Economist Brian Easton says those in central government are happy to focus on local government failures while ignoring central government ones, which can be even bigger

This is a re-post of an article originally published on pundit.co.nz. It is here with permission.

The proposal to organise fresh water, storm water and waste water into four entities reflects the contempt that New Zealand’s central government has for local communities.

It is not the only example of the centre ignoring the localities. Other recent examples include overriding local preferences in voting arrangements and excluding local involvement in running of the local health system. The last National Government’s record includes ignoring much local input when the Auckland Council was established and when Canterbury rebuilt after its earthquakes.

That is the way it is. New Zealand is politically centralised. Those at the centre see local government as a necessary evil whose discretion is to be minimised while their communities are hardly listened to. They are happy to focus on local government failures while ignoring central government ones, which can be even bigger.

Thus we get the Three Waters scheme with its four divisions covering the country. Had the centre been interested in local democracy it would have been appalled at the proposal of an entity covering East Cape to Nelson and everywhere in between. The politicians would have told the officials to go back and design a more community-focused system.

It is not sufficient to say that the communities have been failing to deal with the three waters. One needs to ask why. Any rational answer reflects poorly on the centre, so instead of analysis it proposes a solution under the pretence that communities don’t care. Of course they do.

The uncomfortable fact is that local government is poorly funded. Their main source of revenue is local body rates, which is an inequitable and clumsy tax. Desperate for funds and subject to strong community demands, the local bodies by cutting corners when providing their services. That which is unseen is underfunded. So underground piping suffers inadequate maintenance and insufficient provision for the future. As the Auditor-General reported in 2019/20, the amount councils – excluding earthquake-recovering Christchurch – spent renewing pipes and other plant was 74 per cent of depreciation for water supply, 64 per cent for waste water and just 39 per cent for storm water.

But this does not demonstrate that the people don’t care; it demonstrates that their councils are underfunded. To acknowledge this would place a challenge on the centre which it wants to avoid.

Part of the solution has to be to make the pipes more visible, which is the effect of a three waters entity, although it is fatuous to think that enabling the good folk of East Cape to be more aware of Nelson’s pipes will do that much. The stupidity of the solution was enhanced by the Minister for Local Government who, when first introducing the proposal, said that it would reduce rates.

Any resolution is going to involve a huge borrowing program for replacement, upgrading and extensions of the ‘piping’ and it will be paid for locally – the centre is not going to take over the funding. So while your council rates may be lower, initially you are going to be paying rates to your three waters entity. I bet the sum of the two is higher – it ought to be if we are going to make better provision for the water even if overhead are not increased by the clumsy entity structure.

Ultimately there may be more direct charging of water use, something which I am not in principle opposed to, but I can see practical difficulties. In any case, an honest proposal would discuss the possibility of charging, rather than leaving funding vague to make the redisorganisation more palatable to the unwary.

Proper water management is going to involve an enormous amount of borrowing. It should, for it would be absurd to impose the cost of infrastructure that should last a century entirely on the current generation. The justification for only four entities is they will have to be large enough to borrow cheaply on international markets. Presumably a single entity would be even cheaper. That favours a sole borrowing entity which would fund a set of locally based entities – say, a dozen of them.

But that, you say, would mean that some of the poorer regions with larger responsibilities are going to have impossible financial burdens. The current proposal involves cross-subsidisation within the entities so the good people of Nelson may end up funding the water infrastructure of East Cape. That conflicts with one of the principles of our local government system which is that it is not responsible for managing equity; that is a central government responsibility – or apparently it is until the centre deems otherwise. There are a number of ways that the equity issue could be shared across the whole community which only the unimaginative cannot envision; they may include the government’s policy advisers.

To add insult to injury, not only is the government separating communities from their water infrastructure, but it is seizing the existing infrastructure from the communities which own them through their councils. There is a claim that the councils will still own them, but it is a legal fiction. Auckland Council will provide 93 percent of the assets of its region, but will have only 28 percent of the vote in a clumsy system designed – as is usual by the centre – to separate communities from control as much as possible.

It may be that the government is so committed that it will not deviate from the course it has embarked upon. The local body election campaigns are already sending a strong signal that this ignoring of communities is unacceptable. What do your candidates say? Separate out those with weasel words from those who say that any proposed structure without a community focus is unacceptable.

I suppose the government might listen and go back to the drawing board. If it does not, I fear that you will have another opportunity to vote on your dis-empowerment at the general election next year. But the alternative politicians will be just as supportive of centralisation. That is the way our politics works.

*Brian Easton, an independent scholar, is an economist, social statistician, public policy analyst and historian. He was the Listener economic columnist from 1978 to 2014. This is a re-post of an article originally published on pundit.co.nz. It is here with permission.