Editorial: Labour's water charge leaves much to be decided

Opinion

Of all the commercial uses made of water in New Zealand, only one seems to bother people: the sale of bottled water. And, curiously, it's only unadulterated water in bottles that arouses popular indignation. Vast quantities have been bottled as beer, wine, soft drinks and in milk, without anyone demanding the bottlers pay a royalty for the natural resource.

But there is something about simple bottled water that has many demanding a charge, especially if it is exported. Perhaps the business sounds too easy, involving too little added value by those who bottle, brand and market it. Whatever the reason, it would be hard to justify a selective charge for bottled water alone.

The Labour Party, to its credit, has tried to answer this call with a more general regime of water charges but it is a frightening one in its economic implications. The party proposes to charge for the water used for farm and horticultural irrigation and other commercial uses but it intends to be highly selective in the charges it sets. Leader Jacinda Ardern says bottling companies will be charged by the litre while irrigation water will be charged by the cubic metre. Why? It's the same water.

An economic case can be made for charging for any limited resource but the case rests on a standard charge, providing no favours to some uses over others. Labour very clearly intends to favour some uses over others. Not only will farmers receive cheaper water than bottlers but Ardern adds, "The royalty will be flexible to reflect the scarcity or abundance of water in different regions, the different quality of water, and its use."

The charges will be set in consultation with regional councils and they will get most of the revenue to spend on cleaning rivers and maintaining the quality of aquifers. Councils would therefore have an incentive to set their charges high, especially if, like Ardern, they believe environmental improvement is always economic. She said the charges would be at a level that would "ensure a decent profit margin" for farmers and other commercial users, which introduces yet more variables to the exercise. Would the charges fluctuate with dairy prices, for example?

The policy announcement yesterday raises far more questions than it answers, even before addressing the elephant that is always in the room when water charging is on the table. Maori claim ownership of the water that falls on their ancestral territory or flows through it. The Government's response to these claims before the Waitangi Tribunal is that nobody owns water and therefore nobody can charge for it (as distinct from charging for its supply). Labour proposes to abandon that position and "work with iwi" to resolve Treaty water claims.

It all sounds like a fearful injection of additional cost into the whole economy. Water is used in just about every industry. Concrete, for example, would become more expensive, adding to the costs of building and infrastructure. But freshwater is a finite resource in some parts of the country in summer and a charge is probably inevitable. Labour's plan, though, leaves difficult consequential questions to resolve.