Prime Minister Christopher Luxon says big cheques will have to be written to pay out the many contracts canned as a result of repealing Three Waters.
It was revealed just over a week ago that the Government’s 100-day plan included the dismantling of the contentious centralising Three Waters regime, opting to replace it with the Local Water Done Well policy from the National Party manifesto.
Speaking to Newstalk ZB’s Mike Hosking, Luxon said a lot of money was spent to implement the scheme, and it is going to take a lot of money doing the opposite.
“I think there’ll be massive overruns,” Luxon said.
Luxon admitted there were employees under the scheme who were only one year into five-year contracts who would have to be paid out.
While not sure of the exact numbers of staff who would fall into the bigger payouts around 400 staff were currently working on Three Waters.
He said the Government would have to pay some out of their contracts when the programme was scrapped.
“We’re discovering that Labour has left what we call a whole bunch of fiscal cliffs, fiscal holes, unfunded commitments or time-limited funding,” Luxon said.
“You’ve seen it with respect to transport projects.
“Nicola [Willis] has alluded to it with a ferry project that’s taking place.”
However, Luxon said the cost was worth it.
“There are also hundreds of millions of dollars worth of extra costs if you don’t stop the activity.
“So this is a situation where it’s a bit like gardening and you can keep trimming bits of leaves in the garden where you actually rip the trees out and actually stop the activity.
“That’s what we have to do in many cases to focus the organisation and to focus the public service on the things that matter most.”
This comes after it was revealed last week 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.
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.
Rachel Maher is an Auckland-based reporter who covers breaking news. She has worked for the Herald since 2022.