core issue, I would argue, that lies at the heart of this legislation.

In relation to the first question, I have made it very clear that that is in relation to Watercare establishing a credit rating, and this is redacted in order to not prejudice them establishing a credit rating. Once a credit rating is in place, generally those are made publicly available, and there’s obviously processes that go on from there.

In relation to the second question, this is Part 2. There’s obviously further legislation to come to the committee.

Thank you, Madam Chair. Here is just a very short question from me, going back to the Minister’s previous contribution in saying that this bill was about supporting councils. I did mention, in my first contribution, that there seems to be some irony here when this Government says that they’re interested in what’s happening at the local level but there’s no funding from the centre. So can the Minister address that question? Is there no funding from the centre? Is this just putting extra workload on to councils? Is that what it’s doing? I would appreciate a clear answer on that. And what does he mean when he says the whole purpose of this bill is to support councils? It’s very important.

Thank you, Madam Chair. I just have a very quick follow-up question, and I thank the Minister for his answer and for clarifying that he sees that that is about the credit rating being established and that, following that, there can be disclosure. So what I would like some clarity from the Minister on is when he sees that point being reached. Obviously there’ll be the passage of this bill once it’s passed, but what is his expectation in terms of time frames afterwards? When will he consider that their credit rating is established enough, given the processes that rating agencies go through in terms of monitoring? What is the point where he is satisfied that that is established?

That is a matter for Auckland Council, which is going through the process of the financial separation for Watercare.

Members, the time has come for me to leave the Chair for the dinner break. The House will resume in committee at 7.30 p.m.

Sitting suspended from 5.56 p.m. to 7.30 p.m.

CHAIRPERSON (Greg O’Connor): Good evening, members. When we finished, we were debating Part 1 of the bill.

Thank you, Mr Chair. I will just very quickly remind the Minister that before the dinner break, he had made the comment that the bill is going to support councils, and we are yet to hear how this bill is going to support councils. Of course, that is important, given that we are on the purpose section of the bill, being clause 3 in Part 1, so I’m very keen to hear a response.

Thank you, Mr Chair. I continue the debate on Part 1 of this particular bill, which we’d been canvassing before the dinner break, which are the preliminary provisions part of this Local Government (Water Services Preliminary Arrangements) Bill, which I notice had actually had a bit of a title change from what officials had put in the regulatory impact statement that was on the Table, because it was changed from “Transitional” to now “Preliminary Arrangements”. But, having gone through the regulatory impact statement as part of this bill, trying to understand the purpose and the objective of this particular bill which is set out in clause 3 of Part 1, I came across, in the regulatory impact statement, a footnote in relation to a Castalia report, which was from January 2024, Meeting key objectives of Local Water Done Well: Draft report on policy objectives and proposed process.

In reference to the Minister’s previous answer that, if members wanted information, they could Official Information Act request him, I did actually try and have a look for the background papers to this bill to see whether that particular report, which is very much on the policy objectives in the process for this bill, which, again, pertains to clause 3—whether I could find that particular piece of advice from Castalia.

For those members who are not aware of the affordable water reforms, Castalia was a consultancy group that was used by one of the council groups—I can’t remember the name at the moment, but a group of councils who were objectively against the affordable water reforms. So they had referred a lot to how Castalia had done, basically, a large amount of analysis, basically going through line by line what was called WICS—which is the Water Industry Commission for Scotland—who was actually contracted by the Government of that time to provide, basically, a number as to what this sort of water infrastructure deficit would look like.

Interestingly enough, the regulatory impact statement does refer to how WICS said $120 billion of investment is required over 30 to 40 years to maintain, replace, and upgrade existing assets and enable and provide for needed residential development. The regulatory impact statement quite helpfully goes through also why Castalia, basically, disagreed with the WICS analysis. Interestingly enough, the department and the advice that they provided for the Minister for this particular part of the bill didn’t say that they sided with WICS, but they agreed with the $120 billion price tag for these water reforms.

Basically, the $120 billion, for those who are not aware, is, basically, an analysis of how much would need to be spent to get the water infrastructure across the country, across all the different councils, up to scratch. So I found it really interesting, therefore, that later on in the regulatory impact statement, officials actually referred to this draft report on policy objectives. It goes to some of the earlier debates within this committee on this part of the bill around what the purpose of this particular bill is. It is set out in clause 3(2)(a) to 3(2)(e), but my question is for the Minister, because I couldn’t find that draft report online. I couldn’t find it in the proactive release that officials have helpfully done on the Department of Internal Affairs web page. I couldn’t find that particular report, and yet it seems to be such a crucial report, because it was January of this year when it was talking about the policy objectives and the proposed process.

So I would like to just have a bit of an understanding from the Minister: what is that report? Did he receive that report from Castalia or is that a report that officials received from Castalia? How did that inform clause 3 of Part 1 of this bill? If so, why has that not been—and the Minister might not be able to answer this—released? Or, actually, can he point to where I can find it online—

💬 Hon Dr Megan Woods: Or table it.

—or table it, because for me, I’m trying to understand why an independent consultant would provide a draft report to either officials or the Minister in January of 2024 around the policy objectives of these particular changes which pertain to this bill, and just basically, for transparency’s sake, where we can find this so we can have a look at the analysis and then compare what the policy proposals were that were put forward to the Minister, and then how that compares to Part 3.

Thank you, Mr Chair. Following on from my colleague the Hon Barbara Edmonds, of course, we’re in Part 1 of this bill, the preliminary arrangements, defining the terms used in the bill and the bill’s contents. I think that’s one of the important things that Part 1 of this bill does; it really summarises what is in this bill.

Connected to the contribution and the questions that my colleague Barbara Edmonds has just asked, my question is really about paragraph 167 in the regulatory impact statement of the bill, which talks about “Due to timeframes, it was not possible for the Department to complete a full analysis of the costs and benefits of the four proposals beyond qualitative [assessments]. They should be considered as indicative only.” So my questions for the Minister are: why are we galloping ahead when we’ve only got indicative costings? We know that, in terms of what we’re doing here, the rubber is really going to meet the road when it comes to who’s going to pay for what and how much it is going to cost. I think this is the right part of the bill for us to be asking these very overarching questions of the Minister, given that this is the part of the bill that contains the summary of everything that is in there.

What I would like to know is whether, in the Castalia report that the Hon Barbara Edmonds referred to, there is anything in there that attempts to move beyond those qualitative assessments? Are we getting down and into any quantitative analysis of the various options in terms of what is set out in terms of what the bill is seeking to achieve? I think it’s really important for this committee to know what information exists before we move beyond the purpose in terms of the quantitative work that has been done and whether we have the ability to move beyond the indicative costings, because when we get into the more substantive parts of this legislation, as I’m sure you’ll appreciate, Mr Chair, there are going to be a lot of questions about particular councils, about particular costings, so for the Minister to give the committee an update on exactly what information is there in terms of both quantitative and qualitative analysis of the costings, I would be interested to hear.

Thank you, Mr Chair, and I appreciate the questions from members. The key question here following the dinner break is in regards to this Castalia report, which is referred to in relation to this part. The Castalia report was commissioned by the department. I haven’t received a copy of it. Castalia also provided advice to councils on modelling as councils did not agree with the efficiency assumptions in the Water Industry Commission for Scotland modelling. The previous Government’s modelling used a top-down methodology which estimated that some amount between $120 billion and $185 billion would be required at a national level to maintain and improve water infrastructure. Current long-term plans estimate $41 billion.

The point in this bill, which I think is an important point to go back to, is that this bill is around establishing a framework for local government to manage and deliver water services. It will require the territorial authority to prepare water service delivery plans. It’s a bottom-up exercise to understand what is actually needing to be done from local government’s perspective, working upwards, rather than what the previous Government was doing, which was saying, “This is what we think.”, and pushing it downwards and then taking all those assets away from local communities and the ownership and forcing on local councils their own mandated, co-governed model. We are taking a fundamentally different approach through this legislation.

Thank you, Mr Chair. It’s a real pleasure to take a call on this really important bill, the Local Government (Water Services Preliminary Arrangements) Bill, and it’s something that I had an interest in in the previous Government, because the legislation there took an approach which saw not only an objective of regulatory compliance—that is freshwater standards and so on—but also had a whole framework around quality and price standards as well. So, in terms of looking at the purposes of the bill, which, essentially, seem to be structural purposes, to get a framework for delivery of water, I’m wondering why, in there, there’s nothing about the consumer. There’s nothing about the purpose of the bill being to deliver water services to the consumer at a price and a quality which is appropriate. And, in particular, in tying that into the definitions section there as well, I see that one of the key definitions is “financially sustainable”. And “financially sustainable”, essentially, is defined to mean that they’ve got enough money to meet their regulatory thresholds. But, again, in doing that, there’s no real identification of the need to meet quality and price standards for the consumer.

Now, quality standards aren’t just “the water doesn’t make me sick”; it’s that the water is there consistently and that there’s not outages. And, of course, the price standard is also not just “I want it cheap”; it’s a price standard which is reasonable given the costs of the infrastructure, the long-term costs, the ability of the consumer to pay, and all of those things going in. In terms of infrastructure like this, we’ve got models—airports are one example—where pricing structures are regulated in terms of the long-term cost of infrastructure. I’m interested to hear from the Minister where in terms of the, if you like, hierarchy—to use words from another legislative framework—does the consumer sit in this? At the moment, just on a first reading of the purpose clause and just on its words, it seems to say the consumer isn’t really relevant to this piece of legislation. “Consumer” is a defined term. So they sit there somewhere. In clause 5, “consumer means a person who consumes, uses, acquires, or is provided with, water services”.

The other consumers—and I know that my colleague Mr Bayly would be interested in this, because he had something to say about this—may also include future consumers, which might be developers who want to develop an area of land and want water connections. Now, where do they sit in that? Because that’s, in terms of water being a critical part of infrastructure to unlock land for housing and industrial and commercial development, a really important point.

So my question is twofold. On the definition “Financially sustainable”, why is there no reference to the provision of water at a price and quality that is appropriate? And, in terms of purpose, why is there nothing in the purpose clause which talks about protecting the interests and entitlements of the consumers of water services? Perhaps clause 3(2)(b) is when we’re talking about “consumers” as defined. Do we include consumers who might be future consumers, people who might want to connect to the water network in the future? Thank you, Mr Chair.

I move, That debate on this question now close.

Thank you, Mr Chair. I have a very specific question for the Minister in relation to an answer that he has given in the Chamber. I appreciate that what the Minister said in terms of the lack of moving beyond qualitative and indicative costings is because it’s the desire of the Government to build a bottom-up approach, working with councils to get a sense of what the costings would be. But I’d just like to hear from the Minister about how that approach will work if clause 3(2)(b) is implemented and the Minister intervenes because he’s not satisfied with the water service delivery plan. How will it work when there aren’t any more detailed costings and these have moved beyond indicative, if that 3(2)(b) is instituted?

I thank the members for their questions. In relation to the Hon Duncan Webb’s questions, the issues around price, quality, affordability, and the regulatory framework are all good questions. There are three parts to our water reforms. This is the second piece of legislation. There is a third piece of legislation which will come and which will include a number of those particular elements, and this puts in place the start of the initial regulatory framework. I’d also make the point, though, that the purpose of this Act is to establish a framework for local government to manage and deliver water services. That is the purpose of this Act. It’s around the water service delivery plans, it’s around the council-controlled organisation opportunities, and it’s around Watercare. That’s the purpose of this particular legislation. There is further legislation to come.

In terms of the Hon Megan Woods’ question there, ultimately, the process is around the use of the powers which are envisaged through 3(2)(b) within Part 2 of the bill and in terms of the process, but it doesn’t change the fundamentals in terms of the water service delivery plan needing to be prepared.

Thank you, Mr Chair. I’m looking at the purpose of the bill in Part 1, and I appreciate the Minister earlier answered my question about water safety, though I don’t feel entirely confident that taking mention of safety as a purpose is the best way to approach it.

The Minister suggests that that is a bottom-up approach to not put those things as overarching objectives. What it made me consider, looking at the regulatory impact statement, was: what was the background to these reviews of the way that our water is done? Of course, it was in 2017 that the National-led Government first established the three waters review to assess whether local government practices and systems and oversight relating to water services and infrastructure were fit for purpose. We had the Havelock North event occur, which was a major influencer of the determination to set up Taumata Arowai, the water services regulator, and let’s not forget that event caused the death of four people, the hospitalisation of over 40 people, and made 5,000 people ill. So the prioritisation of water safety became starkly evident as important.

Given we have 67 councils operating water services across New Zealand for around 85 percent of the population, the challenges of having real clarity in the expectations of those water providers are great. Now, that water review was continued by the Labour Government, who, of course—when they came to power with New Zealand First and the Green Party in 2017—put in place three waters. We understand this Government has removed three waters and this is, essentially, the replacement for it—part two of that replacement.

I wanted to point out to the Minister and ask him why, in the purpose of this new regulatory system, the four key things that were outlined as part of the three waters reform programme were “safe, reliable drinking water;”, which was number one; “better environmental performance of wastewater and stormwater services;”, which is not mentioned in the purpose of this new Act; and “efficient, sustainable, resilient and accountable multi-regional water and [sewerage] services; and making it affordable for future generations.”, as my colleague from Labour has just been speaking about. None of these things are mentioned as purposes of the Act. Yet, as I would state again, water safety seems to be of the utmost priority when it comes to the provision of drinking water, in particular.

Earlier I had asked you, Minister, to answer questions as to ensuring water services infrastructure is retained in public ownership. I’d appreciate an answer as to what guarantees the Government is making that they will retain the water services in public ownership and that they will ensure that water services infrastructure is not operated for the purpose of generating profit for shareholders. Again, I would appreciate an answer to that because that’s an obvious impact on the affordability of water, which is a basic human right—access to safe drinking water.

Finally, in part three of your intended regime of change to the water regulatory system, the intention is, according to the regulatory impact statement, to “amend the legislation providing for Taumata Arowai’s”—which you sheet back all responsibility for ensuring safety of water—“regulation of water services, which could include amendments to the threshold for regulated suppliers;”.

I would love clarification as to what that refers to and why exactly it is not optimal in this legislation to place safety and reliable drinking water as a purpose of this overarching Act for our drinking water and all our water services. Thank you.

I move, That debate on this question now close.

Thank you, Mr Chair. I have just a question, really, of the response that the Minister gave previously to my question—and thank you very much for clarifying with his officials that that Castalia report was not a briefing that he had seen but was actually one that officials had instigated off their own and must have clearly been part of this bill because, again, we’re going through the purpose clause.

The Minister talked about looking from the bottom up, rather than the top down, but this is where my confusion sits, because in the regulatory impact statement (RIS), officials have used the $120 billion tab minimum—minimum—based on the Water Industry Commission of Scotland’s (WICS) analysis. They had actually set out quite nicely, in pages 23 and 24 of the RIS, why Castalia—which was, basically, at the time, the group that was representing a group of councils—believed that the WICS analysis wasn’t robust enough. They basically said WICS was too much—it was overestimating it—and they had set out a number of reasons as to why.

For example, they argued that Auckland’s Watercare had an estimated 1.6 times more investment than needed; Waimakariri District Council, four times more investment than needed; Hastings District Council, more than 4.5 times more investment than needed. This is where the confusion for me sits with the Minister’s response—he said top-up, not top-down. However, the WICS analysis, which was used as part of the previous Government’s reforms, had actually sought the information from every single local council in order to come up with that particular $120 billion minimum figure.

I can show that to the Minister. I mean, it’s right here in the regulatory impact statement. Again, there was a whole lot of data and analysis that underpinned that $120 billion figure. So I just want to get some clarification from the Minister, given that his officials are now using advice that they instigated, which is not of his instruction. They’re using advice from a consultancy group in order to help them develop the purpose of this clause, the objectives of this particular framework, which we are, basically, testing tonight. However, it also goes to show, though, that this particular consultancy group did not agree with the previous Government’s analysis, which was based off the Water Industry Commission of Scotland’s—or WICS’s—analysis, which came up with the minimum $120 billion figure.

I’m just trying to understand, because that $120 billion figure came from information from councils. I know we will go through it as part of a different part of the bill—we will talk about those water service delivery plans and what’s the type of information that the Minister will be expecting from that and what the Department of Internal Affairs will be expecting from that. But I’m just trying to understand. Have I missed that alignment where, basically, both different sets of advice stand on their different merits? However, for the purposes of being able to put a price tag around this whole framework, which is dealing with water infrastructure, that you’ve landed on, $120 billion as a minimum—thank you to my colleague Rachel Brooking—I wonder whether you still think that that $120 billion figure is still robust, given that that information came directly from councils in order for them to get the analysis?

Is there a bit of a gap missing there, and is this why you’re going to do the framework later? I’m just trying to understand that now so that when we get to that next part where we will drill into the water service delivery plans, we will try to understand whether there are actually more gaps than actually what the framework of this bill sets up.

Thank you, Mr Chair. A couple of quick responses to those questions. Steve Abel raised a number of questions—I’ve already answered many of those questions. One was in regards to the definition of “financially sustainable” in relation to one of his colleague’s earlier questions, which was that there was a tabled amendment relating to that. The question, though—which I didn’t answer before—was in regards to public ownership. The purpose of the Act is to establish a framework for the local government to manage and deliver water services. I think it’s clear in the intent that this legislation is not about privatisation of water infrastructure. It’s very clearly about local ownership and control and management and delivery, and that’s very clear in the wording that we have determined and used in this legislation.

In relation to some of the other questions he raised around water quality, we have Taumata Arowai, who are the water-quality regulator. All of the requirements that they have in place around water-quality regulation stay. This is a framework for local government to manage and deliver water services. About the management and the water and the delivery, though, they have to meet those standards we put in place.

In relation to the questions by Barbara Edmonds around the modelling, the key point I’d make in response is: this is about a framework. It requires water service delivery plans to be put in place that will identify, at a local level, what those costs are, what’s required to meet the infrastructure growth, and how that can be addressed. That’s the purpose of these. Rather than coming in from a top-down perspective, which is what the last Government did, we’re taking a bottom-up. These water service delivery plans will play a key role in doing that.

I move, That debate on this question now close.

Tēnā koe, Mr Chair. I’m very happy to be able to raise some questions and make a short contribution in Part 1 of this bill. I specifically want to raise an issue of a very unique part of my constituency, the Rongotai electorate, which is the Chatham Islands. The Chatham Islands is New Zealand’s smallest and most isolated council and faces a number of unique challenges when it comes to the provision of water services. The council is, as I’m sure the Minister is aware—I mean, the population of the Chatham Islands is around 700 people. They provide three-water services to some residents, not all residents—the majority being drinking water and wastewater; there’s very little need for stormwater. However, the council has significant funding challenges to be financially sustainable.

Now, my question is different to the reference to the tabled amendment of my colleague and the questions around “financially sustainable”. But I do have a question around the definition of “financially sustainable” in clause 5 because, as the Chatham Islands Council raised in its submission at the Finance and Expenditure Committee, there is not sufficient clarity on how that will be judged in practice. Is the Minister able to enlighten us, perhaps with reference to the specific circumstances of the rural population on the Chatham Islands, whether the council—how their financial sustainability will be judged? Because the council has had a practice for many decades—and I’m sure this is not unique, because many councils have faced this—of deferring capital investment in order to make their services affordable. But that is not sustainable.

Council cannot borrow, as it has no ability to service the debt. It would probably need central government to be able to borrow. They said in their submission that there were many years—potentially decades—of deferred investment. So they’ve deferred critical renewals, all capital works, in order for services to be affordable and financial sustainable. However, you can only do that for so long, obviously. We all know that. We can only defer capital investment and critical upgrades for a certain amount of time before that becomes untenable.

The capital infrastructure in the Chatham Islands is at or near the end of its useful life, and there’s a really high risk of existing infrastructure failing and causing significant negative health outcomes for the people of the Chatham Islands. So I’m just really interested as to whether—when we look at the definition of “financial sustainability” and how that’s going to be judged, obviously they need revenue applied to the delivery of the services. It has to be sufficient to ensure the authority’s long-term investment, and it’s got to be financially sustainable, but currently they cannot rely on rates to cover the cost of that.

Rates are already contributing to about 40 percent of the operating budget, but that can’t service debt. It’s not going to enable them to invest in capital infrastructure that is absolutely necessary. And, you know, 60 percent of the cost is covered by the Crown grant to the Chatham Islands for operating those services. So how will they be judged as financially sustainable? Is the Government going to have a mechanism or some commitment to funding capital works for communities like the Chatham Islands who have unique rural populations and who face significant challenges in funding these critical upgrades? Does the Minister have a specific answer to that?

I thank the member for her question. The question is in relation to the definition of “financially sustainable”. It’s a definition which is a broad definition to encompass a wide range of councils in New Zealand, and this legislation requires all councils to put forward their water service delivery plans, which, of course, includes the Chatham Islands, which will be required under the legislation to also be putting forward a plan.

I move, That debate on this question now close.

The question is that the Minister’s amendments to Part 1 set out on Amendment Paper 65 be agreed to.

The question is that Lan Pham’s amendments to clause 5 set out on Amendment Paper 69 be agreed to.