Water Tax -- August 2017

Deadlines being what they are, this column was written before I had attended the meeting on water with David Parker

It’s strange to be contemplating paying for water as I survey the damage another 60mm of rain has done to an already waterlogged dairy farm, but here we are. It must be an election year.

What a bold and defining policy it is too: a levy on all commercial water users! A levy on water bottlers (but not Coca Cola), a levy on farmers (but only for irrigation, not for stock water), a levy on… well that’s the end of the list really, all other commercial users of water seem to have escaped for now.

Currently all water to everyone is free, you may pay for pipes and treatment and delivery but the water itself is free. This is a detail that seems lost on anyone with a residential water meter whose immediate response seems to be “I pay for my water, so can the farmers!”

It seems to be a detail lost on David Parker too, Labour’s spokesperson for Water and the Environment asserts that Coca Cola would not be subject to the levy as they already pay Auckland Council and “nobody should have to pay twice.”  Well I’m sorry David, but Coke don’t pay for the water, they pay for its treatment and delivery to their plant, the water itself is free. By the same logic anyone on an irrigation scheme should also be exempt as they already pay for the water and “nobody should have to pay twice.”

What exactly is the levy supposed to achieve? If it’s supposed to send a price signal that intensification is not the way to go, I fear Mr Parker is about to learn about unintended consequences.
About 70% of all irrigation in New Zealand occurs in Canterbury, some 385,000 hectares are irrigated, and by far the most profitable use of that land is dairying yet only about half that is used for that purpose.

I calculated that, at 2 cents per cumec, the farm I manage would be liable for between $50,000 and $60,000 per annum in irrigation tax, a figure that made my arable friends’ eyes water. “The thought you could come up with $60k ‘spare’ money for tax sickens me!” said one cropping farmer on twitter “none spare here!”

Low debt dairy farms may well be able to absorb the cost, lower margin arable farms might find it a little tougher.

If you’re an arable farmer faced with an extra tax for continuing to water, doesn’t converting to dairying look a little more attractive? As a dairy farmer that $60k adds 13c to my cost of producing every kg of milk solids: how do I claw that back? Intensification seems to be the simple answer.

If, as Mr Parker says, the revenue is to be used to clean up waterways nationwide, I hope Canterbury can withstand the sudden evaporation of tens of millions of dollars from the local economy.