Government to start to repeal Three Waters scheme early next year, minister Simeon Brown says

The Government will repeal Labour’s controversial Three Waters law early next year as it starts on the detailed work for its own water reforms, Local Government Minister Simeon Brown says.

Brown said Cabinet has now agreed to introduce the legislation to repeal the former government’s Three Waters law early next year. It was one of the items on the 100 Days programme.

Brown said the Government was now working on the details for its new regime, which he was confident would both ensure good water quality and issues around the costs to households and ratepayers of bringing the country’s water infrastructure up to scratch.

He said the law to repeal Three Waters would include a provision to address the immediate challenges faced by councils, which were preparing 2024-2034 long-term plans under the previous government’s settings.

It would allow them flexibility in setting those plans.

The Bill will also disestablish the new Northland and Auckland Water Services Entity, halting any further spending and work in setting up that body. That was due to come into effect by July next year – the first of the 10 water entities under Three Waters.

“I am writing to mayors and council chief executives today informing them of our decisions on the way forward, including key principles of the Government’s Local Water Done Well policy which has now started for further development, with key decisions planned for early next year,” Brown said.

National’s proposal will allow councils to voluntarily amalgamate their water services and expected that to happen in areas where it made economic sense to do so.

“It’s clear the previous government’s approach of removing community control of water assets and prescribing co-governance was hugely unpopular and proposed a one-size-fits-all approach to water services delivery.

“The coalition Government will instead implement a new regime which recognises the importance of local decision-making and flexibility for communities and councils to determine how their water services will be delivered in future. We will do this while ensuring a strong emphasis on meeting rules for water quality and long-term investment in infrastructure.”

Infrastructure New Zealand policy director Michelle McCormick said the announcement ended uncertainty for the local government sector, but urged the Government to ensure it secured council balance sheet separation as part of the new model.

She said that would ensure the long-term sustainable funding of water networks.

“A reform programme that can unlock the investment and resources needed to improve our water assets is critical to the long-term health and prosperity of New Zealanders and our environment.”

“New Zealanders understand that the status quo is not an option.”

“The current system is straining under the demands placed on it, including from climate-related weather events, economic development and population growth. Councils, meanwhile, are struggling to maintain and fund their water services due to significant balance-sheet pressure and a lack of borrowing ability.”

McCormick said she hoped all interested groups, including central government, local government, iwi and the infrastructure sector, would now be able to hold talks to discuss the replacement framework.

The repeal is not expected to come without a cost: Prime Minister Christopher Luxon recently said one of the costs would be paying out contractors who had been taken on for a fixed period of time.

Funding for the water regulator in the Three Waters reforms which National did intend to keep will also dry up next year, further fuelling a debate over “fiscal cliffs”.

The funding is for the Commerce Commission to create an economic regulator for 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 former government’s Three Waters approach was aimed at addressing the cost to ratepayers of water infrastructure improvements by setting up 10 water entities around New Zealand.

Those entities were to have been owned by councils via a shareholding.

The model contained some co-governance measures: every territorial authority under an entity would be represented on the regional representative group, together with an equal number of mana whenua representatives. That co-governance arrangement was retained after Labour altered its original plan, but was subject to ongoing opposition from National and Act.

Those groups would provide oversight of the entities, which have no co-government requirement and would be run professionally.

Labour’s legislation also allowed for entities to merge if they wished, while laying out financing backstop arrangements - such as a dedicated Water Services Entities Funding Agency, collaboration and funding obligations over the establishment periods.

The Three Waters reforms were meant to help local councils deal with the cost of investment in water infrastructure - estimated to be about $130 billion-$185b over the next 30 years.