Prime Minister Chris Hipkins rejects new water reforms include 'co-governance' as National, ACT go on attack, mayors weigh in

The Prime Minister denies the Government's water reforms feature a co-governance arrangement, saying 10 proposed water entities will be governed by people appointed "for their knowledge and expertise".

A refresh of the reforms was announced on Thursday, ditching the Three Waters name in favour of "affordable water reforms".

However, the Opposition isn't impressed, arguing it's just "a new coat of paint". It's also continued to push the line that the reforms do contain a co-governance element that is "divisive".

The main change is that the four previously proposed mega entities responsible for delivering fresh water, wastewater and stormwater to different parts of the country will be sliced up into 10 smaller entities instead. 

Councils will have some ownership stake in them and they are expected to begin delivering water services from July 2026.

The Government says creating the entities provides for more borrowing power than individual councils can have, which is important considering the significant scale of investment needed for water infrastructure.

"The cost of meeting the upgrades needed for our water systems is projected to be up to $185 billion over the next 30 years," Local Government Minister Kieran McAnulty said. 

"Local councils cannot afford this on their own, and households in some areas could see rates rise up to $9,730 per year by 2054 if we do nothing."

The proposal to establish 10 entities will lead to household savings projected at $2770-$5400 a year by 2054 on average within each region, the Government says.

Prime Minister Chris Hipkins rejects new water reforms include 'co-governance' as National, ACT go on attack, mayors weigh in
Photo credit: Supplied.

Under the rework, a Regional Representative Group (RRG) will still be established for each entity. They will appoint a professional board for each entity and "provide strategic oversight and direction". 

The RRGs will be a partnership between representatives of the councils whose infrastructure is being amalgamated and iwi/Māori. The Government says every territorial authority will be represented on an RRG, with an equal number of mana whenua representatives. 

This is appropriate, the Government says, as under te Tiriti o Waitangi, mana whenua have a right to participate in decisions relating to water services. 

However, as RRGs won't have a role in the day-to-day governance or operation of the entities, Prime Minister Chris Hipkins argues this isn't co-governance. 

"It's not co-governance and it wasn't co-governance. These entities will be governed by a skills-based board appointed for their knowledge and expertise around water and other issues," he told reporters.

"There will be regional advisory groups that will include representation from mana whenua and, of course, representation from every local council. There will be an opportunity for people to have a say within local communities including mana whenua, in how their water is delivered and their priorities for water."

Hipkins said the Government previously had a discussion about adopting a "full co-governance model" but decided against it.

"The governance model for these entities is a professional governance model as we have for many other public service entities. They will have to take advice from the representative groups, but ultimately, the board will be responsible for governing the water entities."

He noted he has previously acknowledged the Government could have done a better job communicating the reform work to Kiwis.

"When we actually made that shift away from talking about co-governance to talking about the representative group model, we probably didn't explain that fully enough so that people understood what we were doing there."

McAnulty, who has led the rework since taking on the ministerial role in January from Nanaia Mahuta, said there has been a "misunderstanding".

"I'm not sure everybody recognises that Māori have a special interest in water that's been established through the courts," he said.

"I'm also sure that some political opponents have tried to leverage this for their political gain. They'd rather talk about co-governance than talk about the fact that their proposal doesn't stack up financially. That's quite convenient for them."

He said councils very rarely raised the issue of co-governance with him.

McAnulty spoke with mayors on Thursday morning ahead of the announcement and said, despite a lot of questions, co-governance didn't come up once. 

He also said that during a tour of 55 councils, only one councillor raised it.

"When I pointed out to the councillor that this was the 41st council that I visited and it was the first time that that had been raised, they were quite surprised and it wasn't raised since.

"The fact of the matter is that local councils work closely with mana whenua, they have similar arrangements anyway."

McAnulty and Hipkins on Thursday.
McAnulty and Hipkins on Thursday. Photo credit: Newshub.

Political parties on attack

Concerns over co-governance have featured in much of the commentary from Opposition parties like National and ACT.

Simon Watts, National's local government spokesperson, said on Thursday the Government's rework was just a "desperate attempt to rebrand their toxic Three Waters reforms".

"The message from Kiwis is very clear – they want local water assets in local hands, and with no divisive co-governance structures imposed on them.

"Today's rebrand from the tired and incompetent Labour Government shows they just don't get it. These are the same broken reforms, just with a new coat of paint."

Watts said the "co-governance structure" is "undemocratic and will not lead to better water services".

He also said moving from four water entities to 10 "makes a mockery of Labour's repeated claims that four entities was the only way to go and would provide huge economic benefits".

But McAnulty said this change balanced getting the all-important scale as well as ensuring local voices are heard. 

"I briefed the mayors this morning and I have to say that the feedback has been positive," he said.

"I can guarantee that there will be more mayors that support this proposal than supported the last one because they recognise that with a seat at the table guaranteed for every mayor in the country, they'll be able to ensure that the priorities of their local communities are heard, but they'll be able to achieve the scale that's needed to the investment that they have to do."

National's plan for water infrastructure involves scrapping the water entities, establishing a regulator to set and enforce standards for long-term investment, and requiring councils to ringfence money for water infrastructure. 

It's also suggested councils could decide themselves to join regional Council Controlled Organisations (CCOs) to improve access to borrowing. 

McAnulty said the Government's been through alternatives but they don't "stack up".

"The only way to make this work financially for ratepayers and local communities is to have a separate entity that's still owned by the council but is run independently by an independent governing body. That's the only way that credit agencies will allow them to borrow the extent that they need it."

ACT leader David Seymour is also on the attack, saying Hipkins should have "dropped the unpopular and divisive co-government element of Three Waters".

"Hipkins has been desperate to differentiate himself from Jacinda Ardern but, by reheating and rebranding co-governance, he's showing he's no different," he said.

"There are real problems with drinking water quality in some communities, failing wastewater networks and sewage overflows into rivers and onto beaches. None of these problems are solved by expropriating ratepayer assets or with co-government."

ACT is also wanting to repeal the reform legislation and provide for councils to enter voluntary shared services agreements.

ACT's David Seymour.
ACT's David Seymour. Photo credit: Getty Images.

The Greens welcomed the increase in the number of water entities, but believe the "rebrand" doesn't go far enough.

"Right from the start, the Green Party was clear that only four entities would be too unwieldy and disconnected from the community. We are pleased that the Government has finally taken this on board," said water services spokesperson Eugenie Sage.

"But let's be clear: structural reform is pointless unless we manage land better and prioritise action to protect clean drinking water sources. Today's rebrand doesn't go anywhere near as far enough to protect nature."

She said that "options such as a Crown guarantee for borrowing should have been investigated further to allow councils to be more closely accountable to their communities, while allowing them to invest in improving services. 

"The failure to separate stormwater management is another missed opportunity. Managing stormwater needs to stay as the responsibility of local councils because of the connection between land use and stormwater volumes and quality."

Mayors weigh in

McAnulty said he received positive feedback from mayors he spoke with on Thursday morning, but some of the responses since the refresh was announced have been critical.

Communities 4 Local Democracy, a group of councils which have previously criticised Three Waters, said it was disappointed by the announcement.

It said the rework contains "minor tweaks" and doesn't "answer concerns around community property rights and meaningful local voice".

"We think New Zealanders will see through this, it's the same plan with a different name," said co-chairs and mayors Helen Worboys and Dan Gordon said.

"Simply adding more entities and changing the name is a desperate attempt to save this plan and attempt to show they've done something with the $100 million they've sunk into this process so far."

They said they had been "genuinely excited" about engaging with the minister to "map a great path forward for water reform". But they believed the Government had continued "to shelve local democracy and ignore an overwhelming majority of the community to press on with its plan virtually unaltered".

"Unfortunately, instead of listening to what communities are asking for, the Government once again thinks it knows better and is serving up a reheated version of the same unpalatable, unpopular plan."

Nadine Taylor, the Marlborough Mayor, said the changes were only a "minor improvement", noting the region's voice will be greater now that it's in a smaller entity. 

"However this latest proposal is not set in stone. The Three Waters reforms will be a political football in the run-up to the elections in October," she said. "Which means the uncertainty will continue for a while yet, unfortunately."

"Ironically the Government has labelled the new project 'the Affordable Water Reforms' but it's likely that the cost of running 10 smaller entities spread across smaller population bases will be higher than the four mega entities. Perhaps that is the price we will have to pay for a greater level of local control."

Porirua Mayor Anita Baker welcomed the "certainty" the move on Thursday provided.

"Our bottom line has always been public ownership, involvement of iwi and affordability for our people. None of this has changed with today's announcement," she said.

"While a ten entity model may not deliver the same long term affordability, it does provide a pathway to future mergers, which in my view will be inevitable."

But Lower Hutt Mayor Campbell Barry wants more "certainty" from political parties. While a change to 10 entities is not his preferred approach, he said it's important parties just get on with the work.

"It's clear the Government has made some major concessions on affordability to allow for smaller regional entities. While I personally don't agree with those concessions, it is what a number of councils across New Zealand have been asking for.

"We now need to take the politics out of this issue and move forward constructively with what's on the table".

Local Government New Zealand President Stuart Crosby called for more detail, but acknowledged the rework was a genuine shift and response to feedback.

"There are 78 councils across the motu.  Within local government there are many and varied views on reform. One thing the vast majority agree on is that water reform is necessary," said Crosby.

"We will need to go back to our councils to understand their views on the new model."