Voters won’t stop water privatisation through a referendum. They’ll stop it through the threat of an election rout.
ANALYSIS: It was a strange omission from Mahuta’s press release, almost as if she and her advisers had second thoughts.
She didn’t so much announce provision for a referendum to protect New Zealand’s water assets from privatisation, as admit it. It wasn’t in her statement. It wasn’t in the “notes for editors”. And one had to read to question seven of the FAQs before one eventually found it.
“Continued public ownership of three waters water services and infrastructure is a bottom line for the Government,” the Q&A noted in the small print. “We are developing safeguards against future privatisation, making it more difficult to privatise than under the current arrangements. These include legislation specifying that local authorities that constitute each water services entity would be the owners of the entity and any future privatisation proposal be put to a referendum.”
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This seeming equivocation may reflect doubts about the efficacy of such a referendum provision; it is patently a sop to water privatisation worries but journalists were quick to question its power to bind a future, privatising government.
It’s difficult to reach any conclusion except that the referendum provision was dropped in at the last minute in response to concerns expressed by the mayors of New Zealand’s two biggest cities, Phil Goff and Lianne Dalziel, in interviews with Newsroom at the start of June.
The two both warned of the danger of expropriating the nation’s drinking water, wastewater and stormwater assets from the control of New Zealand’s 67 city and district councils.
This Government might not support water infrastructure privatisation, they said, but it was making it very easy for a future government to sell off the family taonga.
“Building into legislation the requirement that a viable proposal for privatisation be but to a referendum would bolster democratic protections and send a clear signal that it will be the public’s decision as to whether any future privatisation should occur.”
– Nanaia Mahuta
These two mayors, together, represent more than 2 million people. For them to both “opt out” of the water reforms would be calamitous for the Government.
And so, documented in a June 14 minute, the Cabinet agreed to set in place provision for a referendum as a “strong protection against any future privatisation proposal”.
The water reforms legislation to be introduced later this year, all going well, will include a requirement that a Regional Representative Group vote in favour of any privatisation proposal, by a 75 percent super majority, before the entity can proceed to a referendum.
If that requirement above is met, the the water services authority must arrange for a referendum to be conducted, covering eligible electors in its big region. In order for that proposal to be successful, 75 percent or more of the referendum votes cast must be in favour of privatisation.
In an accompanying Cabinet paper, Mahuta admits that future governments or third parties may put forward proposals to privatise, wholly or partially, water service delivery arrangements.
“It is important that we pre-empt these situations and build in democratic protections for such circumstances,” she argues. “Building into legislation the requirement that a viable proposal for privatisation be put to a referendum would bolster democratic protections and send a clear signal that it will be the public’s decision as to whether any future privatisation should occur.”
Mahuta had already proposed restrictions to prevent the sale or transfer of water infrastructure, similar to those protections already written into the Local Government Act 2002. That requires a 75 percent majority to completely shut down a small drinking water service, but just a 50 percent referendum vote to transfer its ownership.
So in requiring a 75 percent majority just to transfer ownership of water assets, Mahuta is upping the ante.
“Given the highly contentious nature of privatisation of water service delivery it is important that we ensure that any decision to privatise in the future would be the choice of those who are served by the water entities, and own them, and iwi/Māori who have Treaty rights and interests,” she told the Cabinet.
Even if a privatisation referendum is successful, Parliament would need to change the law to implement the privatisation proposal, which Mahuta said would provide an additional democratic protection.
“Entrenchment should not be resorted to in order to place a government’s substantive policies beyond future repeal by ordinary parliamentary majority.”
– Professor Philip Joseph
So what does the minister mean by “privatisation”? That’s important.
It is is any proposal that seeks to change the ownership model of an entity, or seeks to divest or transfer a material part of the entity’s assets or operations, or any action to a similar effect.
Critically, the discussion is around privatising the assets – that’s the pipes and plants – not the water itself. It’s difficult to conceive what kind of process might be required to privatise ownership of the water itself, but the divisive foreshore and seabed debate in 2004, and subsequent protests over just licensing water for bottling and export, have cogently demonstrated how emotional our connection is to Aotearoa’s waters.
The Cabinet has agreed to more policy work being done to define the parameters of this new law, and the shape of the referendum process.
Is this an appropriate use of a referendum?
The trouble with referendums is they ask the public to make decisions entirely out of context. For instance, voters in the first Citizen’s Initiated Referendum, in 1995, overwhelmingly agreed (87.8 percent) that the Government should be required to maintain the number of professional firefighters employed full time in New Zealand.
But what of the cost? Nowhere were voters asked to balance the budget and decide what spending cuts or tax increases should be applied in order to pay for these firefighters.
That’s why the Royal Commission on the Electoral System opposed the widespread use of referendums, describing them as “blunt and crude devices”.
Professor Philip Joseph, from the University of Canterbury, says an example of a successful binding referendum was the the 1993 vote on introducing MMP as an electoral system. By contrast the five indicative referendums, held under the Citizens Initiated Referenda Act 1993, have been disregarded by government.
Joseph literally wrote the book: The fifth edition of the textbook Joseph on Constitutional and Administrative Law was published this year.
He says the last citizen’s initiated referendum in 2013 was on the Key Government’s proposal to partly-privatise the state energy assets. It asked: “Do you support the Government selling up to 49% of Meridian Energy, Mighty River power, Genesis Power, Solid Energy and Air New Zealand?”
“The topic of water privatisation is one that triggers strong reactions – the idea that something we all must have to live could be owned by private entities and profited from is something many people will find repellent.”
– Professor Andrew Geddis
Of those who voted, 67.3% said “no” – but the Key Government went ahead notwithstanding, and partially privatised the assets. “A future government intent on privatising the water assets might likewise be expected to ignore the results of an indicative referendum,” Joseph says.
It is questionable whether privatisation of water assets would be an appropriate subject for entrenchment, Joseph says, and requiring a 75 percent referendum vote may be legally fraught for Mahuta.
“Such a requirement might invite challenge in the courts on the basis that it was, in fact, an attempt to limit the powers of a future Parliament to privatise the assets,” he says.
An ordinary majority of the people is certainly a valid entrenching proposal, but not a 75 percent majority vote. “It might be argued that such a requirement was a veiled attempt to limit the powers of a future Parliament, which would be of no legal effect.”
He is clear about the use of such referendums: “National referenda should be confined to proposals for constitutional change, or for deciding moral or ‘conscience’ issues,” he says.
“Here, it could be argued that the Government is proposing to entrench its water reforms as insurance against their future repeal. Entrenchment should not be resorted to in order to place a government’s substantive policies beyond future repeal by ordinary parliamentary majority.”
Would provision for a referendum have any legal force?
Professor Andrew Geddis, from the University of Otago’s Faculty of Law, assures me the level of protection against privatisation, to which the Cabinet has agreed, is so high that it amounts to an “effective prohibition” on such a step ever being taken.
“The topic of water privatisation is one that triggers strong reactions – the idea that something we all must have to live could be owned by private entities and profited from is something many people will find repellent,” he says.
“As such, it makes some sense to say that any such step ought to be given direct public sanction.”
He says those two super-majorities – 75 percent of the Regional Representative Group, then 75 percent of the voting public – provide the water assets with even stronger procedural protection than is given to, say, the term of Parliament, or the use of MMP as our voting system.
But nonetheless, there’s nothing to stop the next Government changing the law that sets in place the super-majorities. And that would require only the vote of a bare majority of MPs in Parliament.
“It would remain entirely open to any future government wishing to allow for the privatisation of water services to amend the legislation and lower (or even abolish) the referendum requirement,” Geddis says. “As such, the protection against privatisation is only as strong as future parliamentary majorities deciding it ought to remain in place.”
In law school we were taught that one Parliament could not trump the sovereignty of a future Parliament any more than a referendum supermajority could. That today’s MPs cannot tie the hands of tomorrow’s MPs.
But that facet of our fragmented constitution may be changing. The Supreme Court has ruled on “manner and form provisions” like s268 of the Electoral Act, which requires a 75 percent Parliamentary majority to repeal or amend reserve provisions of our voting system.
The Court does not absolutely say that a failure to legislate in compliance with a manner and form provision will invalidate legislation – but it strongly hints that this will be the case.
“So yes,” says Geddis, “they most likely can bind the sovereignty of future Parliaments.”
That’s a super-majority in Parliament, though, rather than a super-majority in a referendum. What is certainly the case is that no Government has been brave enough – or mad enough – to amend the fundamentals of our electoral system like the three-year Parliamentary term without first putting it to public vote.
And that is where Mahuta’s referendum provision does carry some weight. Even if a future, privatising Government felt legally able to repeal the referendum provision, would it be electorally wise to do so?
To abrogate the public’s democratic expectations would be dangerous. But it would be the actual privatisation of New Zealand’s waters that would surely be fatal when that Government next went to the polls
As a political marketing tool, the referendum provision may help Mahuta get her reforms through the country’s 67 councils and through Parliament. But legally, it’s more a sop than a solution to water privatisation worries.
Voters won’t stop water privatisation through a referendum. They’ll stop it through the threat of an election rout.
