The Labour Party wants farmers and other large-scale water users to pay a "resource rental charge" so the taxpayer isn't saddled with a $500 million tab for funding new irrigation schemes and for cleaning up polluted waterways.
But although the party says it wants to work with farmers on the proposal, Federated Farmers has already reacted angrily, dismissing it as an "ill-conceived" plan for a "punitive" tax, even though Labour has not said how much the charge would be.
Labour's policy would make regional councils responsible for allocating water rights under a system in which "water goes to the best uses rather than to who applies first".
But a "fair price" in the form of a resource rental would be charged to big water-users including farmers and industries to "encourage wise use of water and its allocation for higher-value uses".
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Party water spokesman Brendan Burns said the plan was not a revenue-gathering exercise but an "economic and environmental tool" which would also alleviate the burden on taxpayers.
"Part of the reason we're wanting a resource rental is at the moment the Government is saying mum and dad taxpayers shall potentially fund $400 million in irrigation development."
The Government this year committed $35 million to enable the development of irrigation plans and intends to invest up to a further $400 million in schemes that stack up.
It also this year increased taxpayer funding for cleaning up degraded waterways - $94 million will be spent over the next five years.
* $35m - to develop irrigation plans.
* $400m - investment in irrigation plans that stack up.
* $94m - funding to clean up polluted lakes and rivers over the next five years.