A council and iwi working group asks that central government not wash its hands of responsibility for water services – but ministers decline to give an assurance

The Government isn’t committing to ongoing taxpayer investment in water services, as its Three Waters governance working group had recommended.

It’s one of three working group recommendations that are “noted but not agreed” by ministers.

When Local Government Minister Nanaia Mahuta and Infrastructure Minister Grant Robertson announced last week that ministers were accepting the vast majority of the Three Waters working group recommendations, they didn’t say which ones they weren’t accepting.

“None of the recommendations has been rejected outright,” a Department of Internal Affairs spokesperson told Newsroom. “Of the 47 recommendations the Government has accepted 44 in full, partially or accepted in principle.”

He said there were three the Government had not accepted: ensuring agreed central and local government priorities for the big new water authorities; confirming a funding plan to address issues of historic degradation of waterways and inequalities in the provision of water services; and an ongoing role for the Government in supporting and investing in water services.

Robertson said the four new water corporations would have sufficient working capital, by aggregating up the assets transferred to their management from the individual councils. “It’s our estimate that they will be able, as a result of that, to borrow at about six to eight times the rate that the individual entities would be able to do. We’re now finalising their capital structure, but they will certainly have the ability to have the working capital they need to kick things off.”

He said that would unlock significant extra investment. “I can’t give you a specific number today. It’s one of the things that we’re working through. But obviously, we’ve recognised a deficit of infrastructure of north of $150 billion, $180b. We believe we can start to unlock significant parts of what’s needed to invest there.

“Once we get the assets aggregated together, we can have a full picture of the value of them. And obviously, the ability, as I said before, to borrow against them – which in that estimate from June, I think, was around six to eight times.”

Mahuta added: “What we’ve done is proposed the creation of four standalone water service entities to be able to achieve scale and to leverage, through debt financing, the ability to invest in infrastructure.”

The governance working group, chaired by Doug Martin and comprising nine mayors and nine iwi leaders, had expressed explicit concerns that the Government Policy Statement on Water might direct the operation decisions of the new water corporations, limiting their ability to prioritise investment according to the needs of their communities. There were questions about who was consulted in the development of the Government Policy Statement, the working group’s report said.

The report acknowledged the need for high level national direction to achieve coherence across the system, including coordinating regulators, but recommended stronger provisions around the Policy Statement’s contents, and consulting to lessen the risk of disconnected priorities and unintended consequences.

The Government acknowledged that its Statement was likely to provide its expectations about water services, which may differ from local priorities. But in declining to accept the working group’s recommendation, it said any “problematic” differences between local and national priorities should be identified when it consulted on the Government Policy Statement. 

“In short, the establishment of the water services entities should not be the end of the Crown’s involvement in addressing water services issues. We believe the Crown will have an ongoing role to support and invest in water services.”
– Governance working group report

The working group also discussed the role of the Crown as the potential funder of the water corporations. Its report notes a big backlog in infrastructure investment that needs to be better understood. “In particular, investment will be needed to deal with historic degradation of waterways, and inequalities in provision of water services,” it says.

Councils have pointed to differing rates of connection to water services; for instance, in Kaipara just 25 percent of residents are connected to drinking water services. Iwi, too, have highlighted inequities such as the fact that 12 of the 18 Ngāi Tahu villages don’t have treated, reticulated drinking water provided by their local councils.

“Some of these issues may be due to Treaty breaches,” the report says. “This may require investment in infrastructure that would not pass traditional cost-benefit analysis but will nevertheless be required to meet new regulatory standards, and address inequalities.”

It recommended the Crown confirm to iwi and councils the size of these issues, along with a plan as to how addressing them would be funded.

The Government acknowledged that remediating historic underinvestment, and providing for more equitable service delivery arrangements, was a fundamental rationale of the creation of the new water corporations.

“The governance arrangements for the new entities, including the role of the regional representative group, Te Mana o te Wai statements, and the statement of performance expectations, will provide the means for mana whenua, councils, and communities to convey their expectations and priorities for investments necessary to address inequities in provision of services and adverse environmental impacts over time,” the Government said in its response.

The third recommendation the Government did not accept was around further taxpayer funding.

Given the sheer scale of investment required, the working group report said, additional Crown investment may be required in the future. The four water corporations may not have the capacity to fund all of what is required.

“We have stated earlier that iwi/hapū and councils will require financial support from the Crown to ensure that they have the capability and capacity to fulfil their roles in relation to the water services entities,” it said.

“An increase in investment will also require an increase of investment in education and training, to ensure that the water industry has sufficient capacity and capability to deliver.

“In short, the establishment of the water services entities should not be the end of the Crown’s involvement in addressing water services issues. We believe the Crown will have an ongoing role to support and invest in water services.”

The Government agreed it would have ongoing oversight, stewardship and regulatory roles through tools such as water quality regulator Taumata Arowai and an economic regulator, details of which are still being consulted on.

But it did not accept the need for ongoing investment. “The Government will continue to review any need for Crown support for water services infrastructure as part of the stewardship work, including monitoring the effectiveness of implementation and achievement of intended outcomes of the reforms,” it replied.

Some of the recommendations that are agreed in principle will require further work on exactly how to provide for them, the Internal Affairs spokesperson said, citing recommendation 33 which asks that Māori rights and interests in water be legally protected.

It recommends a statutory provision confirming that nothing in legislation creates or transfers a proprietary interest in water. Nor should it limit, extinguish, or otherwise adversely affect or constrain iwi or hapū authority over water, or their rights and interests in it.

Both the Government and the working group are treading a fine line there, by seeking to protect ownership rights in water without acknowledging any such rights exist. 

In its response to the working group, the Government kicks the can down the road to the resource management system reforms, and the proposed Natural and Built Environments Act.

“The broader questions of freshwater allocation and consents for taking water and discharges to it, and the associated questions of Māori rights and interests in freshwater, are matters to be considered within the resource management system,” it says. “Nothing in the Three Waters legislation creates or transfers ownership rights or interests in water, and is not an acknowledgement by the Crown that ownership rights or interests in water exist.”

The Government has, however, agreed to amend the bill to include a clause that preserves the status quo of iwi and hapū customary rights and interests in water, with the nature of that clause to be agreed by ministers during the drafting process.

Mahuta, along with Attorney General David Parker and Minister for Māori-Crown Relations Kelvin Davis, are tasked with reporting that new clause back to the Cabinet Legislation Committee this month.

Newsroom Pro managing editor Jonathan Milne covers business, politics and the economy.

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