The consensus for a Three Waters model

National over the weekend released their Three Waters policy. It is very similar to the policy endorsed by the Mayors of Christchurch and Auckland, 31 local Councils, the Taxpayers Union etc. It is not the status quo, as this graphic below shows.

It keeps the good stuff from the Government’s reforms (water quality regulators) but dumps the undemocratic stuff. It is highly likely to see Councils forming water companies that span more than one Council, but the Councils will decide amongst themselves what they should be, rather than have just four companies based on historic boundaries.

A key element of the policy is that revenue from water charges must be ring fenced to fund water infrastructure. This will allow proper funding of infrastructure.

What I want deal with is the propaganda claim that rejecting the Government’s model will cost every ratepayer $7,000 more. It is a farcical claim, for two major reasons.

The first is that it is based on a 30 year projection of costs of future infrastructure. No 30 year projection of costs is every robust enough to survive reality. It is slightly better than throwing darts at a dartboard, but even five year infrastructure projects often have cost variations of 50% to 100%. For the Government to say they know exactly what it will cost under their plan, and under another plan for 30 years is just trying to scare people.

The second and more salient point is that almost inevitably the Government’s model will see households pay far far more, because the decision makers are isolated from those who have to pay the bills. Labour’s model will have the companies not fully accountable to either Parliament, central Government or local Councils. Now consider decision making under this model.

Future infrastructure costs will be the result of hundreds of decisions by these water companies – what types of pipes to build, and where. How to treat the sewerage, and where to have outlets etc.

Now consider a scenario where a decision has to be made on a new sewerage plant. Let’s say Option 1 will filter out 99.9% of bacteria and have it pump out to sea 250 metres out, and Option 2 will filter out 99.95% of bacteria and have it pump out 750 metres. Option 1 costs say $200 million or $2,000 a household and Option 2 costs $900 million or $9,000 a household.

Now if a water company is under the control of Councils who are accountable to ratepayers, they will probably say the quadrupling of cost will not match the marginal increase in benefits of Option 2, and go for Option 1.

But under Labour’s model, it is almost inevitable that every single time the water company will choose the most expensive gold plated option, because they can’t be sacked for imposing huge costs of ratepayers.

Democratic accountability is why we now have elected Government, not Kings.