The Committee Secretariat

 Health Select Committee

 Parliament Buildings, WELLINGTON.

1st March 2021

Submission on the Water Services Bill   (No. 314 – 1)

(Written submission pdf here)

(Oral submission pdf here)

Ko te manu e kai ana I te miro nona te ngahere –

The bird who eats from the Miro tree owns the forest.

 

The move to ensure high quality fresh water is delivered to all New Zealanders is admirable, essential, urgent (highlighted by the Otago lead contamination issue) and to be commended.

The actions of previous governments in drastically under-funding infrastructure and in particular not coming to grips with the need to find innovative solutions to solve the inability of councils to fund improvements to infrastructure of all kinds, has in large part been responsible for the poor state of water and waste water services in New Zealand.

The report of the Productivity Commission on local government funding, delivered in 2019, is just one example. The report's major recommendations were a series of additional ways for councils to extract more money out of the pockets of already overburdened ratepayers and taxpayers. Our submission to the Commission on using the power of the Reserve Bank to fund council infrastructure (see submission below) was simply ignored, despite less than three months later, that power being used to fund the Covid 19 recovery.

Our submission of June 2010, on the Local Government Act 2002 Amendment Bill was similarly ignored. It proposed:

1. That the provision of public water services be funded interest-free by the Reserve Bank of New Zealand, with management directly under the control of democratically elected councils.

2. That the bill includes a clause permitting local government access to Reserve Bank of New Zealand Credit-lines to fund essential infrastructures, utilities and environmental protection.

Although there are a number of aspects of this Bill which concern us, our main interest at this time is in Section 11: Meaning of Operator; and Section 12: Meaning of Owner.  None of the definitions set out in those sections give us any confidence that all ownership, control, and funding will be by New Zealand owned entities.  In fact there is nothing in the Bill that precludes any of those functions being in the hands of overseas owned entities.

Indeed, several of the descriptions in the explanatory notes seem to based on exactly that –

“All territorial authorities and council-controlled organisations will be required to become authorised, or have their drinking water services delivered by an authorised supplier, within 5 years of the commencement of the Bill”

“require territorial authorities to work with a supplier

“whether provided by the territorial authority itself, or by another supplier

 

In the light of decisions made over many years by the Overseas Investment Office and respective Crown Ministers, we suspect that all the proposed Three Waters reforms are designed to be profitable to private sector owners, contractors and financiers – as again, there is nothing that is evident to make it clear that is not the case. 

 

The structure and time-line set up to move water assets into the hands of new water services entities bears a striking resemblance to the road taken to ‘reform’ the electricity industry in New Zealand and the water industry in Britain, both of which have seen the ownership of the assets and service delivery end up in the hands of private companies (mainly overseas owned) with users effectively paying a ‘tax’ which guarantees substantial profit for the shareholders of those companies.  

 

We all know that the country is facing severe infrastructure deficits and that the problems with funding those infrastructure deficits (particularly on the part of local bodies) is one of the major things driving the proposed reforms (as listed by the Steering Committee). But we are alarmed that private investment is being sought through Crown Infrastructure Partners, who is “tasked with designing and implementing new commercial models to attract co-investment from the private or other sectors to achieve the Government’s objectives for the efficient deployment of water and roading infrastructure to support the timely increase of housing supply”. 

 

Current and future residents will have imposed upon them extra debt-servicing, to find from their household incomes besides their rates and other payments, to provide a gold plated return to wealthy New Zealand and overseas investors.

 

This unnecessary impost is the more galling when our sovereign Reserve Bank has the ability to fund such infrastructure directly - by for instance, providing nil-interest credit lines to district and city councils. After all, if the Reserve Bank can create and issue $100 billion (as it is currently doing) to purchase Government bonds and local body debt from banks and private investors, it clearly has the ability to create and issue the necessary loans to local bodies directly so that they can upgrade and build new water infrastructure and ensure high quality water supply.

 

While we approve of the employment of private sector firms (preferably New Zealand owned) to construct the infrastructures needed for the supply of clean, fresh water, in no way must any element of private involvement be permitted regarding its ownership, management, funding or supply. Private Public Partnerships in particular must not be deployed in the building or upgrading of infrastructure. 

Councils have been assured that the “bottom line” for planned reforms is public ownership, but if  funding is provided by private investors, the path is open for eventual sell-offs, similar to the way our SOEs (State-Owned Enterprises) have surrendered shares to private interests.

We consider the allocation of an $500 million stimulus to councils for their compliance in signing Memorandums of Understanding in regard to the proposed reforms as sheer out and out bribery. For the government to advance funding, something councils have been crying out for for decades, on the basis of them agreeing not to oppose the so-called ‘reforms’ raises serious questions as to the drivers behind the Three Waters programme, leaving us with grave doubts as to the Government’s real agenda.

We look forward to appearing before your Committee in due course.

Chris Leitch

Leader

Attachments:

Oral Submission (pdf here)

 

Social Credit submission on the Local Government Act 2002 Amendment Bill – 18th June 2010 (pdf here)

Social Credit submission to Productivity Commission enquiry - Local Government Funding & Financing Issues – 15th February 2019 (pdf here)

Press Release - Productivity Commission Recommends Milking Ratepayers More - 13th December 2019 (here)

Excerpt from ‘Private Island’ by James Meek, published by Verso Publishing – 2015 (pdf here)

Department on Internal Affairs - Reform Timeline – December 2020 – (Areas of concern highlighted) (pdf here)