Government to scrap Three Waters next week

Monday, 12 February 2024

Prime Minister Christopher Luxon announces that Three Waters will be replaced by the new government's Local Water Done Well scheme, which returns water management to local bodies. (Video first published February 12 2024.)

The National-coalition Government will scrap Labour’s contentious Three Waters reforms next week, but a replacement scheme to fix the country’s leaky pipes and dirty drinking water will be more than a year away.

And the new scheme - refashioned council-controlled organisations with independent debt-raising capability - may see water meters proliferate across the country, as the Government insists councils will have to ringfence water revenue to fund costly infrastructure upgrades.

Though it’s promised taxpayers are off the hook, ratepayers will be soaking up costlier water bills.

“This is about ensuring that councils are in control of the process rather than a very expensive, mega-entity bureaucratic approach actually mandated on local communities,” said Local Government Minister Simeon Brown on Monday.

“We will be allowing communities to put forward their plans and have the tools that they need to deliver that.”

Prime Minister Christopher Luxon and Local Government Minister Simeon Brown on Monday afternoon.

Details of the Government’s promised water reform package, dubbed “Local Water Done Well”, were announced by Prime Minister Christopher Luxon and Brown at a press conference after a Cabinet meeting, on Monday afternoon.

National successfully campaigned on a pledge to do away with Labour’s plans for the country’s patchy drinking, waste, and storm water, which had been years and $1.2 billion in the making.

Next week, the Government will repeal Labour legislation that would have taken water assets from councils to create 10 public water entities, overseen by a representative group split between councils and iwi.

Both the “co-governance” arrangement and planned public entities will be done away with. Instead two pieces of legislation, the first to be passed in the middle of 2024 and the second a year later, will create a new system in time for the 2025 local government elections.

A new type of council-controlled organisation will be created under the law, so councils can choose to amalgamate their water services with neighbouring councils in these regions. Control of these new water organisations will be retained by the councils, which will have to provide the Government with plans to sustainably finance water services through gathering and “ringfencing” revenue, and raising debt.

Local Government Minister Simeon Brown discussing his plans for water services on Monday afternoon.

Crucially, the Government believes these organisations will be deemed to have “balance sheet separation” by rating agencies, allowing them to raise debt untethered from council books. Obtaining this status was part of why the prior Government wanted to take water assets from councils.

Brown said the Government would not have to “underwrite”, or financially guarantee, debt held by any water organisations to ensure balance sheet separation. However, as with local councils, there would be a regulatory “back stop” to allow the Government to step in if the organisation was failing.

“Water is a local government responsibility. They are responsible for the pipes in the ground. This is about giving the long term tools and the policy settings so they can make those investments.”

Luxon said he could “guarantee” the Government’s scheme would be the most efficient way to manage water. He did not directly answer a question about whether ratepayers would end up paying more for water.

Brown said he expected “a lot” of the council plans would involve installing water meters - a move that councils in Wellington are now considering.

'That'll be up to those councils when they put those things together. But I mean, there's two excellent things that water meters do. Firstly, they identify leaks, which would be quite helpful here in Wellington. And secondly, they mean that you can measure usage, that means that people pay for what they use, rather than the way it's been operating recently,“ Brown said.

Auckland was a “special case”, however. Auckland Mayor Wayne Brown has previously called on the Government to underwrite the debt of his council’s CCO, Watercare, to prevent escalating water charges.

“We need to find a way through that. There are options on the table we’ve been working through with the mayor and the council,” Brown said.

Luxon said Auckland was a special case because of its size.