SIMON COURT (ACT): Thank you, Madam Chair. I want to bring the Minister the Hon Andrew Little back to the comments that he made in response to my question about balance sheet separation. I think, Minister, you've laid it bare: there is no balance sheet separation. You stated that these water service entities will require Crown liquidity—a backstop lending function. That's exactly the point that Standard & Poor's made in their report to the Department of Internal Affairs that was tabled with the Finance and Expenditure Committee. So you don't have balance sheet separation; you, essentially, have all of the debt and all of the liabilities that these water service entities will have, basically, recorded against the Crown's balance sheet. What on earth is the point of that? Either you're going to stand up water service entities, some kind of corporation, whether it be as ACT proposes, a voluntary amalgamation of assets and services—that's what ACT proposes in our alternative three-waters infrastructure plan—which can be truly independent if they want to be, or you go through this charade, which is what this Government has done, of pretending these entities, by moving these assets out of local government control into a centralised entity, can somehow achieve balance sheet separation. Minister, thank you; you've made it clear that's not going to happen. These entities will be backstopped by the Crown.
So what would be a better proposition? This is what ACT would do—and I want to test this on you, Minister. When it comes to funding and financing water services, water infrastructure development, if we think about all of the options that are available to the Government right now, we have the Infrastructure Funding and Financing Act. That allows for special purpose vehicles—essentially, a bond to be raised—to raise money to fund infrastructure. Right now, there's an application sitting on the Minister for Infrastructure's desk for an upgrade to the Moa Point Wastewater Treatment Plant, just here in Wellington. Now, the Infrastructure Funding and Financing Act, which was passed by Labour in 2020, actually says that, look, if you've got a piece of infrastructure that you want to develop, build new, renovate, you should be able to go and raise debt to pay for it now, to pay for the design and construction, as long as you've got a revenue stream out into the future—in other words, you can send people a bill, whether they're ratepayers or commercial water users—and that revenue will then pay down the debt over time. It's called a special purpose vehicle, to people watching at home or listening to this debate. The current Infrastructure Funding and Financing Act, which Labour passed, allows for that. Moa Point Wastewater Treatment Plant is the first cab off the rank—it's the first project that's been proposed under that model—and Wellington Water is waiting for a decision from the Labour Government on that. That's one way to fund and finance infrastructure, and we don't need the Water Services Entities Bill to do that.
Now, another way might be, if you're a land developer, for example, or if you're a big industrial water user, that you might want to go out and raise a revenue bond to fund your infrastructure. A local council could do this, too. In fact, up until the 1990s, one of the main ways that local governments raised money to pay for infrastructure, including things like the Auckland Harbour Bridge, was to raise a bond and borrow the money from the likes of super funds, institutional funds, pension plans—the kinds of places that people put their money for their retirement, and those institutions have money that they want to invest in long-term, safe assets that give a good return for people who need to collect their pension years down the track. That's how local government used to raise money—through revenue bonds. That's a great idea; ACT supports that. That was proposed by Dr Eric Crampton of the New Zealand Initiative. He said, "We've already got these tools, Minister. And, in fact, we don't need balance sheet separation; we just need to let local government asset owners have access to more flexible funding and financing arrangements." That's what the ACT Party supports.
So, Minister, would you please respond to this question: why, simply, isn't it that you let the Infrastructure Funding and Financing Act and these more flexible tools deliver the money that these assets need?
Hon ANDREW LITTLE (Minister of Health): Thank you, Madam Chair. I'll try to respond as briefly as I can to Mr Court's points that he raised. So, in terms of balance sheet separation, the advice we've had is that, notwithstanding any credit liquidity facility that the Government has previously offered to local government and would continue to offer, that doesn't affect the Crown's credit rating, but it enables, as we do with local government when they get financially distressed, and we have had some in recent years—it simply means that that body can continue to do its job on behalf of its ratepayers as it stabilises and sorts itself out.
In terms of the ACT Party's alternative approaches, the reality is that these entities will not be constrained in terms of the ways they may wish to raise finance. If they want to issue bonds, that will be a matter that they can consider. It is possible that the infrastructure investment facility may be available for water projects run by any of these entities, but my understanding is that, in terms of planning and preparation for these entities, it won't necessarily be the most attractive option for them. They will find and work out their ways of financing their projects as they make decisions that affect their balance sheets in due course. In the end, they will be charged with making sure that the infrastructure they are responsible for is functioning and working, the long-term planning is happening, and they seek financing accordingly.
CHAIRPERSON (Hon Jacqui Dean): Members, the committee is suspended and will resume after oral questions this afternoon.
House resumed.
Sitting suspended from 12.58 p.m. to 2 p.m.