12 Sep 2022

Three waters 35-year contracts 'de facto' privatisation, academic warns

10:23 am on 12 September 2022
Labour MP Kieren McAnulty

Associate Local Government Minister Kieran McAnulty. Photo: RNZ / Angus Dreaver

New Zealand's water services could be contracted out for up to 35 years under the Three Waters reforms, which academic Dr Jeff McNeill says amounts to "de facto" privatisation.

He says the government should put its legislation on hold until more is known about an economic regulator, but the government argues its bill will protect against asset sales - and the contracts are nothing new.

As Kieran McAnulty - one of the government ministers responsible - points out, several councils around the country already hold 35-year water services contracts, including with multinational company Veolia.

The reforms would centralise councils' water services into four regional mega-entities, aiming to keep drinking water healthy and prepare for climate change without blowing council budgets.

The government has also pledged to keep water systems in public ownership, but Clause 117 of the 164-page first piece of legislation would allow services to be contracted out for up to 35 years.

Clause 117 of the Water Services Entities Bill.

Photo: Parliamentary Counsel Office / NZ Legislation

Dr McNeill, a Massey University resource and environmental planning senior lecturer, said it would allow foreign companies to reap profits from rates paid for public service water services.

"It's a de facto kind of privatisation ... it's the management that is actually a real key to things," he said.

"If this gets contracted out to, say, Veolia or SUEZ - the two really big multinational French water companies - you know, they just clip the ticket every time someone turns the tap on. Twice when someone flushes the loo: once for the water going in, and once for the waste going out.

"So who cares about ownership when you can manage it and then clip the ticket as it goes through?"

The Green Party's spokesperson on Three Waters, Eugenie Sage, said the clause would also make it more difficult for councils and ratepayers.

"The functions of providing drinking water and wastewater services end up being contracted out and locals having less say. And that makes changes that councils may want to happen to improve services quite difficult in future because they're all on these long-term contracts.

"While the assets may still be owned the services and the delivery of those is effectively privatised for long periods and then you can't change the way they're delivered ... it embeds a way fo doing things without the ability of councils to influence how those services are delivered."

Conservation Minister Eugenie Sage

Green Party MP Eugenie Sage, a former Conservation Minister. Photo: RNZ / Rachel Thomas

She said it would affect things like the daylighting of streams, management of stormwater and urban development, "and just where urban development happens and the sort of liveable towns and cities that we're planning to create".

Sage and Dr McNeill both urged the government to push pause on its legislation until it had published secondary legislation - expected before the end of the year - detailing an economic regulator regime.

National and ACT have both promised to scrap the reforms.

National MP Simon Watts questioned what the point of setting up the mega-entities was if they were going to hand the work to contractors.

"It's ironic that you're creating a mega-entity model to simply allow them to contract out the services," he said.

"The issue that raises is that actually they are comfortable with semi-privatisation or corporatisation and that's definitely not what they have let on to date around the management of water services - actually quite the opposite. So in our view they're in a bit of a muddle in terms of where they stand on these issues and these reforms.

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National's Local Government spokesperson Simon Watts Photo: Supplied

"There's no major party that are calling for the privatisation of water assets, I mean these contracting out agreements are up to 35 years but the entities will maintain control around pricing and the policy behind the services."

"I think it raises more confusion for communities around what actually is the problem that the government is trying to fix."

ACT leader David Seymour said water systems were always going to need support from private companies.

"Labour have promised public provision but it's a mirage," he said.

"In reality, modern supply chains mean that there'll be a mixture of public and private entities involved in providing any kind of municipal service such as three waters ... Labour were foolish to ever promise that they were going to deliver an entirely public three waters system. That is impractical in the modern world."

ACT party leader David Seymour

ACT Party leader David Seymour Photo: RNZ / Angus Dreaver

He said he did not think the government was being deceptive, but was so ideologically driven they had not thought about the practicalities.

Associate Local Government Minister Kieran McAnulty said the contracts clause had simply been carried over from the Local Government Act 2002, and that it had not caused any problems.

"I know they're trying to kick up a stink but actually this is exactly the same as what currently stands ... I'm not concerned about carrying out a provision that is currently in the status quo."

He said it was not a risk to the ethos of public service delivery, and he did not believe it would cause any problems for ratepayers in having to deal with the entities and third parties.

"This clause has been in place for 20 years and it hasn't caused any problems ... all this is carrying over is a provision that currently exists, that isn't commonly used, but ultimately the rationale behind these reforms is recognition that we face $185 billion of expenditure on water services that councils can't afford to pay themselves.

"If we stay as the status quo that will fall solely on ratepayers at a more expensive rate than it will if we don't reform."

McAnulty has been travelling around the country visiting councils - more than 40 so far - and said there were a range of views on the reforms.

"But what they all say is that the status quo is unsustainable because they can't afford it.

"So I'm focused on looking at any opportunity to refine and improve the bill but given that councils are telling me that the status quo is unsustainable I don't see any rationale to pause this when ultimately this is trying to save ratepayers money in the long term."

He said if National or ACT were concerned about privatisation they should support the government's entrenchment provision - which would add an additional requirement of at least three quarters of MPs to back any asset sale.

"That's for them to answer."

A select committee has finished hearing submissions on the current bill and will report back to the government soon. It is expected to be passed by the end of the year.

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