Our key concerns with the Water Services Entities Bill

The impact of the Water Services Entities Bill will be profound. The public and many local authorities appear to share many common concerns about provisions set out in the Bill. These include:

  1. The take-over of council assets. Council – and therefore ratepayers’ - assets will be taken without the consent of the local communities, and without fair compensation. The public has been told by the Government, including in the Bill’s explanatory note, that councils would continue to own the three water assets and that there would be accountability and transparency. However, provisions in the Bill tell a different story.

  2. The so-called ‘ownership’ model. To call territorial authorities ‘owners’ of the Water Services Entities is meaningless, as they won’t be able to exercise any of normal ‘ownership’ rights of control. The proposed shareholding model does not provide any of the conventional benefits that typical shareholding arrangements convey. Councils are denied the rights of possession, control, derivation of benefits, and the defining attributes of ownership. This is made clear in clause 166 of the bill, [which says a “territorial authority… (a) has no right, title, or interest (legal or equitable) in the assets, security, debts, or liabilities of a water services entity (and the constitution cannot confer any such right, title, or interest…); and (b) must not receive any equity return, directly or indirectly, from a water services entity;….]”. The only possible benefits of the shareholding to be (i) a right of veto in the instance that privatisation is proposed, and (ii) in determining the make-up of the Regional Representation Group.

  3. The loss of democratic control, and poor accountability to the public. Taking three waters infrastructure and delivery services out of the control of local councils and placing it in the hands of the proposed entities with their complex governance structures will greatly diminish proper public accountability. John Ryan, the Controller and Auditor-General, wrote to Parliament about the bill, saying the legislation “could have an adverse effect on public accountability, transparency, and organisational performance”. Furthermore, he said, “Water Services Entities cannot be held to account by ratepayers like local authorities are, nor can they be held accountable by Parliament because they are not Crown entities this makes direct accountability to their respective communities more important.” 

    The Office of the Auditor-General’s submission to the Parliamentary select committee says the proposed Three Waters changes will result in ‘a serious diminution in accountability to the public for a critical service’ and ‘no proposed audit scrutiny’.

    Under the proposed structure, the loss of local communities’ influence over their water services will be further diluted by the 50/50 co-governance-with-iwi make-up of the Regional Representation groups and the Regional Advisory panels, which are the only avenues open to local authorities to have any influence on the behalf of their communities. 

  4. The proposed governance structure is overly complex and top-heavy. “The complex accountability mechanisms mean the Boards of the mega entities will have multiple ‘masters’. Management will have multiple accountability documents, including various important socio-cultural obligations that need to be balanced against cost efficiency and maintaining minimum service levels. This creates room for mismanagement or worse, compared to a more straightforward council-owned, corporate state-owned enterprise or Crown Entity model.” (Communities4Local Democracy submission).

    The multiple levels of bureaucracy will result in increased costs, and erode any potential efficiencies created by centralisation. 

  5. The co-governance model will give iwi members a much greater say than other citizens. Considerable weight has been given to providing for iwi/Māori input, without the same consideration given to other New Zealanders. This is a significant departure from a society where all citizens are equal before the law. 

  6. The requirement for everyone who exercises functions, duties and powers under the Bill to give effect to both the principles of Te Tiriti o Waitangi, and Te Mana o te Wai. 

    Under the requirement to give effect to Te Mana o te Wai statements, iwi and hapū will wield a significant degree of power over how the Water Services Entities operate. Iwi/hapu can formulate Te Mana o te Wai statements as broadly as they wish - there are no strict definitions or limiting criteria. As the Department of Internal Affairs states: “The [three waters] reform will provide for local expression of Te Mana o Te Wai that will enable development of Mauri frameworks, application of mātauranga Māori measurement or any other expression that iwi decide is relevant to them”.  

    Furthermore, there is no limit to the number of statements an entity must refer to - section 140 of the Bill makes it clear that iwi and hapu can make such statements as often as they like.  And the entities must respond to them with a plan that sets out how they will give effect to the statements.

    As Te Mana o te Wai statements lack carefully articulated definitions and constraints, this provision is open to abuse.

    On the other hand, there are no solid and clear mechanisms to ensure other local perspectives are heard and considered by the proposed entities. While some detail regarding consultation and engagement with local communities is set out in Part 6 cl 202, there is a lack of clarity on what engagement and consultation entails, and at what level this is required. Although the entities are required to have "consumer forums" and prepare a series of "stocktakes" this does not guarantee community input, as they are not required to act on any of the issues raised.

  7. The Government’s claims of cost-savings through proposed water reforms are unrealistic. It has been reported that the cost saving claims are based on dubious modelling and implausible assumptions that exaggerate the benefits of mega entity reform. The effect of the erroneous assumptions includes understating the likely cost to water users. (Refer to the Whangarei District Council Castalia report). Nor does the bill recognise the unpredictable cost implications in implementing Te Mana o te Wai statements.

    Furthermore, the mega entities significantly increase Crown fiscal risk. A Standard & Poors’ report concludes that there is an "extremely high" likelihood that the New Zealand sovereign will provide timely support to the water entities if they are in financial distress. Therefore, significant risk will be transferred to the Crown without the typical control and accountability mechanisms.

  8. There is widespread opposition to the proposed reforms, including from 60 out of 67 councils. Polls commissioned by various groups prove this reform is highly unpopular. One such poll was commissioned by Democracy Action in November last year – please click HERE to read.

Further ideas are available in the Water Users’ Group submission, and the Democracy Action submission. 

References

Water Services Entities Bill

Communities4Local Democracy: Submission to Finance and Expenditure Select Committee on Water Services Entities Bill

The Whangarei District Council Castalia report

Department of Internal Affairs: Three Waters Reform FAQ 

Controller and Auditor General: Submission on the Water Services Entities Bill

Commentary

Gary Judd QC: Ideological government indulging sectional political constituency

Dr Muriel Newman - Time to Oppose Three Waters

Graham Adams: Talk of a coup ratchets up Three Waters debate

Media coverage

Newsroom: Ratings agency says Govt will bail out Three Waters corporations in a crisis

National party press release: Labour Must Listen To OAG And Scrap Three Waters

Stuff: Auditor-General raises concerns about accountability in Three Waters plan


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