Bryce Edwards: Government failure on water reform

Bryce Edwards: Government failure on water reform

The Government’s water reforms appear to be fatally flawed before legislation is even introduced to Parliament. The fact that the Minister of Local Government Nanaia Mahuta is now pushing through unpopular reforms in the face of mass opposition and concern from nearly all quarters shows just how much she has bungled the process. The sad reality is that the Government has failed to create what should be enduring and convincing reforms in a crucial environmental and infrastructural area.

The management of water is too important to be so recklessly reformed. New Zealand desperately needs waste, drinking, and storm water systems and infrastructure to be fixed and future-proofed, and this is the Government’s one-off opportunity to bring consensus and build the foundation for sustainable water usage. And yet it has arrived at a situation where hardly anyone is happy or convinced with the blueprint that is about to be imposed.

As the Green Party warned yesterday, when it called for a pause to the reforms, the Government risks bringing about a “reverse Goldilocks situation” in which no one is satisfied – see Claire Trevett’s The Three Waters backlash: Greens call for a pause, ‘a blatant power grab’ says Winston Peters.

It isn’t entirely surprising the government has ended up in this position, given the poor process they have followed. It’s been entirely top-down and elite-driven, with Mahuta clearly pushing for her pre-determined “solution” from the outset. Authorities say that behind the scenes there were over 30 different models of water management that Mahuta had to choose from, and she insisted on only one option being debated.

The policymaking process has eschewed real consultation and any genuine scoping of alternative policies to reform water management. Coming up with a blueprint and basically saying “like it or lump it” is no way to persuade people and bring them with you.

So it’s no surprise that recent opinion polling by Curia shows Mahuta’s plans have the support of only 19 per cent, with 24 per cent being unsure, and a majority of 56 per cent being opposed.

Mahuta and the Government just didn’t want public input into designing a better system. Many knowledgeable individuals and institutions have tried to raise different ways of managing water, but these have been dismissed as not fitting with the precise model that Mahuta has dogmatically pursued.

There is actually a lot about her broad blueprint that many will agree with, but it’s the set-in-stone details that make the whole package a problem. For example, some sort of amalgamation of water systems is a good idea, creating economies of scale. After all, the Auckland Supercity now has Watercare amalgamating what used to be multiple different water catchments. Lessons from such models could be used more widely in New Zealand. In fact, a case could have been made to pass water management to the current regional councils.

But if entirely new entities are necessary, with new dividing lines across the country, then why haven’t different options for this been put forward? Few people seem convinced that the Government have got the model right in terms of having exactly four entities. And the very strange divisions of the country into those four groups, with some seemingly arbitrary lines, needs much more debate and options.

Could the transfer of water assets from local authorities be done by purchase instead of confiscation? This is the one of the key objections to the current scheme, with some local authorities having invested much more in infrastructure than others, creating an iniquitous outcome under Mahuta’s solution. Some economists have therefore argued it would be preferrable for the transfer of assets be done by sale – for more on this see my previous column on this subject, The Democratic and equity deficits in the Three Waters reforms.

Local government losing control

Perhaps the biggest complaint from local communities and politicians is that they are losing control over their own assets. Of course, the Government says local communities will continue to own their assets. Mahuta said yesterday: “Councils will continue to own water assets alongside other councils within an entity… For those councils who are still perpetuating that myth, it is deliberate, and it is misinformation.”

Few are convinced by this. For example, National-aligned blogger David Farrar explained it like this yesterday: “The Government claims that it is not theft, as the Councils will still own the assets – just not manage them. This is farcical as ownership without control is not ownership. Imagine if you own your house and the Government announces that you will still own your house, but you have to move out and any decisions about who lives in it will be made by some committee, Would you regard that as satisfactory?” – see: The great water theft is on.

Reducing local government control is about satisfying credit agencies

The reduced control of local government has clearly been deliberately designed to make local communities and politicians less powerful in managing water.

One vital reason for taking control away from locals is to satisfy credit rating agencies. By making the new entities independent of local government, the Government believes that they will more easily borrow billions of dollars to build the necessary water infrastructure – and won’t require central government to pay. This was explained yesterday by Thomas Coughlan in his column, Three Waters: Councils will never have control over water entities (paywalled).

Here’s Coughlan’s main point: “the Government invited one of the ratings agencies, Standard & Poor’s to give its advice on how both councils and the water entities could borrow money independently of one another. What the debt market wants is those three words – ‘balance sheet separation’ – and what this translates to is a design that ensures that councils have almost no control over the water entities. Any system that proposes more control ceded to councils will compromise that balance sheet separation and will, by extension, undermine the whole reason for upending water in the first place: being able to borrow and invest in new water pipes.”

Reducing local government control is about fixing Treaty claims

Of course, local authorities will continue to have some indirect control of the water entities by appointing half of the board that selects the directors of each entity. But the crucial factor is that although the local authorities will technically have 100% ownership of these assets, half of those boards will be appointed by mana whenua.

This is the elephant in the room for many, and there’s been hardly any debate or explanation of the need for this radical reform. Essentially this is the Government using the reforms to address iwi Treaty claims to the ownership of water. This is a long running problem, and Labour hopes that by yielding some control over the assets to local iwi, they will get off the hook.

But will Labour receive a racially-charged backlash for this? Broadcaster Heather du Plessis Allan thinks so, saying “Let’s not beat around the bush here; that is going to raise the hackles of a lot of people who see this as giving power to unelected iwi who haven’t funded the assets, and that’s a potential problem for Labour because they are seen to be pushing too hard on Māori issues” – see: Three Waters fiasco has potential to go badly for Labour.

Earlier this month leftwing columnist Chris Trotter argued that the water reforms are less about the ideal way of fixing water infrastructure problems and more about implementing a radical solution to the question of who owns water in this country. And he complains “That [Mahuta] has been less-than-forthcoming about her true intentions can hardly be presented as a government acting in good faith” – see: Labour adrift in dangerous waters (paywalled).

In Trotter’s view, Mahuta has designed the new entities so “Iwi will exercise veto power over all important policy decisions”, and “iwi authorities will become the beneficiaries of what to most observers will look like water royalties in perpetuity”.

He argues the Minister has pushed this through Cabinet with the help of the Māori caucus, with colleagues being too intimidated to object: “her Pakeha colleagues will not call ‘Taihoa!’ In the ideological hothouse of the contemporary Left, the slightest challenge to an indigenous agenda is taken as proof of unreconstructed ‘White privilege’. As such it spells certain career death. So, silence reigns – even as danger approaches.”

In another column, Trotter also suggests that in the current climate in which the Government has so clearly failed Māori in terms of the vaccination rollout, “the Labour leadership felt obliged to back their own Māori caucus’s agenda without reservation” – see: Looking forward to 2022.

Damaging local government fights loom

One victim of the Government’s decision is its own relationship with local government. There have been plenty of visceral reactions from the local authorities themselves – see, for example, RNZ’s Three Waters: Mayors respond to government’s brute force approach.

As Thomas Coughlan points out, the damage to local government trust in central government is likely to be significant: “councils have every reason to be furious at the Mahuta. Having previously said the reforms would be essentially voluntary, the Government changed its mind and made the changes compulsory when it realised it wouldn’t get its way. Future negotiations with councils are likely to be tainted with the knowledge that the Government isn’t coming to the table in good faith.”

For the best explanation of how this move will destroy that relationship, see Peter Dunne’s latest column, which argues that although the Minister of Local Government has recently said some nice sounding words about the value of local democracy, “actions she and her government have taken since then show not only that the government no interest in working constructively with local government, but also that the Minister’s words were no more than waffling poppycock that cannot be taken seriously” – see: Words count, Minister.

Dunne argues that “What fluttering shreds remained of her credibility were completely ripped away” by Mahuta’s announcement.” He also points out that her process has failed to involve the public: “The group with the biggest stake of all in the management of water resources – local communities – have not yet been consulted at all at this stage, so it is unclear what they think of the idea.”

But he’s got a solution – next year’s local government elections will be a chance for candidates and the public to debate and send a message on the Government’s reforms: “The obvious opportunity for hearing what the public – or at least the portion of it that bothers to vote – thinks will be at the next local government elections now less than a year away. But the last thing the Minister of Local Government and her colleagues want is the local body elections to become a referendum on the Three Waters plans, hence the decision to proceed at this point.”

Heather du Plessis-Allan also thinks the Government will be vulnerable at upcoming elections, arguing in her latest column that Mahuta has “pushed the nuclear button on the Three Waters reform and potentially picked herself a big fight”.

Here’s du Plessis-Allan’s key point: “The confiscations might be law this year, but they don’t’ take effect until 2024.  But between now and then we have two sets of elections. The local government elections next year, and then the central government elections in 2023. So Mahuta has just given mayoral candidates and council candidates in every single territorial authority something to complain about next year. And they will. And the targets of their complaints will be Mahuta, Labour and confiscation and iwi governance. It cannot be good to have election campaigns up and down New Zealand fought on whether Labour are a ‘revolting pack of thieving liars’ as one councillor said today. So, politically, this feels like a bad idea all round.”

These elections will however present a difficult decision for Labour-aligned candidates. Coughlan says: “Labour-aligned councillors with an eye on a seat in Parliament will face a difficult choice between backing concerns of constituents now at the risk of aggravating the party that they hope will eventually send them to Parliament.”

And could the decision help bring down Labour MPs and the Government at the next general election? Former Christchurch mayor Garry Moore thinks so, believing that anger over the fast-tracked amalgamation will fester – see: Labour MPs risk election backlash over water reforms. On the other hand, Labour will be calculating that by championing greater iwi control of water they have a better chance of winning Māori votes and wining all the Māori seats.

Finally, there is currently a major Local Government Review being undertaken by the Government, with some arguing that this should have preceded any decisions about how to manage water resources. But there are bigger questions about why local government has so little power and resources, and for a good explanation and discussion of this, see Josh Van Veen’s The Problem with local government.


Dr Bryce Edwards is Political Analyst in Residence at Victoria University of Wellington. He is the director of the Democracy Project.

This article can be republished under a Creative Commons CC BY-ND 4.0  license. Attributions should include a link to the Democracy Project.