TL;DR: My six things of note this morning for Monday, March 25 include:
Simeon Brown threatening intervention if councils refuse reasonable Three Waters-style mergers of water assets off their balance sheets; 1News Q+A (See more detail and analysis below)
Chris Bishop detailing four phases of RMA reform in two years to planners in a speech, then telling them politicians make better consent decisions than planners; (See more detail and analysis below)
John Key suggesting to Christopher Luxon he back away from doing big tax cuts and big spending cuts all in one budget, via Fran O’Sullivan in the NZ Herald-$$$ (See more detail and analysis below)
Christopher Luxon is now the most unpopular National PM since Jenny Shipley, but persists in using campaign-style TikToks that feel disingenuous, such as this TikTok on Saturday about ‘oiling up’; (See more detail and analysis below)
Chris Hipkins telling supporters in a speech it was time for Labour to look at all its tax policies, including how to tax capital gains and wealth more fairly; and,
Banks are increasingly being blamed for not doing enough to protect customers from scammers, including in this Sunday investigative report last night via 1News.
‘Adopt Three Waters-style water reform, or else’
Local Government, Transport and Auckland Minister Simeon Brown threatened councils with intervention in this Q+A interview with Jack Tame (see below) yesterday if they don’t merge water assets to take them off balance sheet, just as the now-repealed Three Waters plan directed.
He also repeated comments made previously about the Government not putting up any more of its capital and not providing a guarantee to these off-balance-sheet vehicles. In my view, that means there will not be enough private sector lending to pay for the $180 billion-plus of water infrastructure needed over the next 30 years, given the bond investors won’t invest without a guarantee and don’t want to buy small parcels of hard-to-analyse and illiquid debt in smaller water entities.
“If they're unable or unwilling in terms of putting forward that plan, which meets those tests, we will have a regulatory backstop which will allow the government to step in.” Simeon Brown
Brown also said he did not expect rates to rise. In my view, that’s disingenous because the Three Waters-style off-balance-sheet vehicles won’t be created without water charges being implemented, which will be in addition to rates.
Here’s the full exchange between Jack and Simeon (bolding mine):
Jack Tame: Will your government put any new money in to support councils get their water up to scratch?
Simeon Brown: We're focused on making sure they've got the funding and financing tools to be able to do that. Is there going to be any new money? Well, we're not putting capital in. The last government didn't either.
Jack Tame: Number two, will you give councils any new money in order to establish the CCO entities?
Simeon Brown: We're working through some options around some of that, but I can't say.
Jack Tame: But that's a possibility, something you're considering?
Simeon Brown: Well, ultimately there is some money remaining from the last government reforms. We're looking at some options around that, but I can't give any answers right here.
Jack Tame: And will the government underwrite the debt of those CCOs in the future?
Simeon Brown: No, that's not our intent, and we've made that very clear through this process.
JACK Do you accept that rates will have to significantly increase in order to deliver services that meet the regulatory requirements as they stand?
SIMEON No, because ultimately what we're focused on here is giving councils the long-term funding and financing tools that they need, and there's a range of options that that could work. For some councils — I mean, I met with Ron Mark, who's the mayor of Carterton1, yesterday — and he said, look, we're good till the 2040s, in terms of we've made prudent decisions, we've invested, and we're in a really good position.
JACK What about Tararua, just up the road?
SIMEON Well, exactly. Other councils are in a more challenging circumstance. So we're going to require councils— we've got legislation coming to Parliament in the middle of this year which will require councils to put forward a water service delivery plan which will show, over the next 10 years, 30 years, what their plans are, and how they intend to have a financially sustainable approach to it.
Now, some councils might join together in a regional CCO to do that. Others might want to work with the local government funding agency to see how they can have borrowing, which is tied to their water revenues. We're going to make sure that all water revenue is ring-fenced to go back into water. But there'll be a range of ways that councils will approach that financially sustainable model.
Jack Tame: So how do we know that when councils are preparing those plans, especially the councils that are in more dire positions at the moment, won't just say, yeah, well, we can meet all these requirements, but we have to significantly increase rates.
Simeon Brown: We're going to have three tests for it. That's a possibility. So one will be, we want to make sure the money's ring -fenced, make sure it's sufficient and affordable. And the third one is we want make sure they’re funding for growth. And so they will have to start…a number of councils are already talking about how they can have a regional council controlled organisation which gets that scale, means it's an affordable, you spread the cost of that infrastructure over a longer period of time. You have a user pays approach.
Jack Tame: Which means that question is whether or not some councils, depending on the state of their water infrastructure, will have to really massively increase rates and forecast those increase in rates in order to achieve what you are requiring them to achieve under their long -term plans.
Simeon Brown: Ultimately, they'll be working with other councils around that as well. And we'll have a regulatory backstop. So if they're unable or unwilling in terms of putting forward that plan, which meets those tests, we will have a regulatory backstop which will allow the government to step in.
Two years reforming RMA and ministers decide on consents
Infrastructure, Housing and RMA Reform Minister Chris Bishop gave a speech to the NZ Planning Institute in Hamilton on Friday that I attended, although he gave the speech by livestream. He laid out the Government’s remaining RMA reform plans and answered a couple of questions, although not to the liking of planners, who were notably derisive by the end of the session with questions muttered under their breaths and in the chatter afterwards. Bishop also referred to a Cabinet paper on the reforms.
Here’s the key section of the speech, starting with three phases of RMA reform over the next two years, with Phase One of repealing the NBEA and SPA done: (bolding mine):
The first part of phase two is our commitment to introduce a one-stop-shop consenting and permitting regime for regionally and nationally significant projects.
The Fast-Track Approvals Bill is based on the previous government’s RMA fast-track regime, but it goes further in three ways. First, it applies to projects of regional and national significance. Second, Ministers are the final decision-makers on the project that will be dealt with under the act. Third, it doesn’t just affect the RMA, but other relevant statutes like the Conservation Act, Wildlife Act, Public Works Act, etc.
Projects of regional or national significance will become eligible for fast-track through one of two ways – either through a referral by Ministers of Infrastructure, Transport and Regional Development, or by being listed as a project in Schedule 2A of the Bill.
Once a project has been referred into the fast-track process, it will be considered by an expert panel which will apply relevant consent and permit conditions. Panels will have a maximum of six months to do this before the project is referred to joint Ministers to either approve it with conditions, or decline it. Ministers will also be able to refer a project back to a panel if they determine the conditions recommended are too onerous.
We introduced the Fast-Track Approvals Bill to Parliament earlier this month and it’s now before the Environment Select Committee. I encourage you to make a submission on the Bill so we can help refine it and get it in good shape before it returns to Parliament later in the year.
Phase Two doesn’t end at Fast Track. We will also be making targeted changes to the RMA, to reduce unnecessary regulation and help unlock development and investment in infrastructure, housing and primary industries, while ensuring the environment is protected. This will take the form of two bills to amend the RMA.
The first bill, which for ease of reference I’m calling RM Bill 1, will be narrowly scoped and introduced in May. It will include changes to the RMA to clarify the application of the hierarchy of obligations in the National Policy Statement (NPS) for Freshwater Management to resource consenting, extend the duration of marine farm consents, and cease the implementation of new Significant Natural Areas for three years to enable a thorough review of their operation.
We are also considering a couple of other targeted amendments in this Bill, which I will announce in due course.
The second bill will be more substantive and will take some time to develop. I expect to introduce it to Parliament later in 2024. Two big areas it will deal with are on housing and on renewable energy.
We have extensive commitments around housing supply in our Going for Housing Growth agenda. The Bill will make the Medium Density Residential Standards optional rather than near-mandatory for councils, and require councils to ratify their use. It will also require councils to live zone 30 years of growth, and strengthen the National Policy Statement on Urban Development, particularly around mixed-use zoning. There will likely be other changes as we design the legislation.
On renewable energy, we intend to deliver on our ambitious policy called Electrify New Zealand, which aims to double renewable energy in New Zealand. This will involve a variety of changes to the RMA itself and also to national direction.
To help finalise the scope of the second amendment bill, I have written to Ministers, and will shortly write to key stakeholders, seeking suggestions for targeted changes to the RMA that will have the most impact in the short term while we develop a replacement to the RMA.
The other part of phase two is around national direction. Our national direction programme is aimed at unlocking development and investment in infrastructure, housing capacity, horticulture, aquaculture, forestry, and mining while achieving good environmental outcomes.
We have proposed to amend, review or develop over a dozen national direction instruments. It will not be feasible or efficient to progress all these processes separately. Some straightforward priority amendments to national direction will be included in the RMA amendment bills.
I intend that all other work on national direction is combined into a single process for decision-making and engagement. This will include the review of the NPS for Freshwater Management which will take 18 to 24 months to complete. A combined process will support policy integration and allow everyone to see and engage on all the changes in one place.
Work on this is at an early stage and I’ll have more to say as we firm up our plans. Building on these quick wins, phase three will develop policy and legislation to permanently replace the RMA, based on the enjoyment of property rights.
This is a massive undertaking and a lot of work has been going on behind the scenes over the past two years to develop our thinking.
Finally, the new system needs a purpose statement that is consistent with human welfare. That means equal protection for the right to access to housing and other basic human needs alongside environmental protection. Both are essential and both will be protected.
Land use within environmental limits will be permitted. I believe that with clear rules, the replacement RMA system can deliver economic growth and better environmental outcomes.
In terms of the new legislation, I favour clearly separating urban and spatial planning from environmental protection, possibly through separate legislation for each of these functions.
Our new regime will have the enjoyment of property rights as its guiding principle and of course it will include a commitment to uphold Treaty of Waitangi settlements and other arrangements.
We will be establishing an Expert Ministerial Advisory Group to flesh out the detail of the new regime. There is a lot of work to do.
The first step is for Cabinet to decide on and agree on the core design principles for phase three. I’ve outlined some considerations for that today. The Expert Group will do the heavy lifting alongside MfE and other agencies.
My aim is to get a Bill - or Bills - introduced into Parliament in mid-2025 and passed into law by the end of 2025. I realise that’s ambitious but I don’t want a repeat of the Randerson Review debacle and more wasted time and money. Bishop speech
In my view, this means the makeup and terms of reference of the yet-to-be-announced Expert Ministerial Advisory Group will be crucial and I’m willing to bet chocolate fish none of this is completed by the end of 2025. Meanwhile, the development and consenting sector will remain in a state of suspended animation, due to this regulatory and legal uncertainty, plus a lack of funding for water and transport infrastructure (as detailed above)
Then, MC Carol Hirschfeld relayed a question from the audience about ministerial decision-making embedded in the reforms.
Carol Hirschfeld: Do any other OECD countries leave final decisions on planning commissions in the hands of ministers, rather than those with relevant knowledge and experience?
Chris Bishop: Ministers do have the relevant knowledge and experience. The point of our new Fast Track team is that the technical details around consent conditions will be dealt with by experts in the same way that the current Fast Track team deals with that. The COVID -19 Fast Track team did that and the National Built Environment Fast Track, which we've preserved, where we get this new regime up and running, does that as well.
So I'm not an expert on the precise protection mechanisms that you would go through when it comes to a project. But I reject the proposition that ministers who are the elected representatives of people do not have the expertise around resource development in New Zealand. And frankly, the idea that we should leave things over to planners or other people involved in the system. It's part of the problem and that's what we're trying to solve.
That’s when the muttering and sideways glances really got going.
Key fears Luxon is going too hard, too early
It’s clear some of the grandees of the National Party are starting to get nervous about the ‘crash or crash through’ mentality that seems to have gripped PM Christopher Luxon’s coalition ahead of the Budget on May 30. Last week’s headlines about job losses and emergency funding freezes for disability benefits to pay for billions in tax reductions for rental property investors risks creating a type of ‘Mother of All Budgets’ vibe, but without the genuine fiscal crisis.
The National Party’s fathers of its ‘radical incrementalism’ strategy of 2008-2017, John Key and Bill English, were wary ahead of their first Budget in 2009 of being painted as the ‘nasty’ party or trying to get too far ahead of the electorate. That’s why an initial plan for income tax cuts was suspended in early May 2009 for a Tax Working Group review2 that eventually led to the ‘Big Switch’ of a GST hike for lower income taxes and Working For Families changes that they presented as both fiscally neutral and distributionally netural. Willis has talked about fiscal neutrality, although the IMF challenged that last week, but she hasn’t talked about distributional neutrality.
Here’s how Key framed the 2009 Budget as it became clear the Budget projections would have meant significant borrowing to pay for the promised tax cuts:
“In the end being a country is no different from being a household or a family: if you want to have the things that you think are important and deliver those things on a long-term basis, then you have to be able to pay for them. Not just this year, but next year and the year after that, and the year after that.
“So the Government will make some responsible decisions in this Budget. These will include delaying some steps in our economic plan that we would have rather made sooner.” John Key speech on May 8, 2009
That delay included delaying tax cuts3. He was at pains not to scare the horses.
I want to make it very clear today that this will not be a doomsday Budget.
There is no way I will pull the rug out from under New Zealanders when they most need the Government's help.
We will preserve entitlements and health and education spending because we believe it is fair on New Zealanders and because it is the responsible course for the long-term good of this country.
Maintaining government spending is also the right economic response to the conditions we face, because it helps stimulates demand in the economy, and ensures those who are hit hard by the recession are provided with the safety net they need to recover. John Key speech on May 8, 2009
It’s clear from some of the smoke signals around National that Key is worried Luxon is scaring the horses. This Fran O’Sullivan column in the NZ Herald-$$$ on Saturday appears a plausibly deniable seeding of those concerns.
When Sir John Key and Christopher Luxon recently breakfasted, he would have urged his political protege to take caution preparing the May 30 Budget.
Key strongly believes a new prime minister should think about delivering a political change programme by taking a three-term view, not a three-year view.
They should assume - if successful - a prime minister or their party will have nine years to deliver a considered change programme rather than trying to cram all their spending cuts and policy changes into three years (and going too hard in the first year), risking plunging the country into so much discontent their programme has to be abandoned and they don’t get re-elected. It is vital to secure trust in that first year in office. Fran O’Sullivan column in the NZ Herald-$$$
Not a quote in sight, yet…
Get Key on this topic and he’ll happily cite Tony Abbott, whose disastrous first Budget began his death spiral as Australia’s Prime Minister.
The problem was the cuts in Abbott’s Budget deeply offended the egalitarian streak that still ran deep in the Australian psyche. He also cut election promises - Luxon has not done that (yet) - and was dispatched as Prime Minister through a caucus spill after just two years at the top. Fran O’Sullivan column in the NZ Herald-$$$
Someone has had a chat with someone…
The policy Key and his Finance Minister (now Sir) Bill English pursued was known as “incremental radicalism”. The Key Government’s secret sauce lay in four sequential steps: explain the reason for changes far in advance, bring the public with you, adjust the expectations of the electorate and implement reform with competence.
The problem Luxon and Willis face is they are not getting cut-through. They are being drowned out by the verbal incontinence of Winston Peters and David Seymour.
The rational choice would be to wait for revenues to restore and park the tax cuts until we can afford them. Luxon won’t want to do that. Fran O’Sullivan column in the NZ Herald-$$$
We’ll see. The background to this concern is in the next section.
An ‘oiled up’ Christopher Luxon is slipping down the polls
Christopher Luxon is now the most unpopular National PM since Jenny Shipley in 1998, but persists in using campaign-style TikToks that feel disingenuous, such as this TikTok on Saturday about ‘oiling up,’ a phrase used by young people which he professed not to know the meaning of.
Really?
This looks like the work of Topham Guerin, or social media aides modelling their work on them. TG received $320,000 from the National Party during the election, as Farah Hancock reported on RNZ on Friday.
There’s a good question about why the PM is spending time on this over two years out from the election. He may think it works, but it handicaps his attempts to connect authentically with more New Zealanders, in my view. The polls are showing it’s not working either.
Cartoon of the day
Timeline-cleansing nature pic
Ka kite ano
Bernard
I have updated to make clear Ron Mark is the Mayor of Carterton. Not Cardiff. My apologies. To both Ron and Cardiff.
Key interview on NewstalkZB on May 11 and in comments after May 9, 2009 speech. Newshub
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