Three Waters regulator funding runs dry, Finance Minister Nicola Willis says one of Labour’s many ‘loose ends’

Funding for a key part of the former Government’s Three Waters will dry up next year, further fuelling a debate over “fiscal cliffs”.

The funding is for the Commerce Commission to create an economic regulator for Labour’s Three Waters entities. The regulator would ensure the new entities do not abuse their monopoly position. Labour gave the regulator transitional funding of $3.9 million over two years, but this runs out at the end of next June.

The “fiscal cliff” is a problem for National - albeit a relatively small one in dollar terms - because National’s water policy is also to have a water regulator in the Commerce Commission - although its promised regulator has a slightly larger scope, probably requiring more funding.

National has accused Labour of leaving many “fiscal cliffs” in the books - these are things that appear to be permanent but have only been funded for a limited time, forcing the new government to give them more funding just to keep the lights on.

Labour has pushed back saying that in most cases, the time-limited funding for these initiatives was clearly marked at the time.

The funding for the economic regulator was tagged as “[t]ransition and Implementation of Economic Regulation and Consumer Protection Regime of Three Waters” - with an emphasis on the “transition”.

Labour’s Kieran McAnulty, the local government spokesman and former minister said the intention was for the new Three Waters entities to cover the cost of regulation themselves, rather than the taxpayer - hence the “cliff”.

“This is common practise for regulators for the industry itself to pay,” he said.

“But more to the point. Any cost that is incurred by the new Government is on them. If they weren’t fiddling around with water services they wouldn’t have to find money to cover this cost.”

Finance Minister Nicola Willis said the funding was “an example of one of the many messy financial loose ends [Labour] left behind them”.

She said the new Government had found “financial time bombs across government”.

Other “fiscal cliffs” include the likes of a Pharmac funding increase, the apprenticeship boost scheme, and school lunches. In each of these cases the time-limited nature of the funding was very clearly established from the outset.

Willis has directed Treasury to find other examples of fiscal cliffs, she said there are “billions” of dollars worth over the four-year forecast period.

She said that the exercise of looking for these “cliffs” has turned up more than initially expected, which she argues undermines Labour’s claim that they were easily discoverable in budget documents.

Thomas Coughlan is Deputy Political Editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.