Brian Rudman: Hide's Watercare defeat is our gain

A poll shows 85 per cent of Aucklanders oppose privatisation of their water assets. Photo / Alan Gibson

Act leader Rodney Hide's dinner table brag to munching party faithful - and an unnoticed journalist - that he could get anything through Cabinet because "they are too busy with their own stuff" took me back to my schooldays. To the time when the latest caning victim would emerge from the staffroom, bottom stinging and eyes red, full of bravado about it not hurting at all.

In recent weeks, Mr Hide's "half asleep" Cabinet mates have watered down or rejected proposal after proposal from their lowly outsider fellow minister. A plan to introduce regular referendums and polls to control local government spending was rejected. His desire for rate-capping was shelved.

Also dumped was a proposal to amend the Local Government Act to permit "divestment of council [water and wastewater] supplies to the private sector". The Cabinet decided instead on a minor change, extending the time limit on any contract a council made with a private water supplier or operator, from the present maximum of 15 years to 35 years.

Mr Hide received another bloodied nose over his proposals on the expansion of Watercare Services into the sole provider of all drinking and wastewater services to the new Auckland Super City. He wanted to scrap legislative requirements that Watercare pay no dividend and that it "manage its business efficiently with a view to maintaining prices for water and wastewater services at the minimum levels."

He argued to the Cabinet that "the Auckland Council, as the sole shareholder, will be best placed to direct Watercare, through its constitution and statement of intent, in how water and wastewater services are to be priced to achieve its broader objectives."

His "sleepy" Cabinet colleagues managed to stay awake long enough to vote both of these proposals down.

For Aucklanders worried about the transparency of their water costs, this is something of breakthrough. Watercare has always been bound by law to provide water as cheaply as possible and pay its council owners no back-hander dividends, but local retail council water companies Metrowater, Manukau Water and the like, have never been bound by such restrictions.

Of course as Mr Hide points out in his paper, a "ban on dividends alone could not prevent excessive charges. Higher prices could result in Watercare incurring excessive operating or capital spending, or building up a large cash reserve, rather than paying this out as a dividend."

History shows how right he is. In 2004, the shareholder council of Watercare, made up of representatives of the various councils, cooked up a way around the dividend ban.

They told Watercare to pay a $15.7 million "rebate" to the owners. It was election year, and one mayoral candidate even suggested a rebate for each household. The result, Watercare now carries a larger debt burden.

It was a game the local councils have long played. At the time Watercare was being forced to pay a non-dividend, Auckland City's Metrowater was revealing "retained earnings" of $62 million.

The Government's attempt to keep the money we pay in our water bills going on water services is commendable.

People more savvy on these matters than me also say the prohibition on dividends and profit-taking will be a dampener on any foreigner contemplating a bid on this $5 billion asset. That's if it ever gets to that, and only extremists on the edges of the Act Party and water campaigners who enjoy scaring themselves to sleep each night, seem to think this is a possibility.

Sure, the Cabinet has endorsed Mr Hides' proposal that come 2015, the Auckland Council should be allowed "to determine ... the governance arrangements and asset ownership for the delivery of water services." I'm relaxed about this. While I see no reason to even bring the issue up in 2015, if the UMR poll, Labour's Auckland issues spokesman, Phil Twyford is waving about is accurate, it's a non-issue. The poll shows 85 per cent of Aucklander oppose privatisation of their water assets.

Mr Hide's argument is that once the new Auckland council is bedded in, it should be allowed to decide on issues such as the governance of asset holdings in Watercare.

At least Wellington is letting us have a say for once. We should treat that as a breakthrough and a precedent, not a threat. How about a vote on the CBD rail tunnel as well?