For Kaipara mayor Jason Smith, his involvement with central government in the Three Waters reforms has provided a defining political moment. This week he joined the National Party; yesterday he announced he would not seek re-election to council, and will instead seek the National nomination for the parliamentary electorate of Northland.

His turning point came when he was sitting in Zoom meetings with council and iwi leaders from around the country, as a member of a working group to address concerns about the governance of the new water incorporations. “I had this moment of clarity,” he tells Newsroom.

It was about the threat posed by the Three Waters changes to local control of their drinking water, wastewater and stormwater. “I looked this taniwha right in the eye, and it has a very cold heart,” he says. “I was extremely frustrated and disillusioned at what was afoot, and just went ‘New Zealand deserves better. And the people of Northland deserve better’.”

He will make a submission to the select committee, saying that in the first instance he opposes the water reforms – but if they are to proceed, they should include a clause allowing as few as 25 percent of MPs to veto any proposal to privatise New Zealand’s water infrastructure. “We need as great a privatisation protection as we can possibly have. The privatisation provisions should go back to at least 75 percent parliamentary approval for any sale.”

Smith may have a more colourful turn of phrase than some, but he is not alone in his concerns about the Water Services Entities Bill, introduced to Parliament yesterday. Communities 4 Local Democracy, a makeshift coalition of Christchurch and 30 smaller district councils, says it too will oppose the Government’s reforms at select committee hearings.

Manawatū District Mayor Helen Worboys, who chairs the lobby group, says the new bill will take community property with no compensation. “With the introduction of this bill we can see this set out in black and white.”

That’s not quite correct. Councils will continue to legally own the water assets; the question is just how meaningful that ownership is. So three councils in the group will go to the High Court at Wellington, next week, seeking declarations on the rights and interests that property ownership entails.

Timaru mayor Nigel Bowen, who is leading the court case, says: “If the Government can single-handedly redefine ownership of three waters infrastructure in this manner, then where else could it apply these concepts? Could roads or port companies be next?”

The new bill provides that the councils will retain ownership of their water assets through a “community share”, but effective control will pass to the four new body corporates, each encompassing multiple councils and iwi. Council opponents express concern that this constitutes an effective expropriation of council property, they are unhappy at their limited oversight of the boards of the new entities, and they fear that future councils or governments might sell the water assets.

The council-iwi working group, on which Smith was a member, had recommended an entrenched clause to stop the water assets’ privatisation. The sale or transfer of even a single pipe would require the agreement of at least 75 percent of all MPs.

The Government agreed. “Cabinet agrees that this provision would safeguard these services against privatisation for all New Zealanders into the future. The Government is seeking cross-party support to entrench these provisions to protect against privatisation of water services infrastructure – this will require a 75 percent majority by Parliament at the Committee of the whole House.”

“Entity A includes Auckland, which is New Zealand’s great global city. It will be the first of the opportunities to be cherry picked by an international buyer. That would be catastrophic.”
– Jason Smith, Kaipara mayor 

Constitutional law expert Professor Andrew Geddis, from the University of Otago, explains that in order to set in place a 75 percent Parliamentary support entrenchment provision, the Government needs 75 percent support in the first place.

He points to Parliamentary Standing Order 270, which says a proposal for entrenchment must itself be carried by the House by the majority that it would require for the amendment to be entrenched.

In April, Local Government Minister Nanaia Mahuta said she had written to all political parties to seek their support for entrenchment.

Infrastructure Minister Grant Robertson called on opposition parties to “step up” if they believed in public ownership. “We’ve heard certainly from the National Party that they’ve been throughout this process concerned about the loss of ownership in communities,” he said. “Now they can step up and say ‘we will agree that these assets won’t be sold’.”

But it’s understood the National Party did not agree to support the entrenched clause, protecting against privatisation – it is ironic for Jason Smith that it is the party he has just joined that has effectively blocked the requirement for a super-majority.

Today National Party leader Christopher Luxon, in response to questions from Newsroom, says: “National’s totally opposed to these reforms. We will never privatise three waters assets and that’s because we want them to remain as assets owned by local councils and ratepayers. That’s why we don’t support the reforms, we will repeal them, and frankly the privatisation letter is just Labour playing politics.”

To the question of who had blocked the recommended super-majority safeguard, a spokesperson for Mahuta will say only that “cross-party support for entrenchment of the privatisation provisions has not emerged”.

“The Minister has not received written responses from other parties to her letter which sought agreement.  However she will keep engaging across Parliament to secure the strongest possible protections against privatisation.”

Andrew Geddis argues that either National or Labour could break that deadlock – if they were so inclined.

If National wished, it could support the 75 percent entrenchment requirement and yet still vote against the policy as a whole, as Jason Smith seems to advocate. The easiest way to do this would be through a Supplementary Order Paper requiring the 75% majority. “Then, National would be free to vote against the Bill as a whole at the third reading.”

On the Government side, Labour could simply work the Greens to set in place a smaller entrenchment. Together, the parties have 62.5 percent of seats in the House, so they could put in place an entrenchment requirement saying that this proportion of MPs is needed to privatise in the future. “There’s no magic around 75 percent,” Geddis says.

Yet, with neither side of Parliament seemingly inclined to pursue such solutions, the Bill has now been introduced without any parliamentary entrenchment to protect against privatisation. There are other safeguards, though.

It does provide for local protections: for one of the four big water body corporates to divest any assets, or for its council owners to privatise it, would require the agreement of 75 percent of the council and iwi members of the regional representative body that appoints its board and signs off its strategy.

It would also require a local referendum – and that poll must achieve 75 percent support for the privatisation to proceed.

“The Bill still contains very strong safeguards that are significant obstacles to privatisation,” Mahuta’s spokesperson emphasises. “These protections will, in practical terms, make it very difficult for any privatisation proposal to proceed.

“Continued public ownership of water services is a bottom line for the Government. Safeguards against future privatisation are written into this legislation to maintain ongoing public ownership of the new entities.”

Although the final protection of a parliamentary super-majority will not be there, the country’s critical water assets should be better protected from privatisation than they are under existing law. 

At present, under the Local Government Act 2002, a 75 percent majority at local referendum is required 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.

But the big change is from the perspective of small councils. Jason Smith points to so-called Entity A – the new water incorporation taking in all of the Far North, Whangārei, Kaipara and Auckland. He worries that with Auckland council and iwi holding a majority on the incorporation’s regional representative body, they could run roughshod over his small district and privatise.

To be fair, it should be noted that the bill introduced this week does require all the shareholders to agree to any privatisation – so if the Entity A assets were to be divested, Kaipara would also have to sign off.

An example of the scale and value of the infrastructure is the new Central Interceptor wastewater pipe – the biggest tunnel ever bored in New Zealand, which will allow an additional 360,000 houses to be built in Auckland. Workers are beginning digging beneath Auckland’s Manukau Harbour as they extend the tunnel from Māngere to Grey Lynn.

“Entity A includes Auckland, which is New Zealand’s great global city. It will be the first of the opportunities to be cherry picked by an international buyer because entity A will be the largest,” he says.

“That would be catastrophic for the water entities to be owned by offshore interests, especially for the vulnerable people in Northland and anywhere in New Zealand. This is not who we are, is New Zealanders.”

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

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