Thursday, April 07, 2016

Why we need to price water

On Monday, we learned that Ashburton District Council plans to sell 40 billion litres of pure water from an over-allocated catchment in a time of drought. Media commentary on this has focused on the over-allocation and drought issues, as well as highlighting how it undercuts the government's claim that "no-one owns water"; selling the right to extract is the same as selling the water for all practical purposes, especially when that water can then be onsold for profit. And its the latter point which deserves more attention, because it shows us just how much of a rip-off this is.

The buyer is believed to be a foreign water bottling company, who will bottle the water and sell it, no doubt leveraging off the "100% pure" New Zealand brand. Bottled water starts at $1 a litre and goes up (it easily sells for $3 or $4 per litre with the right branding), so what Ashburton District Council is effectively selling is the right to make $1.4 billion a year for the next thirty years. Even assuming a 1000% markup from production to retail, its still $140 million a year. Which is about five times more than the councils annual budget.

How valuable this income stream is depends on the discount rate. But plugging it into an online calculator at 4% says its worth $2.4 billion. Will Ashburton District Council be getting $2.4 billion for this? Like fuck they will. They'll be lucky to get a thousandth of that, and that foreign water bottling company will be laughing all the way to the bank.

And that's why we need to price water and charge for its useage: because its valuable, and not pricing it sees us utterly ripped off, our natural wealth privatised and sold, with the profits accruing to the buyers. A resource rental - making companies who use water pay for it - solves this problem, at least partly. It would ensure that the public were compensated for the use of public resources, generate a revenue stream for government, councils and iwi, and encourage conservation. Because at the moment, we are just being ripped off, and farmers and water bottlers are profiting from that theft.