Three Waters finally got its comeuppance when the Auditor General called out its underpinning lack of accountability to taxpayers and ratepayers.
The Government should have been up front about its strategy of trying to engineer a tax increase and higher debt onto the nation’s public water infrastructure from the start. Now the reform is mired, unfortunately, in a backlash over co-governance, which is not the real reason for the reforms.
The Labour Government’s way-too-clever-for-its-own-good idea of trying to quietly solve Aotearoa-NZ’s fundamental infrastructure financing problem has now backfired, largely because not being crystal clear about the need for those higher taxes and debts has allowed others to insert co-governance into the vacuum left by that vagueness.
In my view, a massive backlash in this October’s council elections and the ongoing political toll on the Government is likely to see it scuppered before the General Election late next year. Or it will be reversed by a new National-ACT Government by the end of 2023.
The real problem with Three Waters
It took the driest of reports from the unlikeliest of places to expose the fundamental problem with Three Waters.
The Auditor General lobbed his submission on the Water Services Entities (WSEs) Bill into the Parliamentary Select Committee process on Monday. It skewered the lack of accountability that Three Waters is creating in its attempt to solve New Zealand’s existential infrastructure funding blockage.
“WSEs cannot be held to account by ratepayers like local authorities are, nor can they be held accountable by Parliament because they are not Crown entities this makes direct accountability to their respective communities more important," Ryan said.
"I am concerned about whether these mechanisms will be sufficient, individually or collectively, to enable comprehensive and effective public scrutiny and accountability. I recommend that the Committee seek further information from officials about the effectiveness of these public accountability arrangements," he said.
The too-clever-for-its-own-good nature of Three Waters finally caught up with it and sank its teeth into its own rear. The Government, in essence, is pushing ahead with plans to create a brand new set of indirectly controlled public assets with their own debt structures and ability to charge the public fees without asking for (or receiving) permission from those who will ultimately pay higher those higher water charges and bear its debts.
It was an understandable strategy. Voting taxpayers and ratepayers almost always reject tax increases and higher debts whenever they’re asked upfront for permission from politicians before it is done.
A way around the 30/30 rule
Three Waters was a clever way for central Government to essentially circumvent the bi-partisan ‘30/30’ consensus that has dominated our political and economic settings for thirty years.
That is that:
- taxes won’t be raised or new taxes introduced in a way that means Government revenues are more than 30% of GDP; and,
- central and local Government won’t raise long term net debt levels beyond 30% of GDP.
That 30/30 consensus meant Aotearoa-NZ’s Government and Councils under-invested in water, transport, health, education and other infrastructure to the tune of about $100b over the last 30 years, and will need to invest another $100b over the next 30 years just to keep up with forecast population growth.
That $200b of infrastructure spending over the next 30 years would require breaking one or both of those 30/30 rules. The alternative is much heavier ‘demand management’ tools such as congestion charges, water charges and other forms of user pays that effectively become tax increases.
Given voting taxpayers and ratepayers don’t want to agree to those tax increases or higher public debts (because it means higher interest rates and lower house prices), but also want working infrastructure, there is a massive ‘magical thinking’ problem in both the body politic, Parliament and the Beehive.
Squaring the circle of not asking for permission for higher taxes and debt but still doing it is Three Waters’ major driving force. Unfortunately, Nanaia Mahuta and the Government didn't want to (or couldn’t) spell that out and have a proper debate.
By being vague about that motivation, local authority politicians and ratepayers inserted what they think is the motivation into the vacuum crated by that vagueness. In my view, co-governance is an inconsequential sideshow. Standard and Poor’s would never approve the debt issuance required if actual revenues and assets were to be actually controlled by Iwi groups.
So where are we now?
The Auditor General’s intervention has cast a harsh spotlight on Three Waters.
Sadly, the Government persisted with Three Waters over the last year as the backlash built, and it is now in an awful mess. It is dragging on Labour’s poll rating and will be exposed for all to see in a massive electoral backlash in council in October.
My bet is Labour will quietly drop it before the end of this year, or it will be loudly repealed by the end of next year by a new National-ACT Government.
54 Comments
Councils like Nelson have actually raised rates far, far above the inflation rate over the last 15 years. But much of the money raised has not gone to essential infrastructure, which was often neglected. Instead it has been spent massively on entertainment, nice-to-haves, and costly but wasteful planning processes involving many expensive consultants and paperwork that went nowhere. Nelson with foresight had already put in place a world class water filtration plant, but the storm water and sewerage system was often neglected. Where work is now being done is the result of borrowing. The rates money has been largely wasted.
Unfortunately what you describe in Nelson is hardly unique. And just as unfortunately this has largely been assisted by voter apathy, that is abysmal turnouts on election day. This has allowed well organised and aggressive elements, with subjective and often unpopular agendas, to obtain council seats well beyond their actual representation in the electorate. To put it simply if only 30% of any one ward votes then winning 51% of that, at the very most, is sufficient to carry the day and of course much less, if a majority is only needed when other candidates are splitting the vote.
Try Tauranga. Rates up by 10% plus and what do they invest in - a new library and art gallery... a new multi story car park that had to be sold for $1 because it wasnt earthquake proof, buildings old off to the govt at less than market value with no justification and better still - ratepayers arent even allowed to vote for the council leaders anymore.
Not sure what they do about water. But can confirm every year for about 6 months we have sprinkler bans and so on.
Who needs water and proper infrastructure.. if we have tons of paper books (do people even read them) a fancy art gallery (prob visited by 1% of the population) and a even better a plan for a 200 million stadium.
Absolutely Elmoboy! Ditto Auckland. A massive cost of amalgamation into the "Super City" where the possibility of gaining economies of scale melted like snow on hot tarmac. How could anyone achieve the amalgamation of (eg, )7 library services each with their own administrations into one which, even ignoring the costs of the reorganization, immediately cost more in operational expenses.
Despite obvious need to upgrade sewer systems which regularly discharge raw sewerage into the inner harbour, and which supposedly was going to allow infill housing and massive population growth, Council found a thousand new ideas to spend money on,...the main one being "investment" in it's own institutional comfort; liveable wages (well over 2500 staff on more than $100k), much talk & $ spent on a new port ( to replace the one they already owned and ran like a Soviet era Polish shipyard) plus endless investment in "play"...parks, sports facilities etc..
When we finally got the first mayor, who was promoting an exciting future as..." the world's most loveable city", out of office (& out of someone else's bed) we have possibly settled down a little ,..,probably because it hit its debt ceiling, to think about real priorities.
So Bernard wrong, on co governance being a minor issue, and wrong on the 30/30 rule. Elected councillors are often muppets but are our muppets, the main target is council CEO's paid significant salaries but remarkably little accountability.
Really Bernard!
While this might have been a reason the primary driver was asset control linked to co-governance - which has turned out to be a dead rat the public dont want to swallow
and the AG's report is exactly as it should be
and I am sure you have made up the 30/30 "rule" The borrowing ability of local bodies has been restricted by Central govt rules - maybe for the better given their inability to spend money wisely but they could have had approval to expand their borrowing levals for specific things such as infrastructure (although to be fair some councils have done a good job so it is possible)
Labour, clever, in the same sentence? Surely you jest. These Clowns have invested years and loads of money into a completely unworkable solution to a problem they don’t understand and can’t articulate ( so much for the communication skills). They even added co-governance into the mix which was even less clever. Hardly anyone wants their solution, less people want anything to do with co-governance, and they wonder why everyone hates them and why they will likely receive a well deserved drubbing at the next election.
what they have done, is not clever, they have effectively broken the law to try and sneak in higher taxes and co-governance. In reality this is the end of their plan, and also of co-governance. There was a problem to be solve but they have spent the best part of five years virtue signalling and not solving the problem at all. Nice one Labour, you made you own bed here, how clever.
Can you tell us what centralised models are knocking it out of the park when it comes to infrastructure spending? Do we have light rail in Auckland yet? Do we have rapid transit in any of our cities yet? Nope, but we do have a plan to open up our borders and keep importing the population pressures that led to these crappy outcomes, because Central Govt wouldn't prioritise spending in these areas to support the people they kept allowing to be added to our local population.
Wellington is the problem, not the solution. More of it won't solve anything.
Whilst I believe in the ultimate decentralization of democracy to the individual (we are our own MP) NZ is a backwater of 5 million people. A centralised framework is easily managed with todays communication and information technology. I see no reason for local government for anything any more.
Its all about co-governance. What is blithely passed off as a 'tweaking' of democracy is in fact one of the biggest threats to democracy this country has ever faced. If all we can come up with to sort problems in this country is to bolster one group's fortune by taking away from another group, we need better policy makers.
I don’t get why people are so opposed! I wouldn’t want my local council providing internet or power because it would be extremely overpriced, same goes for water. Watercare are raising prices by something like 9% a year for the foreseeable future, and it’s already bloody expensive. I’d say privatise the lot but give us all shares so we still effectively own it.
That's just talking in riddles.
And the costs are energy and resource costs - the format is immaterial, all else being equal.
And that is 'The real problem with Three Waters'
In energy terms, society can no longer afford itself. But nobody is talking about that
yet
"Do you believe that Nanaia Mahuta lied to the NZ public about Three Waters?"
https://omny.fm/shows/today-breakfast/do-you-believe-that-nanaia-mahuta…
by Audaxes | 14th Jul 22, 10:16am
The World’s 10 Worst Places to Live
- Kuwait
- New Zealand
- Hong Kong
- Cyprus
- Luxembourg
- Japan
- South Africa
- Turkey
- Italy
- Malta
This may single-handedly reduce the immigration flow significantly. Apparently this, as someone else noted, a ranking by expats. I suspect that these expats would be at the high end of the earnings tree and the complaints more about our quiet lifestyle. Speaking to many new immigrants over the years the most attractive aspects of migrating to NZ is the low crime, family friendly and outdoors lifestyle. Whereas the expats are only located here temporarily and are looking for different things.
Thank you Bernard for finally explaining the fundamental problem in a way everyone can understand. Our infrastructure deficit (including 3 waters) is a case of people voting to keep rates down. Instead of that strategy, prospective councillors need to campaign on keeping rates down by focusing on RRR (roads, rubbish, rates).
Bernard Hickey states: "In my view, co-governance is an inconsequential sideshow."
If it's so inconsequential, then why doesn't Mahuta (and the govt) simply drop it?
3W is killing Labour in the polls, yet Mahuta has made it clear time and time again that co-governance is a non-negotiable bottom line.
It was explicitly made off-limits as a topic for the Working Group that Mahuta set up last year to mollify opponents.
It makes absolutely no sense to persevere with a feature that is so divisive — and may sink the govt next year — if it is indeed inconsequential.
I think that co-governance could be described as a sideshow — but only in comparison with the direct iwi control given through Te Mana o Te Wai statements that only iwi / hapu can issue (see S 140 of the WSE Bill).
The Working Group asked for the right to issue TMoTW statements to non-Maori but Tuku Morgan (Mahuta's mouthpiece) turned them down flat.
In his podcast, Bernard Hickey also described opposition to co-governance as a "dog whistle".
This seems to me to be a completely unwarranted slur against those who cherish democracy.
I think David Seymour was correct when he described 3W as a "Treaty settlement dressed up as an infrastructure project".
To my impression, both National and Labour will embrace co-governance, they may just dress it up slightly differently.
National kicked it off with signing up to the concept through UNDRIP, and folk have highlighted the use of that with Ngāi Tahu in Chch and Bill English's response to the legal case over the privatisation of Mighty River Power.
I'd suggest David Seymour is correct: National would undo nothing, just tweak some little bits or labels to calm the farm.
There is a huge difference between how local government and central government finance themselves. Local government is not a sovereign currency issuer while the central government is.
It is totally unnecessary for the government to issue debt and it has nothing to do with financing its spending.
In my part of NZ the water infrastructure is buggered and in large parts non existent. Being patched up with band aids and project specific loans needed to fund each band aid. I see the merit in moving management AND ownership to a regional level to gain economies of scale and expertise while keeping some local accountability.
But I do not support the current 3 waters proposal. The government tried to be clever with their wording by constantly referencing Ownership but it is Ownership without control. The auditor generals report explains this distinction really well and the risk of loss of accountability.
As someone involved in the process I disagree that the co governance is not an issue - it is entwined in the transfer in ownership of billions of dollars of infrastructure assets and without popular support now by government mandate.. .
Three Waters is failing because it's the Maori caucus deliberately undermining one person one vote, all equal before the law, that is, democracy, and replacing that with the graft and corruption of tribal, and in Mahuta's case, family rule. Richard Prebble and Muriel Newman are right: it's a coup in New Zealand that has already happened at the hands of dreadfully boring but dangerous revolutionaries aka Willie Jackson, Mahuta and co.
It's a major foundation for turning NZ into an uncivil and increasingly violent Pacific Zimbabwe. There will be from this point a large escape of the wise out of New Zealand.
On a more mundane level of destroying our economy, Three Waters has, per the Auditor General, a governance structure that is not accountable and that exists nowhere in the world. It has financing that a prudent person would never implement, and while watering this pakeha's vote down, is putting me on the hook as a taxpayer for when it all goes wrong which it will under Labour's practiced incompetence.
Related, I live in the Marlborough Sounds where our private water schemes are being wastefully, insanely, offensively regulated under the massive bureaucracy the govt has already put in place with the Water Services Act 2021, where we are subject to Mahuta's sister and her Maori Council. Thankfully it's looking like many of the schemes are telling the officials to go to hell, we will not be complying, we will not be reading page fulls of flim flam, we will not be writing ruddy water safety plans. We have been safely and cheaply running our waters scheme since houses were built, and we demand the right of self sufficiency from the state and being micro managed.
I hate this country now.
Golly gosh, who would have thought? New residents need water and sewerage!
Bring in a million more people and the roads, schools, sewers and reservoirs get all bunged up. How unexpected.
Why don't we just auction residence visas to raise the money? Or is there a better way?
I do hope we don't end up like Palestine or Northern Ireland, too.
It seems the wider effects of this immigration business are not well understood. The rate matters, absorption matters.
whats required is a campaign to educate ratepayers that defence against the theft of our infrastructure assets by central government lies in our efforts to elect local councillors who pledge to defend them.
how can this be communicted simply to get voter turnout above 30%.?
I have been calling 3 waters treason for some months now & I see no reason to change that description.
Democracy has been hijacked by the Maori elite (supposedly) & 3 waters is but one of the many projects they want to deploy. Worse, the over-educated, over paid urban elite are the real persons behind all this turmoil, as their global agenda is now very similar in all English speaking democracies across the planet.
Labour have been busted but not beaten. They still have another 12-13 months to elect their crooked agenda upon us all. They are shameless, they are unrepentant & they are arrogant in their creating of a new apartheid [co-governance] for the South Pacific.
They are on notice. And they'd better watch their step. Things could get out of hand.
Three Waters and its underhand, unfair (to the majority) sidekick co-governance have been foisted on NZ by the Labour caucus without any electorate mandate. Thankfully, the AG's office hasn't (yet) been infiltrated by those who would undermine our democracy (where political parties used to seek mandates before being elected). Remember, the PM once said that Labour would be "the most transparent government in NZ history if elected" - yeah right! National is not devoid of historical unmandated moves either (think John Key and his 21% GST increase in 2010 or Muldoon's unmandated economic crippling in the 1970's and early 80's). Labour's (Douglas) 1984 economic ambushes weren't mandated either but were born of necessity because National (Muldoon) had bankrupted the country and swift remedial action was unavoidable. Successive governments in NZ have neglected their core roles of Health, Education, Transport, Trade in favour of pork barrel spending and watched as their other objective 'Welfarism" (and PC madness) has exploded out of control.
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