Natural Resources Management (Transparency of Ministers Directions) Amendment

Introduction and First Reading

The Hon. J.M.A. LENSINK (16:35): Obtained leave and introduced a bill for an act to amend the Natural Resources Management Act 2004. Read a first time.

Second Reading

The Hon. J.M.A. LENSINK (16:36): I move:

That this bill be now read a second time.

The bill is not a large bill. It relates to the matter of the government's current cost recovery from NRM boards which for 2015-16 is $3.5 million and which rises to $6.8 million in the 2016-17 financial year, which is effectively adding to the tax burden of those who pay water levies—and they are our food and fibre producers in South Australia.

The bill has also been promoted by my colleague the member for Chaffey, Mr Tim Whetstone, and he will be introducing it into the House of Assembly at some stage. It is not a complicated bill but it arises because of this particular budgetary decision which was snuck in in last year's budget and which is going to cause quite a lot of difficulty. I would like to thank at the outset the member for Chaffey and also the member for Bragg in this matter.

I understand that there are some similar provisions within the NRM Act already which relate to annual reports and reporting by the minister to the Natural Resources Committee of parliament. What this piece of legislation does is that if there is a directive which is given to NRM boards by either the minister (being the Minister for the Environment) or the Treasurer, those directives will be placed with the Natural Resources Committee within 14 days.

What this does is to expose state government decisions as they have in this instance decided to raid the NRM boards to pay for departmental costs, it will also provide some public exposure for NRM boards that really have been prevented from being able to expose this as a government decision rather than their decision, and it will give early notice to the Natural Resources Committee members so that they are aware when any budgetary reports are brought to their attention. Already within the NRM Act there is a range of similar functions where NRM boards or the Natural Resources Committee must provide certain reports or ministers must provide certain reports, so it is similar to that concept and really is a measure to improve the transparency of the system.

I would like to save the rest of my remarks for the budget decision because it has been outrageous, and in many ways I am speaking also to the motion on the Notice Paper, which is the private business, 'That the Report of the Natural Resources Committee on Natural Resources South Australia Business Plans and Regional Levies, 2016-2017, be noted.' So I will not be making a long contribution on that particular motion given that most of my remarks relate to the same matter.

How this came about: the 2015-16 budget contained two items which we did not know at the time were related, but the government has decided to link up. First and foremost, number one, its decision was to abolish the Save the River Murray Levy, which results in revenue forgone of $108.9 million over four years. We said, in the Liberal Party, that this is long overdue. It has been our longstanding policy, now that we have the Murray-Darling Basin Agreement in place, that there are a number of means to address those issues, and this was really just a tax burden on South Australian households. So we welcomed the loss of that particular tax.

In estimates, we did see commitments that the programs funded by the levy would continue to be funded from general revenue. I must say we were led to believe, by both the minister for the environment and the Treasurer, that they would. I would just like to quote from estimates last year. Minister Hunter was asked in estimates on 22 July 2015 by the member for Flinders:

Mr TRELOAR: I refer to Budget Paper 5, page 7, Save the River Murray. It shows that the Save the River Murray levy has been abolished from 1 July 2015. Minister, will the programs that were funded from the levy be funded at the same rate?

The Hon. I.K. HUNTER: My understanding is that all the programs will continue. They will just be now funded through consolidated revenue into the future.

Minister Hunter also advised in that estimates session that South Australia's contribution to the MDBA joint programs in 2014-15 was $15.5 million. Members will recall that, shamefully, this government chose to slash this program and its contribution to those critical programs, but that is a discussion for another day. The budget amount for the MDBA for 2015-16 is $19.05 million.

The Treasurer was asked similar commitments regarding the Murray-Darling programs by none other than the Leader of the Opposition, the member for Norwood, Mr Steven Marshall, as follows:

Mr MARSHALL: Referring to Budget Paper 5, page 7, it states:

'The specific measures funded by the Save the River Murray Levy will continue to be delivered.'

Can the Treasurer provide a guarantee that all programs previously funded by the levy, including the River Murray improvement program, the South Australian River Murray salinity strategy and the South Australian environmental flows strategy will continue to receive the same level of funding in real terms?

The Hon. A. KOUTSANTONIS: That is a matter for the minister in the budget process. There are some programs that are time-limited. They will be funded but, yes, we have replaced the levy with government appropriations through the budget process. The minister will bring to us programs and we will decide in the budget process whether we fund them or not.

Mr MARSHALL: But where it says quite specifically in your budget document that 'The specific measures funded by the Save the River Murray levy will continue to be delivered,' is that conditional in any way? Are you giving a guarantee to the people of South Australia that that funding, in real terms, will be preserved, or are you saying you are not prepared to give that guarantee?

The Hon. A. KOUTSANTONIS: No, what I am saying is that, when the levy was in place, there were different programs that were funded at different times, so it is up to the department to come up with a quantum of programs that they wish to be funded. We are not attempting to spend any less on this important work. What we are simply attempting to do is benefit households by giving them a cost-of-living benefit by removing this regressive tax.

Mr MARSHALL: No guarantee.

The Hon. A. KOUTSANTONIS: I think I just made it pretty clear.

Which, of course, is his form of spin. Item No. 2 in the 2015-16 budget is an item called 'Cost recovery for water planning and management costs'. We have seen this before. The origin was in a 2010-11 budget, that from the financial year 2011-12 the government would seek to recover water planning and management costs. From 2011-12, that amount was to be $7.5 million, from 2012-13, $15.5 million, and in 2013-14, $21.6 million. Ironically, these items were listed under the title 'Non-taxation revenue measures'.

However, the government did not pursue cost recovery at the time. Why not, one might speculate. I have had speculation put to me that DEWNR (the environment department) did not actually know how much the water planning and management costs were. One suspects, in light of the evidence that has come through, that they had not worked out a justification for it as yet. SA Water has started paying its share since 2012, which in that year was $16 million.

The 2015-16 version of the water planning and management costs made Liberal members very suspicious that these would result in cost shifting to licensees, and it was therefore the lead item in our questions before that section of estimates. I seek leave to incorporate the specific table from the budget papers, Ms Acting President.

Leave granted.

DEWNR savings measures

Budget implications ($000)

The Hon. J.M.A. LENSINK: In those budget documents, the 2015-16 target is $2.5 million, rising to $6.1 million in 2018-19, and the total amount is $20.3 million over the next four years. However, we have, through other means, found that these items are actually $3.5 million in 2015-16 and $6.8 million in 2016-17.

The member for Chaffey led the questioning in this section of estimates and specifically asked about the water planning and management partial recovery from NRM boards. He said:

Obviously the NRM will now need to find an extra $3.5 million of cost recovery through the NRM water levies for water management and planning functions. Recovering these costs will reduce the amount of funding available to NRM boards in 2015-16. The state government recognises that for NRM boards this may require prioritisation of activities in the short term.

I think he is quoting their documents here. He said:

There is an opportunity to consider the extent to which costs should be passed on to the users through increasing water levies in 2016-17, working with the NRM boards to establish a formula to fairly distribute the impact of these costs in 2015-16 and that smooth transition that all ratepayers would like as far as possible. Will the cost recovery be apportioned equally across all regions?

The minister then goes on. He did not provide a huge amount of detail, but said that he had asked the boards to provide him with advice. He said:

I have asked the NRM boards to give me advice on what the fairest way forward will be. I am still waiting on that advice from the boards.

It was confirmed that SA Water and the South-East forests would also be paying a contribution. Mr Whetstone then asked: 'Has the government calculated how many water licences are likely to be affected?' The minister then said:

Once again, you are putting the cart before the horse. I have asked for the boards to come back to me first with their advice, and before I receive that advice, I cannot think hypothetically what those outcomes might be, and I could be accused of prejudging their advice and none of us would want that.

Mr Whetstone then said:

How will this affect the NRM budgets? It is all very well to ask them to come up with their best, fairest, possible scenario, but how will it affect their budgets given that the budgets are already set through their business plans?

The minister started trying to be cute about what year he is talking about. The minister then said:

In which case I can advise that DEWNR will be picking up half of the revenue to be recovered. We have discussed this with NRM boards already and DEWNR will be utilising its own resources to cover half of the projections that the boards will need to come up with.

It is worth remembering that DEWNR has negotiated temporary relief since about 2011 against the cost-recovery target, but from 2015-16 this relief will no longer be provided. Boards will need to plan for their future cost recovery as required under the National Water Initiative—

which is the first time this policy is mentioned—

which this government and other jurisdictions have signed up to.

Not a great deal of detail from the minister through estimates. Since then, the government has clearly tried to sheet home a lot of the decision that it made to the boards. Mr Whetstone asked, 'As a landholder, as a water user, there is an increased tax?' to which the honourable minister replied:

There will be increased cost recovery, and this goes to the very heart of the National Water Initiative. Those people who receive a benefit should be paying for the government resources that are utilised in delivering that benefit. That is what cost recovery is about and that is what user-pays is about. I understand your party has signed up to those very same principles, have you not?

What we do know is that the government failed to consult with NRM boards beforehand. As the member for Chaffey pointed out, they had already set their business plans and this decision was lumped on them. To shift the blame from its own poor budgetary process, it has also, as I said, been made to sound many times like it was an NRM board decision. The government also blamed the National Water Initiative, and has consistently failed to provide details on how the quantum was arrived at.

I suspect that when the item first appeared in the budget in 2011, the government did not pursue it because it had absolutely no justification for that cost recovery. So, I turned to the good old Freedom of Information Act. In October last year I applied under FOI for:

…the dollar breakdown of the components of Water Planning and Management to DEWNR, in context to Budget Paper 5, page 39, DEWNR savings measures, 'Water planning management partial recovery from NRM boards.'

It took a while to get any response, as I think the department was scrambling around, trying to cobble things together. I received a response from the department which I think is so comically Yes Minister that it is worth reading into the record:

The dollar breakdown of the partial recovery from NRM Boards has previously been undertaken off ledger on an ad hoc basis using complex models. Unfortunately the costs are not easily identifiable from our financial systems. Information for data up until 2012-13 is only accessible from the previous Department of Water reporting system eFinancials. This reporting system has been shut down and would require a cost to reopen to search for data. This data would need to be thoroughly investigated to ascertain the availability of the information within scope of the request. This would result in many hours of searching and validating data.

To analyse prior years actuals centrally is also an impossible task as there is no one project or activity code that has accurately captured the actuals and as such, a 'breakdown' for anything pre 2014-15 would result in many hours of searching and validating data.

What that says to me is the department was really trying to scramble to avoid providing the data. Of course, I had the usual fudging from departments that we get, 'This is going to cost you too much,' and all those sorts of things. What they are really saying is that, even if they do have the information, they cannot really put it together because it is not available. It is in some old systems, they have not really been kept up to date, and it is all too hard.

This really begs the question that if the department does not keep this information and has not kept it up to date how can they justify putting this cost shift onto water levy payers? Enter, at some point in the last 12 months, the Natural Resources Committee of the parliament, which has parliamentary oversight of NRM. As part of its statutory responsibilities, this committee examines levy increase proposals when they are above CPI and is able to make recommendations to the minister.

Given the magnitude of these increases in the coming financial year and the impact on food producers, it received a lot of evidence this time. Six Liberal MPs presented to the committee on this issue (the members for Bragg, MacKillop, Chaffey, Hammond, Finniss and Stuart) as well as the boards, primary producer groups and the department.

At its conclusion, the non-government members voted against approving the proposed increases to NRM levies in 2016-17, and in that I acknowledge the Hon. John Dawkins, the member for Flinders, Peter Treloar, and the Hon. Rob Brokenshire, who voted against those proposals. The government members voted to allow them.

The government has failed to provide credible arguments to justify these costs. The department in providing evidence to that committee argues that the total cost to it for water planning and management is $43.5 million. I seek leave to have that table incorporated into Hansard.

Leave granted.

Attachment 2: DEWNR water planning and management costs—by NRM region*

* The figures presented here are intended to provide an indication of what DEWNR spends on water planning and management costs in any given year. These figures are based on 2015-16 budgets and include minor components that would not be recoverable water planning and management costs under the National Water Initiative (such as ministerial services). It should also be noted that this represents a point in time snapshot, and the costs incurred across these functions and regions, and the total cost, will vary from year to year.

** Costs that are very difficult or meaningless to breakdown to a regional level. Includes overhead costs such as finance and business services, HR services, and accommodation costs.

The Hon. J.M.A. LENSINK: This is a table that has been provided to the committee, as I understand. It includes $19.1 million of the Murray-Darling Basin Authority contribution, with the note attached to it:

Delivery of South Australia's share of water in the River Murray system across the South Australian border, operation of locks 1 to 6, the Barrages and other asset management functions undertaken by SA Water including dredging of the River Murray Mouth and acceptable river salinities. Supports Basin-wide environmental water planning, delivery and monitoring.

Note: In 15-16 the MDBA contribution of $19.1m resulted in $25.133m being returned to SA. Of this, $18.696 million is directly spent in the MDB region on infrastructure and people. A further $4.887 million is largely spent in the MDB region on infrastructure and staff. The remaining $1.55 is spent in the AMLR region on staff based in Adelaide and research and monitoring contracts.

The reason I have pointed out that particular note is that the MDBA contribution used to be funded by general revenue and appropriation. It was funded for a while from the Save the River Murray levy. In the current financial year we are in, 2015-16, it has been funded from general revenue or appropriation, and next year, in 2016-17, it will be funded entirely from NRM water levies, and yet it is a responsibility of the state as a whole.

The second matter is that the note points out that $19.1 million of South Australian funding to the MDBA results in a $25.1 million amount returned to South Australia, which is a net return to this state of $6 million. Where does that $6 million go? It is not, unfortunately, reducing the burden for South Australian food producers. In appearing before the committee the CEO of the department, Ms Sandy Pitcher, advised that the $6.8 million in water planning and management cost recovery, which is in the budget for 2016-17 is going to Treasury. So, let's be honest, this is just a tax. The Hon. John Dawkins asked:

…can you tell me whether the $6.8m raised (if the levy increases are approved) will go to DEWNR or will they go straight to Treasury?

Ms Pitcher said:

They go straight to Treasury—and I'm not trying to be tricky—in that the savings probably appear in the DEWNR part of the budget, but it's a direct budget return. So, to Treasury effectively—we won't see it.

That is from 27 April 2016. The government-controlled Natural Resources Committee sent, what I think we could describe in Sir Humphrey's language as a brave letter to minister Hunter to outline their concerns, and they clearly had concerns about the lack of credible detail. Their letter is dated 9 May 2016 and it says:

After extensive deliberation, the committee remains concerned with the general lack of detail regarding several matters, especially given the short time frame for consideration by the committee. Although the committee began reviewing the draft levy proposals early in the year and has received some clarifications, information about a number of matters remains outstanding, notably:

The method of distributing water planning and management costs across all the regions

The extent to which WPM costs are recoverable

Which WPM costs are attributable to which impactors

The removal of the Save the River Murray Levy from the DEWNR budget and how the subsequent appropriation from Treasury to replace it is to be used towards WPM costs

The marked inequality in available NRM funding across the regions

The inclusion of corporate services fees as a sharp increase in proposed expenditure of all boards, most notably the smaller boards.

Further:

The expenses imposed on the boards this year are a heavy burden and might have compromised the ability of the boards to carry out their works effectively as well as caused possible damage to their relationships with their communities. This also has the negative effect of discouraging the next generation of board members.

We certainly know that to be true.

As I understand it, the committee is yet to hear back from minister Hunter regarding his response to that. We also know that Primary Producers SA, Livestock SA, DairySA and the various horticultural groups have been actively engaged in this issue. They and some of their members have raised concerns in the media, they have given evidence to the Natural Resources Committee, and they have been trying to extract details from the government about the WPM costs. I understand they have provided spreadsheets to the Natural Resources Committee, and I seek leave to incorporate one of those in my contribution.

Leave granted.

# The figures presented here are intended to provide an indication of what DEWNR spends on water planning and management costs in any given year. These figures are based on 2015-16 budgets and include minor components that would not be recoverable water planning and management costs under the National Water Initiative (such as ministerial services). It should also be noted that this represents a point in time snapshot, and the costs incurred across these functions, and the total cost, will vary from year to year.

## Costs that were not itemised in the 'What does DEWNR spend on Water Planning and Management?' factsheet.

The Hon. J.M.A. LENSINK: Once again we can see the item $19.1 million for the Murray-Darling Basin Authority contribution. There is an item of $200,000 for Lower Murray levy banks, $540,000 for River Murray waste disposal stations, $300,000 for salt interception schemes, $115,000 for River Murray operations, and $79,000 for drainage disposal basins. Those items used to be paid for from general revenue. Certainly some of those items have been EPA and some of them have been DEWNR, and I think it is quite astounding that these items are now being used as an excuse for this government to push these costs onto water levy payers.

I would also like to draw members' attention to the last Save the River Murray Fund annual report, which was for 2013-14 and which was tabled on 5 May 2015 (we are yet to see the last one, for 2014-15). Those items I have just listed are absolutely identical to the Save the River Murray Fund, so it looks like DEWNR has gone through and, in a fairly shabby way, just pulled out certain items and shifted those straight across onto its WPM costs.

The minister has regularly used the National Water Initiative as a justification for the increase in the levy; however, I would like to refer to the Hon. Rob Kerin's evidence to the Natural Resources Committee where he pointed out water planning and management costs, which are an item in the National Water Initiative, a 2004 agreement between states, territories and the commonwealth. He quotes from that document, one of the appendices or annexures. It says:

It is important to note that the costs of all activities listed in the water planning and management activities…will not be fully recovered from water users. Charges for activities undertaken for the government (such as policy development and ministerial or parliamentary services) are excluded.

I note that in the table I have just referred to there is an item of water policy and strategy of $4.7 million, so that is actually excluded from the NWI. And I continue:

Costs of the remaining activities will be apportioned between water users and governments in accordance with Principle 4. Where costs are recoverable from water users, they will be tested for cost-effectiveness by an independent party in accordance with Principle 3.

Rob Kerin then said to the committee: 'We are actually calling for an independent review; it is clear under the NWI.' I endorse his call for an independent review. The NWI is being used as an excuse, and the flaw in the government's argument is this: that it should be, first of all, partial recovery; there should be transparency, which clearly there is not; and there also should be cost efficiency tests, so that DEWNR can demonstrate that the WPM is being provided efficiently.

We know already that, with DEWNR's corporate cost recovery that it is shifting to NRM boards, it is anything but efficient. Clearly, this is all just an exercise in trying to shift costs in a very underhand way. Unfortunately, we have asked questions of the minister in this place, quite specifically about a number of matters that I have raised, but clearly the minister holds those communities in contempt with the answers that he has provided.

In summary, this decision is unfair to NRM boards, who were not consulted before the decision and are now expected to collect additional levies which were not in their business plans. This certainly does not assist their relationship with their stakeholders. In many ways, I think this decision—I have said this publicly before—is the final straw in any confidence that people might have had in NRM. NRM certainly has had its detractors since its inception; many of those are Liberal members. There are others who have tried to give it the benefit of the doubt; there are others who see benefit in a lot of the programs—and it has run a number of useful programs over the years—but these WPM costs, and also the corporate costs, really are bogus, and are being used, effectively, to fund the department.

Clearly, the Save the River Murray Levy, which was so-called 'abolished' in the 2015-16 budget, has been cost-shifted across from all SA Water users to water licensees. There needs to be an audit or an independent review of costs, as required under the NWI. NRM is clearly now just a taxation system aimed at raising more revenue from South Australian food producers, which puts them at a disadvantage compared to competitors and is potentially costing jobs in our most successful sector, primary industries.

The reduction in programs leads to those paying levies asking where and how the money is spent. There is a complete lack of transparency, and I believe levy payers have been patient enough. The lack of transparency by the minister and his department in providing a breakdown of the WPM costs just shows further ineptitude on his part. If DEWNR cannot justify a breakdown of these costs, then how can they justify this latest cash grab? The minister has stated publicly that he is happy to open up financial records to any interested party, yet his own department cannot even provide those details, as demonstrated through their FOI.

This bill is one effort to improve transparency in NRM cost recovery, and I endorse the bill to the house.

Debate adjourned on motion of Hon. G.A. Kandelaars.