McAnulty Kieran; Xu-Nan Lawrence; Brown SimeonHon KIERAN McANULTY (Labour): Thank you very much Mr Chair I appreciate that. My question to the Minister refers to Part 3 clause 58 the Exemption from cost-effectiveness review". I found this really interesting because of course what the Minister has said throughout is he claims that the rationale behind these changes is around cost effectiveness. He has made many claims in justifying this approach the most recent of which was made just the other day during the announcement around the changes to local government financing increasing the debt caps. He's basically said that there does not need to be as much work done as was outlined by the Department of Internal Affairs in the previous modelling which stated that it was up to $185 billion.And I note that in the regulatory impact statement (RIS) for this it outlines that some alternative modelling has been done but for the purposes of the RIS they are working on the basis of at least $120 billion which of course was always the figure—$120 billion up to $185 billion. Which is interesting because during the announcement for the funding of this where they claimed that it was going to be more cost effective they were working on the basis in their claim that it would be significantly less than that. So there's a discrepancy there between the claims made in the announcement and the figures that the RIS is based on—the figures provided by the department. Now when you have serious questions around this that they are making claims around cost effectiveness based on an assumption that significantly lower levels of investment will be required and yet this clause exempts councils from a cost effectiveness review—now the Minister may stand up and he may say "Oh well they still can. They don't have to but they still might." But what we've already seen under the changes made by this Government is it's resulting in the potential for a perverse outcome. And if you look at Māori wards it's the perfect example. And it's very similar to what I fear may come from what's proposed in this clause.So councils all around the country are currently considering whether or not to hold a referendum on whether to keep Māori wards or whether to scrap them. And I know from councils that I've spoken to that their council actually obviously supported the idea of Māori wards but now they are faced with the reality of voting for a referendum and therefore imposing a cost on their ratepayers and so they're thinking about scrapping it altogether—a perverse outcome. Totally against the wishes of their community and totally against the views of the councillors but because they simply can't afford it they're thinking about getting rid of it. So why would a council voluntarily do something that will use resources and impose further work on their workers on their officials if they don't have to?So I accept that I am anticipating that that is the Minister's response but given it was a response to a pretty reasonable question from Dr Deborah Russell I'm anticipating that it would likely be that. So let's just assume that it's just not going to happen. Why would councils be exempt from a cost effectiveness review when that is the entire rationale behind this proposal? Perhaps it's because in doing so it might reveal to those councils and the ratepayers that it is actually not all that cost effective after all. I say that because subsequent to the announcement that was made last week about financing changes Standard & Poor's the credit rating agency the agency which has assessed this work and assessed alternative proposals for water reform have said that this is likely going to lead to significant increases in the cost of borrowing which is what we of course have been saying all along. And that goes to the claim of it being cost effective yet again.So when you have a bill here in front of us that the Government claims is going to be cheaper for ratepayers have not provided any evidence to back that up they have claimed that there's going to be a need for significantly less levels of investment—which in itself is a flawed claim because what they have based that claim on is that it is on council's long-term plans. Now the Minister knows that councils haven't accounted for the 30 years of upgrading and maintaining that is required and was the scope of the original assessment and rationale for water reform in the first place because long-term plans only go out 10 years.They also made the claim that their figures are more accurate because it was "bottom up" I think deliberately washing over the fact that the assessment that came to a figure of up to $185 billion was derived from the council's own numbers themselves because they had already provided it. But they were required to do so over a 30-year period to give us an accurate assessment. And now all of a sudden they're only looking at figures that come from long-term plans knowing full well that those figures are 10 years and will not give a true and accurate reflection moving forward. So if you look at those two things and the fact that Standard & Poor's have cast serious doubt over affordability of councils why on earth would the Minister then exempt councils from a cost effectiveness review? Now if you link that question to that that remains unanswered posed by Dr Deborah Russell around consultation it's possible that ratepayers will be asked to consider something without the facts and at one opportunity. Now it's possible under the way that things are written here that they consult at the start they then go and carry on and talk to other councils. Yes they may consult more—they might not because of the additional costs that that would bring to the council—and then by not having a cost effectiveness review not give the people making the decisions or the people who have voted those people in the information that they need and I want to know why.I suspect it's because the numbers don't add up. They know they don't add up. This is ultimately a political solution to an issue that they created. They want to wash their hands of it hand it back to councils and then when it inevitably turns sour say "Well that's their fault for not sorting themselves out." And I wonder if that's the reason why councils are exempt from a cost effectiveness review when you consider that this is a massive change to the way local government works and for some weird reason they're exempt.Dr LAWRENCE XU-NAN (Green): Thank you Mr Chair. I actually just want to draw the Minister's attention around the consultation. We still need to get some clarification from the Minister regarding clause 52(2) around "consultation once" and its relationship with subclause (3) around "may decide to undertake further consultation".Now what I want to talk about in the context of subclause (4) is when the territorial authority decides to take on the further consultation I want to check with the Minister what is the rationale that a territorial authority doesn't need to consider consulting more than once? Because he says "may" but then if it does decide to consult more than once only then they have to consider subclause (4). I would assume it would be a natural and reasonable order for a territorial authority to first take into consideration what is considered in subclause (4) before deciding if the consultation is sufficient.And I particularly want to draw attention to what it says in subclause (4)(a) which is "the requirement in section 78(1) of the [Local Government Act]" which is around the need and understanding of hearing from the community views. So section 78(1) of the Local Government Act states "A local authority must in the course of its decision-making process in relation to a matter give consideration to the views and preferences of persons likely to be affected by or to have an interest in the matter." So I would assume that that would have been the logical order first—that they would consult and they would go "On balance based on subclause (4) it's not sufficient. Let's consult again." As opposed to "We'll consult once. We don't need to do it again. But if we do want to do it let's consider have we thought about all of the views?"I also want to mention this in the context of the Amendment Paper 65 that has been put forward by the Minister where the Minister has made changes to subclause (2) and have created two separate sections of that—(2) and (2A). Now (2A) is particularly interesting where it says "A territorial authority that makes a decision described in subsection (1)(a)"—i.e. a water services council-controlled organisation—"is not required to undertake any further consultation before making a decision described in subsection (1)(b)."In terms of the wording I also want to get clarification from the Minister that it is not to do with a water service council-controlled organisation transitioning into a joint local government arrangement under section 137 of the Local Government Act. Because surely as we see in clause 54(1)(e) "if the proposal involves establishing joining or amending … or a joint local government arrangement" that does require consultation because it's one of the required pieces of information for consultation.So I want to get two clarifications from the Minister. One of them is what is the rationale to decide for a territorial authority to not decide to further consult in the context of clause 52(4) as opposed to consider clause 52(4) first before making a decision whether they need to further consultation? Based on the Amendment Paper that the Minister has put forward and this is Amendment Paper 65 changes to clause 52(2) and also specifically (2A) that it is not implying that a water services council-controlled organisation transitioning into joint control doesn't require any further consultation which would then contradict clause 54(1)(e)?Hon SIMEON BROWN (Minister of Local Government): Thank you Mr Chair. The questions in relation to consultation can be answered as this clarifies that consultation is only required once. Councils are currently unsure about how much consultation is required—the Local Government Act isn't clear about this. There are no specific requirements in the Local Government Act 2002 about how many times consultation must occur. Councils have discretion about this and so this is a clarification. I think that answers most of the questions that have been asked in relation to consultation.In relation to the Hon Kieran McAnulty's question in regards to the exemption to the cost effectiveness review the elements that would be requiring the cost effectiveness review are being already undertaken as part of the water service delivery plan."