Hunter Water Board (Corporatisation) Bill



About this Item
SpeakersMerton Mr Wayne; Face Mr Jack; Blackmore Mr Peter; Martin Mr Robert; McManus Mr Ian; Gaudry Mr Bryce; Mills Mr John; Neilly Mr Stanley; Bowman Mr Donald; Hunter Mr Jeff; Macdonald Dr Peter
BusinessBill, Second Reading

HUNTER WATER BOARD (CORPORATISATION) BILL
Second Reading

Debate resumed from an earlier hour.

Mr MERTON (Baulkham Hills) [7.30]: Mr Speaker -

[Quorum formed.]

My colleagues the Minister for Housing and the honourable member for Pittwater have outlined the economic and financial benefits of the corporatisation of the Hunter Water Board. I should like to address two aspects: the innovative legal framework which this bill provides; and the robust and comprehensive regulatory and consumer protection components of the legislation. My strong view is that the strength of these arrangements renders redundant any need for additional research or public inquiry prior to the passage of the legislation. This is all the more so given that the bill provides for a review of the new arrangements 18 months after corporatisation. In practice, any improvements to these arrangements would be identified only as a result of practical experience obtained by running the corporation in the form provided in the bill. Further delay at this stage would result in very limited insight and unduly hold back the benefits that will otherwise result from corporatisation. Clearly this legislation should be passed as soon as possible. If at the end of 18 months certain changes need to be made, the Government will implement them. However, the legislation should not be delayed for the sake of petty nitpicking that will do nothing to further the interests of the people of the Hunter district.

I turn to the legal framework of the legislation. This bill does not provide merely for the Hunter Water Board to have a name change or to be turned loose on consumers in the Hunter region. On the contrary, much effort has been expended in constraining the monopoly of the Hunter Water Corporation to ensure that consumers and
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the community will benefit from the process. That is what the legislation is about. Consumers and the community will benefit from the process of corporatisation. Regardless of whether ownership of natural monopolies such as the water industry are in public or in private hands, it is fundamental that an effective but not too cumbersome regulatory regime be in place. Throughout the world different instruments are used to regulate natural monopolies. The most important aspect of this corporatisation is the method provided to regulate the power of its monopoly and the associated legal rights to be established for consumers.

The bill provides for an operating licence to be created for three and a half years, to give Hunter Water Corporation the capacity to use assets under its control to provide water and sewerage services. The bill requires the licensee, that is the Hunter Water Corporation, to adhere to environmental standards as set by the State Pollution Control Commission, to maintain price restrictions designed generally to constrain charges to the level of the consumer price index, and to provide quality of service. The Hunter Water Corporation will have a fundamental charter to comply with those matters. The quality of service will be audited. For the first time a legal entitlement will be created to ensure that consumers receive services of a defined quality. Indeed, clauses 17 and 18 of the bill provide penalties of up to $150, and the ultimate penalty of revocation of the licence, for breaches of the standards. For the first time in New South Wales certain pecuniary liabilities and the ultimate penalty of revocation of licence will be imposed upon an authority that provides water and sewerage services to the community. Water quality standards will be based on National Health and Medical Research Council and Australian Water Resource Council guidelines. They will relate to microbiological quality; physical quality, that is, colour, pH content, and so on; organic and inorganic chemical control; and pesticide and other chemical residual limits. Sewerage surcharges, discontinuity of water supply, and loss of water pressure will be subject to standards. One realises that this legislation provides a fundamental commitment to consumers in the Hunter district.

Mr Martin: Do you know where it is?

Mr MERTON: You could not find your way home if you lived there. The sampling regime for water control will be consistent with the National Health and Medical Research Council and the Australian Water Resource Council guidelines as defined in sampling procedures now used by the Hunter Water Board. The National Health and Medical Research Council and the Australian Water Resource Council guidelines will be the operating criteria that now apply generally to the water resource industry in Australia. I am confident that the proposed Hunter Water Corporation will arrange its affairs so that fines will not be imposed. However, consumers can be assured that the corporation will have a direct incentive to maintain standards. Also for the first time, the bill provides for the creation of a formal contract between the corporation and its customers. This will be unique. The consumers, the subscribers, the clients, will enter into a formal contract with the supplier. To my knowledge, at present that applies nowhere in New South Wales. The contract will set out the rights and obligations of both parties; it will be a contractual document that clearly will define the rights of the supplier and the consumers. The bill requires that the form of contract be published prior to corporatisation.

Under common law a remedy would be available to persons suffering physical damage caused by the corporation, or damages arising from failure to fulfil a contract. The contract provided for in this bill will be the same as that for any contract for the supply of goods and services. If there is a breach, consumers will have the right to seek
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damages. Under a proper legal structure, consumers who believe that an adequate supply has not been provided, or that the water provided is of low standard or quality, will have a specific action by contract to sue the corporation. This provision is a responsible way of protecting the interests of the corporation, as the seller of the product, and also the interests of those who are the recipients of the service. The legislation is reasonably balanced so that the rights of both the consumer and the supplier are met. In addition, because of the imperatives of operating a service, where, for example, sewer pipes run under properties, the contract provision in the bill will empower employees of the Hunter Water Corporation to enter properties to carry out emergency maintenance. Though this may seem basic, the reality is that under existing legislation no person has the right to enter another's property. The bill provides specific rights for employees of the corporation to enter upon private land to carry out emergency maintenance on water or sewerage pipes.

Mr Schipp: That is a transference of existing rights available to employees of the Hunter Water Board.

Mr MERTON: Similar provisions apply to employees of the Hunter Water Board. The new vehicle, the corporation, which will be responsible for the supply of services, must enjoy the same rights. Similar provisions apply also with regard to the removal of trees that are interfering with assets of the corporation. I am sure that the corporation will act responsibly so far as the removal of trees is concerned and that it will bear in mind the environment; nevertheless, as basic as it might seem, specific powers must be provided for by legislation. If the corporation is not provided with that power, the supply of services will be adversely affected and the cost of service delivery, which is borne by the community, will increase. This proposal will be a joint venture between consumers and the Hunter Water Corporation to provide services at the lowest possible cost and as efficiently as possible. A contract created between the Government and the Hunter Water Corporation, which is pursuant to the licence agreement, cannot be varied without prior approval of the Governor. For the first time a formal definition of the rights and obligations of both parties is provided. This formal definition of rights is one of the key objectives of corporatisation.

Under the provisions of the State Owned Corporations Act the directors of the Hunter Water Corporation will be subject to the full force of the Corporations Law, which, among other things, requires directors to husband the company. Substantial penalties are applicable directly to directors and senior management in the event of any breach of their legal obligations. Federal income tax provisions also provide a rigorous framework to determine payments to be made by the corporation to the State as a tax collector and the owner of the corporation. The directors of the Hunter Water Corporation clearly will have a liability to ensure that the organisation operates efficiently, that the law is complied with, and that the corporation fulfils its obligation to provide services to the people of the Hunter region. The final legal component of the framework is the removal of the Crown privilege of the corporation. Under the new arrangements the corporation will be required to operate in the same way as other companies operate; for example, with regard to the payment of taxes and the removal of preferred powers that would otherwise allow it to directly control land use in catchments. Instead of the corporation exercising direct control over catchments, the control will rest with the Department of Water Resources, which is the appropriate instrument of the Crown to perform such a function.

Mr Schipp: As is the case with most other streams and rivers in New South Wales.

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Mr MERTON: Indeed. That the Hunter Water Board is to be corporatised will not affect existing arrangements so far as streams are concerned; they will remain under the control of the Department of Water Resources. This framework has provided a defined and public division of the powers of the corporation and the State as the regulator and owner of the corporation. Consumers are protected directly by the operating licence and the customer contract, whereas the community at large is protected by the provisions of the Corporations Law, and the taxation and environmental regulation laws, which will apply in full force to the new corporation. The honourable member for Blacktown expressed concern about the rights of the staff of the board so far as superannuation, long service leave and other conditions of employment are concerned. It is my understanding that the employees have been given written guarantees that their superannuation entitlements and employment conditions will not alter. Those who have been employed by the board for many years will retain the same rights and privileges they have enjoyed for the past many years. New employees will have the right to choose whether to pay into the State superannuation fund or another fund. That is freedom of choice.


The public document, the licence agreement that will be entered into between the corporation and the Government, will be put on display. It will spell out from the beginning conditions relating to the supply of services to the Hunter region. For the first time the full detail of the operations and supply of services will be displayed publicly as part of the agreement between the Government and the Hunter Water Corporation. The honourable member for Waratah referred to the involvement of another ministerial corporation. Put simply, the ministerial corporation will assume ownership of the assets on the transfer from the Hunter Water Board to the Hunter Water Corporation. It will be the vehicle to effect the takeover to permit the transfer of assets from the Hunter Water Board to the Hunter Water Corporation. This legislation has been introduced by the Government to give a better deal to the people of the Hunter region. It is consistent with the commitment of the Government to provide efficient services and microeconomic reform for the people of New South Wales. I support the bill.


Mr FACE (Charlestown) [8.45]: The proposed cost reduction in the corporatisation of the Hunter Water Board will, inevitably, produce problems for the consumers. For 10 years I worked in the industry as a plumbing contractor. Indeed, I still hold a licence for that purpose. I concede that during that time the board was in need of some refinement. Though the original legislation did not provide for the absorption of the Plumbing Licensing Board by the Building Services Corporation, the corporation should not have the right to inspect licensed works of the Hunter Water Board or any other water board. Recently I discussed this matter with the Director of the Building Services Corporation, Kevin Jubelin. In no way do I cast aspersions on his performance - he is a fine officer doing a marvellous job - but I doubt that his heart is in the proposal to replace the inspectorial staff of the Hunter Water Board.

The Minister seems to have a closed mind on this matter. It is short-term expediency at the cost of health. Mark my words, in the fullness of time this cost reduction will hurt the consumer because of downgrading in standards of water plumbing and drainage inspectorial staff. The abolition or reduction in number of plumbing inspectors continues to be of concern. Those in charge of the Water Board continually say it is a beat-up by the unions but I know most of those Water Board inspectors. If it had not been for a quirk of fate I could have been one of those facing redundancy. In the past it was true that if one were a Water Board inspector one was right for life. Some inspectors who are my age, in their late 40s, are now facing redundancy. Those officers are being made redundant for the expediency of the general provisions of this
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legislation. The Minister can shake his head, but for two to three years I have pursued this matter because the Government believes that a few officers of the Building Services Corporation can do the job that 30 to 35 inspectors now do.

I served my apprenticeship in the industry with one of the best companies and there was not one facet of my trade that I did not learn properly. I have never lost contact and still hold a contractor's licence, even though I have not practised for 20 or more years. Despite the competence of those people holding gold licences, it is like putting Dracula in charge of the blood bank to allow these people to police their own standards - in other words having self-regulation. It just will not work. Kevin Jubelin was the original chairman of the Plumbing Licensing Board - legislation that I had a lot to do with. I presided over it on behalf of the then Deputy Premier and Minister for Public Works, Jack Ferguson. This legislation was innovative, with myriad councils and organisations throughout the State controlling licences. Former Premiers Askin and Lewis, with the late Wally James and Bob Puffet, after five to six years of considering bits and pieces of provisions could not arrive at sensible legislation. Finally the Plumbing Licensing Board was established by Labor. It set standards and responsibly regularised the industry. The mavericks were gradually hunted out of the industry.

This industry now has the highest standards in the world - I defy anyone to say to the contrary - and now we are about to pull them down. Licensed plumbers, master plumbers and other categories of plumbers will not inspect from the meter and the shaft where the sewer comes in and preside over their own regulation. The high standards will not be maintained and that is why I say Kevin Jubelin's heart is not in it. During the early years of the legislation he travelled to many European countries, some behind the then Iron Curtain, and discovered that in those countries where builders and plumbers are not licensed, the health standards were appalling. Because of low pressures sewer water was seeping back into water mains, and disease was rife. This was particularly evident in Britain because of its damp conditions. The Hunter Water Board once again will be the guinea pig.

Mr Schipp: Rubbish!

Mr FACE: It is not rubbish, Minister. The Minister for Housing could write on a bus ticket all he knows about this subject. I have lost my respect for him. He should keep his mouth shut because this is one subject I know and the Minister knows nothing.

Mr Schipp: The honourable member is rambling. He has been on this for about three years.

Mr FACE: I have been on about it for three years and I cannot get it through to anyone because on this matter the Minister is an absolute dunderhead. He has a closed mind and will go down in history as the Minister who pulled apart the good licensing system in this country. The Minister should go back to what he does best - schoolteaching or working on the land. The Minister does not know what he is doing with this legislation. He is tinkering with something he knows nothing about. How will the board, as the responsible authority, ensure that diseases such as hepatitis and gastroenteritis will be monitored in the future? The Minister does not have an answer to that. This is a public health issue. The Hunter District Water Board Employees Association has evidence to support that statement, but the Minister and his officers do not want to listen. Once again it is a case of kick the unions because they do not know what they are talking about. As an industry over the years the Hunter District Water
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Board Employees Association has been responsible regardless of its membership. The plumbers' union is the only union which is not a member and the interlocking working agreements have always been excellent. The Minister does not want to listen to the assertion that diseases will occur. The board's water supply system has been protected by inspectorial staff with cross connections and unauthorised connections. Over the years this has been a major problem. With corporatisation the board's policy on maintenance to existing copper services ceases. This was raised by the honourable member for Waratah. The Minister may shake his head but he does not have a legal interpretation of it.

Mr Schipp: The honourable member for Charlestown is not correct.

Mr FACE: I beg to be corrected but at this stage the Minister is unable to explain. Will the copper services remain the board's responsibility? If so, the Minister should explain how that is provided for, or he should amend the bill, because as I understand it this legislation has a legal problem. Owners will be faced with accepting a water supply system from the main to the meter which has not been inspected by the board but certified only by the licensed contractor. Also, will the service currently provided by the board for renewing tap washers for public and domestic consumers cease on corporatisation? This matter still has not been addressed. Some say it is a waste of money to have officers doing that work. On the one hand we are told it will save water and on the other hand we are told that this work will not be carried out. If the work is to be done it should be spelt out in the legislation. I ask also whether the board will take over the kilometres of sewer and water mains each year laid by private contractors. These systems are inspected by the Hunter District Water Board employees. Will the normal householder not have his drainage system inspected? Is it the intention that the Hunter Water Board will maintain this same system for those particular mains? At present the Hunter Water Board supplies water and sewerage facilities to the Hunter region. With deregulation of the plumbing industry what will happen with inspectors not situated in district offices, who at present provide an important service to many consumers?

[Extension of time agreed to.]

At present plumbing inspectors give real service in providing residents with vital information on what they should and should not be doing. Will the authority have responsibility for declaring what constitutes a prohibited discharge? Who will determine whether an installation is illegal? In recent years one of the biggest problems faced by the board has been intrusion of rainwater into its mains. Inspectorial staff detect illegal rainwater entry by smoke testing, overtesting and the like. In one suburb in the Charlestown electorate the proportion of illegal entries is more than 50 per cent. For many years water has been surcharging in what is known as Glenrock lagoon. The board, under successive presidents, persistently indicated I was overreacting. The board has now realised that surcharging mains and manholes are a direct result of rainwater entry - as I have been saying to the board for 19 years. The board has a real problem. The Minister should be aware that illegal entries of waste rainwater into the board's mains will continue unchecked if inspectorial staff are disbanded. If nothing is done to check the problem, mains receiving rainwater that should not be in the sewers may have to be amplified and duplicated.

Another problem faced for many years by residents in the Newcastle area has been dezincification of poor quality brass water supply fittings. How will the board solve that problem if inspectorial staff are reduced as proposed? Dezincification has been a
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problem for some years in the Newcastle area. In fact, contractors from as close as Gosford have come into the area and used fittings that will not stand the test of time in the Hunter board area due to the quality of the water supply. Over a period of time the Broadmeadow High School, where I was educated, has experienced serious problems. Many wild and wonderful reasons were postulated for children at that school falling sick until the board discovered that a particular type of fitting became affected by and leached into the water supply, especially during weekends when water lay stagnant in the pipes. At one stage so many children fell sick that the school had to be closed down. That water problem is not peculiar to Broadmeadow High School. The board took a long time to accept that the problem was caused by substandard pipe fittings.

In the early 1960s an extensive inquiry found that water that had lain stagnant in pipes over a weekend in the newly constructed Marcus Clarke building at the bottom of the West End had been used with a new post-mix syrup in a Coca-Cola machine and nearly killed two women. The syrup mixed with water that had been contaminated by dezincification of the pipe fittings was probably one of the most volatile possible. The women were so violently ill that they brought up their entire stomach contents and in that way survived. The Hunter Water Board, however, did not accept almost until the early 1980s that dezincification was a problem in the Hunter area. Dezincification will continue unabated if not checked by inspectorial staff. It is proposed that five Building Services Corporation inspectors will take over that inspectorial role. That proposal will not work. Though the Building Services Corporation has become a much more responsible organisation under Kevin Jubelin, it does not have the particular inspectorial expertise required to combat dezincification.

I have heard it said that the Sydney Water Board may have experienced problems in maintaining standards and that its inspectors could have been better supervised, but the Hunter Water Board has never had those problems. Disbanding the inspectorial staff of the Sydney Water Board, the old Metropolitan Water Sewerage and Drainage Board, is not the answer. Over the years those inspectors have helped to avert many public health problems. Not one Water Board inspector - most of whom I know, and I served an apprenticeship with some of them - made any complaint to me about the likelihood of losing their jobs, though that possibility must be on their minds. The major thrust of their statements to me has been about public concern about standards and requirements. Water and sewerage do not come within my shadow portfolio but I am deeply concerned that untested drains permit sewage to percolate into Lake Macquarie, that surface water is allowed to enter drains, and that inspectors may not continue to conduct smoke and other vital tests. I ask the Minister and his officers to take that on board and conduct an overall analysis, not an inquiry, of the worth of the inspectorial staff before disbanding them, as proposed in the bill. As the Minister said, I have an obsession, but it is a real and good obsession.

Mr BLACKMORE (Maitland) [8.5]: A good deal has already been said of the benefits of reform of the public sector and corporatisation to the national and State economies. Though these matters are of great importance, I would like to focus my remarks on the impact of this step to the people of the Hunter, because at the close of the day these are the people who will judge the success or failure of these initiatives, and these are the people who basic utilities such as the Hunter Water Corporation must serve. The Hunter Water Board has operated in the region for just on 100 years. Over that time it has played a leading role in the development of the infrastructure critical to economic development and protection of community health. It has positioned itself now in such a way that it is financially strong to cope with the demands of asset replacement which are looming for a city with a long history like Newcastle. These demands are made all the
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more relevant by the impact of the tragic earthquake of 1989 with its detrimental effects on the underground infrastructure, particularly in the inner Newcastle area. While the human side of such a disaster was tragic enough, the effect on basic infrastructure is only now being fully assessed. The board has spent an additional $1 million each year since the earthquake to fix the water and sewer breaks that have occurred as a direct result of the quake, and it expects these results to continue.

In recent years the board has invested extensively in environmental protection measures such as secondary treatment and ocean outfalls, which have avoided the undesirable environmental impacts that are all too apparent in the Sydney area. Similarly, it has engaged in an extensive program of water filtration so that water quality is not the problem in that region that it is in Australia's largest cities. Perhaps most importantly, the board's introduction of an efficient system of charging for water consumption has made it possible to delay indefinitely the proposed construction of Tillegra Dam in my electorate. I know from representations by constituents the importance of avoiding the construction of this dam, not only to the finances of the board but also the environmental amenities of the district. As a result of the postponement of the substantial investment in the new dam and the accompanying infrastructure to transport larger volumes of water, every family in Newcastle has saved an estimated $100 a year in water bills for the past 10 years. The Hunter Water Board is in a good position to capitalise on the greater autonomy that will be provided by corporatisation, which will achieve further savings for the local community.

The decision to corporatise the Hunter Water Board and place responsibility for its operations in local hands is a reflection of the Government's confidence in the board and its management and will be warmly welcomed in the region as a sign that Macquarie Street is willing to give the people of the Hunter the autonomy they have earned. In addition to providing that autonomy, the Government is undertaking to allow for higher levels of community service payments. For example, an additional $2.8 million will be provided on an ongoing basis to fund pensioner concessions in the Hunter, while other community service payments will be funded directly by the State rather than by other consumers in the Hunter. A further example of this concept is the Hunter sewerage project, which was conceived by the Labor Party. To its credit this Government has not only carried on the project but extended it to include secondary treatment at Boulder Bay, upgrading of existing plants on the western side of Lake Macquarie and extending the Belmont outfall as well as other projects. All of these improvements will ensure that the Hunter's waste water treatment systems meet the highest environmental standards. This project will be the single biggest contribution the State Government has made to the operations of the Hunter Water Board over the past 100 years. This year $18 million will be paid by the Government and matched by the board to the benefit of consumers and the environment.

Total payments under the Hunter sewerage project eventually will reach $310 million from the Government and the board, in today's dollar values, and the arrangement reached will not be undermined by corporatisation. As honourable members will be aware, people of the Hunter region are justifiably concerned to ensure that they are not disadvantaged by initiatives of this type. It is true that the proposed legislation provides for tax equivalents to be paid by the Hunter Water Board. However, those equivalents generally will be offset by payment of community service obligations. In addition, provision for tax payments and the payment for dividends will be subject to the tax law and the Companies Code respectively. A rational framework has been created to discipline the process by which returns accrue to the Government from the operations of the board. The board of the corporation will make annual recommendations on
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dividends, based on trading performance. Crude cash raids of the type that have arisen periodically throughout Australia's history when governments have been subjected to economic pressure will not be possible. This more rational framework for determining community service payments, dividends and taxes offers the people of the Hunter greater protection than otherwise would have been the case. In addition the hardship fund, which provides relief for those unable to pay their bills, will be maintained by the Hunter Water Corporation. More fundamentally for consumers in the Hunter region, the provisions of the operating licence and the customer contract will give direct protection to ensure that prices do not increase above the rate of the consumer price index and that quality of service will be maintained.

I should emphasise two other dimensions of this initiative. At present the Hunter Water Board employs more than 1,000 people and therefore directly impacts on the lives of more than 1,000 families in the region. It is one of the Hunter's major employers, and it is satisfying to note that under this arrangement the working conditions, including workers' compensation, superannuation and long service leave entitlements, will be preserved. In addition, greater scope will exist for the work force to benefit from more flexible rewards and sanctions, so long as efficient performance can be established and maintained. An example of these benefits lies in the substantial scope that exists for the Hunter Water Corporation to expand its levels of activities beyond its traditional service provision. The corporation will inherit a skilled work force whose ideas and proved products will be increasingly in demand throughout the water industry and elsewhere. Through its marketing arm, Hunter Watertech, the board has rapidly expanded its external sales in the open market. The greater flexibility and freedom allowed by corporatisation will enable markets to be pursued in level playing field conditions and will provide the opportunity for expansion of the Hunter Water Corporation to enable it to add substantially to the employment base of the region.

Corporatisation is not about becoming smaller and cutting costs. Cutting costs in traditional areas of service provision will be of benefit to the people of the Hunter, but equally expanding markets in areas such as computer-based telemetry, water treatment, and pump maintenance offer the scope for an expanded corporation to add to employment opportunities in the area. The Wran Labor Government commenced the process of commercialisation of the Hunter Water Board with its introduction of user-pays pricing. This coalition Government has undertaken additional steps in this process, and the time is now right to offer the Hunter community the benefit of the next step, that is, the autonomy of corporatisation. I should mention some of the concerns expressed by Opposition members. The honourable member for Waratah spoke of corporatisation moving to the next step of privatisation. In his second reading speech the Minister said that corporatisation was not intended to be a precursor to privatisation. Privatisation is not on the agenda for the Hunter Water Board.

When the fringe area sewerage scheme was introduced by the Wran Government I remember well, as will the honourable member for Port Stephens, the hideous situation whereby the Government made one-third of the cost payable by local government. When the Greiner Government came to office in 1988 it removed that anomaly. Local government should not have been burdened with the responsibility of meeting one-third of that cost. Members opposite should recall what happened when they brought in consultants. They have spoken about consultation, but should remember when Dr Paterson came to town. There was all the consultation in the world, but they wanted to throw him out. One man incurred the wrath of the people of Newcastle. The former Labor Government moved him on in a hurry. Consultation procedures in regard to this matter go back as far as 15th October, 1990, to a report in the staff bulletin under the
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heading "Hunter Water Board to be considered for corporatisation". On 11th December, 1990, there was a report on consultation with the unions; on 8th February this year a letter went to the Hunter Water Board Employee's Association; and on 25th March there was a report in the staff bulletin clarifying corporatisation issues. All staff were addressed on 25th September and up until 15th November ongoing consultation with the unions was still occurring.


Earlier this evening the honourable member for Blacktown said that there has been little consultation with the unions, yet the only concern that has been mentioned tonight is that of the salaried officers. The risk of losing inspectorial staff has nothing whatever to do with corporatisation. That can happen with or without corporatisation. The Hunter Water Board can do that with or without the bill. That statement and the discussion that took place earlier have nothing whatever to do with this bill proceeding through the House. The Hunter Water Board should not be the regulator of the plumbing industry. That should be taken into account. The board has consistently reviewed this process to see where it can perform its duties better. Honourable members have run riot in this Chamber this evening trying to put fear into everyone. The honourable member for Charlestown said that the board would replace tap washers. It has never been a policy that the board will replace tap washers. However, in certain cases it has done so for pensioners and will continue to do so. Just because there is a change in the structure of the administration does not mean that community service and the board's duty to less fortunate people will cease.


Mr McManus: Yes it does. What about the Tillegra Dam?


Mr BLACKMORE: Mr Speaker, you must think I am a ventriloquist. I am standing here and I have a dummy 15 feet away.

[Interruption]

Mr SPEAKER: Order! I call the honourable member for Bulli to order.


Mr BLACKMORE: The Opposition is filibustering, trying to stretch out the debate so that it can put fear into the people of the Hunter. It will not work, because the people of the Hunter will accept corporatisation and are prepared to move with change.


Mr MARTIN (Port Stephens) [8.20]: In my contribution to the debate tonight I shall raise questions of the Minister for Housing, and they will be extensive because I am sure the people of the Hunter do not become too excited about the structure of governmental bodies. They are concerned about the end cost to themselves of the water, the sewerage and the drainage provided by this monopoly. It is important that this model of corporatisation is addressed properly so that the people can feel confident. Over the past decade there have been many upheavals in the Hunter. The people underwent massive change when they went over to a user-pays system and the cost of water rose extensively. There was a lot of waste. Much less water is being used today, but the amount charged has increased. Concern is felt in the community that the Hunter Water Board corporatisation should not cost an excessive amount. I intend to pose many questions to the Minister for Housing so that whatever happens with this legislation people of the Hunter can be assured that honourable members with Hunter electorates have raised those very issues to get the guarantees that their interests will be safeguarded and that they will get the best deal possible out of the Hunter Water Board.


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I commend the Hunter Water Board for its liaison with honourable members with Hunter electorates to keep them informed of developments. From the chairman to the managing director, staff have all been most helpful to members of Parliament and have kept them well informed. But we are concerned about the framework, this model of corporatisation. In the past few years corporatisation has gone through this Parliament, but it has related to three major groups, the State Bank, GIO Australia and Graincorp, all of which are destined for sale. It is difficult for members of Parliament to look at another monopoly that is providing a service to the community and hope that it is not destined for the public arena. Honourable members must be sure that this model is not the same as the previous model because it does not have the same sale consideration. The honourable member for Waratah mentioned mains. In New South Wales there are three standards for the area between the mains and the entry to the property, or the meter. I call on the Minister to address this issue seriously so that there is uniformity and the people of the Hunter do not feel disadvantaged but feel that the way they are being treated is equal to or better than the rest of the State. In some areas of the State the consumer's responsibility starts at the meter or the front alignment of the property. Decisions were made in 1959 and 1965 or 1966 in the Hunter district to change from galvanised pipes to zinc pipes and for the board to take responsibility. That has not been clearly defined but it should be so that an organisation that does not have the ministerial control it had before and is clear where it stands.


I call on the Minister in his reply to give me answers on those issues. If the Minister does not do so, there may be lengthy debate at a later date. Not so long ago I noticed that the assets of the Hunter Water Board were valued at about one-third of their value today. The Minister may wish to explain that also in his reply because it is causing concern to the Opposition, which has genuine accountants as against the failed Harvard people on the treasury benches who tend to be creative accountants and run this State into great debt. The Government does not have a good financial record. The Opposition would like to know about the valuation of the assets. My electorate takes in an area from Bulahdelah Bridge to the Hunter River, into Mayfield and up the Williams River. I represent all those growth areas in the Port Stephens shire and part of the Newcastle city area. The Hunter Water Board does not cover Great Lakes. Water and sewerage have not been extended to the Tomaree Peninsula. Sewerage services have not been provided to the Tilligerry Peninsula, Karuah, East Seaham, Fern Bay and Medowie. Medowie is one of the more spread out areas where I am told it is uneconomical to provide sewerage. It has been promised for the past 20 years for Fern Bay. Fern Bay was dropped from the Hunter fringe area sewerage scheme. I am taking a bit of licence here because Fern Bay is in the electorate of Newcastle as of the last redistribution, but it used to be in the Port Stephens electorate and I can relate well to the problems of the people of Fern Bay.


The Minister must be able in this model to indicate to the corporation what should and should not be done. If the Government says that it cannot be done because it is uneconomical yet the people are copping more and more cost increases, it is a questionable model. A mechanism must be available to resolve how to give those areas sewerage services. The honourable member for Maitland mentioned sewage outfalls and Boulder Bay. I remember the terrible fights the Opposition had in this Parliament to force the former Minister to go from a primary to a secondary treatment plant at Boulder Bay. That fight never should have happened. A large proportion of my electorate is expecting tertiary treatment and is very dirty on ocean outfalls. I have to work with that and to do the most responsible thing I can. But if the Government decides that it does not want to pollute the oceans and that the Tilligerry plant - which has not yet been built - is not up to standard and it starts to put sewage and effluent into Tilligerry Creek,
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there must be a mechanism for the Minister to say, "This is not good enough. It has to be done, and done properly".


I have seen what Ministers do. I was a public servant for 22 years. Ministers say, "Find the money yourself". But under this corporation developers will come back to Treasury and say, "We want the money". The Government will say, "There is no money", and the people will suffer. It is the wheel turning. The model and the mechanism must be there for the Minister to address that very issue. I say that also of inferior systems. People who are associated with the Minister are famous for development. Developers put in el cheapo sewerage systems, using plastic pipes. The pipes break down on a Saturday and then do not work for a couple of days. Those sorts of things happen in Medowie. A problem like that occurred in Pioneer Ridge estate. A mechanism is needed that the corporation does not use a substandard system. It is very easy in a privatised system to use the cheapest way out. Standards must not be compromised.


Mr Schipp: What is local government doing all this time?


Mr MARTIN: In the past local government in Port Stephens has been made up of developers. They are the Minister's mates and they have been a disgrace. Fortunately they were cleaned out last September. Let us hope that they do not rear their heads again because they put up with substandard developments. That cannot be allowed. I ask the Minister to put in a mechanism to maintain standards. Consider drainage, for instance. In the southern part of my electorate is Mayfield, an old, very flat area with a large stormwater drain. During the wet years, because of that stormwater drain, people had sewage overflows and stormwater going into their houses. About 20 houses were affected. I know that the Hunter District Water Board is not in a financial position to address that issue. All sorts of problems are causing the flooding and it will happen again in times of torrential rain. It is necessary to provide a mechanism to correct such problems. That is what I am calling on the Government to do in this model of corporatisation.


Consider water board offices. Right now there are moves afoot by the district water board to close the Raymond Terrace office. The present management of the Hunter District Water Board may change and a smartie may take over, as was the case decades ago. If somebody like that said, "I am going to close all those offices. We cannot afford to keep those open", what will the Minister or his successor do? The Minister's party will not be in power long; the Labor Party will have to put up with the legislation when it comes over to that side of the House. A mechanism for ensuring that those offices can be kept open is needed. I understand that arrangements with local government may be involved, but that service must be there for the people. The message must be sent to the management of the local district water board or corporation through that model. I ask the Minister for a very clear answer on customer appeal mechanisms. This matter needs to be clarified for the public record. I understand from the legislation that the appeal mechanism is only the courts; people cannot use the political process. Whether that is correct needs to be clearly spelled out in the Minister's reply. Do people have access to the Ombudsman?


Mr Schipp: They do.


Mr MARTIN: I ask the Minister to explain that clearly in his reply. The honourable member for Maitland addressed the issue of Tillegra Dam.

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[Extension of time agreed to.]

The Minister for the Environment, the good friend of the Minister for Housing, who is at the table, put out a press release saying that that dam would not be needed until the year 2037. By the year 2010 Sydney will be out of land. I imagine that a fair bit of development will take place in the Hunter. I can understand the anguish that was felt up there. As a former fisheries officer, I had to live through the Johnson's Creek-Tillegra argument years ago. It was a very nasty argument that has been going on since the 1950s. That issue will have to be resolved in the future. Those who think that problem will not be resolved politically but will be left to the bureaucracy will find that not to be so. The wheel will turn completely, as occurred with the Health Commission again becoming the Department of Health. The legislation will have a very limited life because of the lack of control. That is why I am asking the Minister to spell out clearly how he will address those issues in his model.

There are 133,000 contributors to the Hunter District Water Board. That multiplied by $72 amounts to $10 million. What would the Minister do if $10 million had been generated for the Hunter fringe area sewerage scheme? Any decent government would put that into the Hunter, into the area of the people who pay, as is done with the $80. The Government takes back the $10 million in dividends. The Government should clearly define whether it will try to take dividends out of the Hunter District Water Board, because the people of the Hunter will find this to be abhorrent. The Government has a very poor record because of the hype it put into the introduction of dividends, which went to the Treasury Corporation. That is nothing short of a scandal. The people of the Hunter became very united because of what the Government did to them. It robbed them of dividends.

Mr Schipp: We are pumping millions of dollars back into the fringe area, and the honourable member knows it.

Mr MARTIN: I faced my first election with posters of the Government's lovely candidate on every light pole reading "Sewer without a levy". There was a poster under the seat on this side of the Chamber until two weeks ago in case the Minister raised that aspect. I will not embarrass the Minister with that tonight. Let me make it very clear that the Government said to the people of Port Stephens and those throughout the Hunter that there would be sewer without a levy. For 24 years that levy will be collected. It is now $72. It was only half that when the levy was introduced. Now $3,000-odd is being taken from each person who lodges plans for a building, so the Minister should not say that he is being fair. An amount of $10 million has been taken out in dividends. The people of the Hunter are being hurt. The Hunter will need a much greater storage capacity. I heard the Deputy Premier, Minister for Public Works and Minister for Roads speak the other day about a dam for cotton growers in the northwest. They are to pay for the dam. Who will pay for the Grahamstown dam extensions when the dam is raised by eight or nine metres? Who will pay for the extraction of water along the sand dunes near Stockton Bight? If the borrowings of the Water Board are limited, if those aspects are totally controlled, as has been done in the past, how will loan funds be allocated and how will development be carried out? The Minister has not addressed that. I need to know the answer to that so that I can address what this Government is doing through this legislation.

As I said at the beginning of my contribution, the result will be the total cost. The people of the Hunter region have to be sure that they will not pay more for their water. Water, sewerage and drainage services are vital. This system must ensure that
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the people will be better off. Having been a public servant for 22 years, I believe that ministerial control must be maintained. The Minister must ensure that the well-being of the people is in the Government's hands and not in the hands of a corporation. At the end of the day the Minister must guarantee that the people of the Hunter region will not pay more and more for the same commodity. If water charges are increased relative to the consumer price index, that is fine, but the people of the Hunter region believe that they are paying more for their water than the residents of Sydney are. They feel they are being poorly treated. I commend the Hunter Water Board for its work in customer surveys and similar activities, but the message must be coming through loud and clear that the people of the Hunter region are suspicious of the Government's actions and they will not tolerate being done over as they feel they have been in the past. I urge the Minister to deal with the issues I have raised.

Mr McMANUS (Bulli) [8.40]: I support and sympathise with my colleagues from the Hunter region. I do so because my electorate has similar attributes to those of Newcastle and the Hunter region. I should like to talk not only about my sympathy for my colleagues but also about my experience with the Water Board. I spent 14 years working my way up through a system at the Water Board. Initially I was a maintenance man in water and sewerage. I worked my way through technical college and became a senior inspector in the wastewater division of the Water Board. I gained a tremendous amount of expertise and at the same time I was a union delegate. When I left the Water Board to enter Parliament I was considered to be fairly good at my job. I was proud of that. The similarities between the actions of the Greiner Government during the last three or four years in relation to the Sydney Water Board and what is proposed in relation to the corporatisation of the Hunter Water Board frighten the living daylights out of me. As a member of Parliament I am concerned that an organisation such as the Hunter Water Board, which has existed for more than 100 years and has provided tremendous service and expertise to the people of New South Wales and the Hunter region, is about to be torn apart like a few other organisations this Government has got its hands on simply because the Minister cannot control his own bureaucratic sector. The "Yes Minister" of the Greiner Government is prepared to flog off yet another Government body, and this is only the start.

I have no doubt that after the Hunter Water Board is corporatised, the Minister will seek to delegate all of his responsibilities to other organisations such as the Illawarra region water board and the western Sydney water board. They are on the mark. Everyone is aware of what the Minister is up to. Everyone is aware that it is the Minister's intention to get rid of his responsibilities, hand them over to private enterprise, and call that process corporatisation. Let me tell honourable members a little about what has happened in Sydney and what will happen in the Hunter region. A little while ago the honourable member for Baulkham Hills spoke about how important it was for the Government to keep costs in line with the consumer price index. He thought the Government was doing a wonderful job by keeping the price of water relative to the consumer price index. However, the sleight-of-hand by the Government is not that the price has been kept in line with the consumer price index; it is that the amount of water the average householder was allowed to use before incurring excess water rates has decreased by a tremendous amount every year. That is what will happen in the Hunter region.

In 1973 the average householder in this State was able to use 1,000 litres of water every day before becoming liable for excess charges. At present one receives a conglomerate of a bill which cannot be understood because it is changed every three months. The average householder in New South Wales is now allowed to use 600 litres
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of water every day, 400 litres less than 10 years ago, before moving into another price range similar to that contained in electricity bills. The sleight-of-hand is that the Government has claimed that the price of water used by residents of Sydney and the Hunter region has not been increased, that the Government has told residents that they can use less water for the money they pay. They were told that the price of water would increase by 5 per cent but the amount of water they were able to use would be decreased by 10 per cent. That is the Government's game. That is what corporatisation and secret privatisation are all about. No one should be fooled by the whole scheme. If the Minister shakes his head and smiles, I am all the more convinced that he does not know what is happening in his own department. He is being led by the nose by a bunch of bureaucrats and economists.

Let me tell honourable members what corporatisation is all about. The process of corporatisation has already been heavily embarked upon in the Sydney Water Board. Opposition members have already referred to plumbing inspectors, and I will deal with that issue shortly. During the past couple of years the process of semi-corporatisation has involved a scandal with IBM. The Sydney Water Board is rife with corruption. The Government has had to deal with a computer scandal, a scandal involving people handing money over the counter and under the lap. The Minister has refused to respond to one matter in relation to the corporatisation of the Sydney Water Board, which is what will happen if the corporatisation of the Hunter Water Board is allowed to proceed. A disgraced union representative and a senior manager of the Sydney Water Board colluded and created a situation as a result of which one person resigned at an appropriate time, gained certain equipment from the Water Board and then won a tender for plumbing -

Mr Hazzard: On a point of order. The honourable member for Bulli has digressed from the bill. I ask that he be directed to return to the substance of the bill rather than disappear into the ethereal distance.

Mr ACTING-SPEAKER (Mr Chappell): Order! No point of order is involved.

Mr McManus: On the point of order -

Mr ACTING-SPEAKER: Order! I have ruled that no point of order is involved.

Mr McMANUS: The honourable member for Wakehurst has just walked into the House and obviously has no idea of what has been said by his own colleagues, who made similar comments. A company named Suresearch won a tender from the Government, from the Water Board, and was allowed to create a privatised or corporatised system of leak detection in this State. For two years I have been trying to get the Minister to investigate this matter and he will not. It is open slather for corruption in the Sydney Water Board.

Mr Schipp: On a point of order. This bill deals with the Hunter Water Board. The House is now hearing a diatribe from the honourable member for Bulli relating to the Sydney Water Board. He claims that there is some conspiracy or corruption -

Mr McManus: On a point of order. I have been telling the Minister for two years.

Mr ACTING-SPEAKER: Order! The honourable member for Bulli will have an opportunity to speak to the point of order.

Page 5135

Mr Schipp: What is he talking about? That subject is not within the scope of the legislation before the House. By addressing a specific issue he may or may not have raised previously about the Sydney Water Board he is totally outside the ambit of the bill.

Mr McManus: On the point of order. I am trying to indicate the problems that will arise in the Hunter Valley, and specifically in the Hunter Water Corporation. Under the provisions of this bill, the number of plumbing inspectors will be reduced and we will see the demise of the Building Services Corporation. If the Minister does not listen to what the Opposition is saying, he will be in all sorts of trouble. I am trying to save him and his Government some problems, if he would only listen.

Mr ACTING-SPEAKER: Order! I take it the honourable member for Bulli was giving examples of the point he was wishing to make. I exhort him to return to the scope of the bill and not to spend the major part of his speech dealing with matters outside the scope of the bill.

Mr McMANUS: Consequent upon my passing reference to the company called Suresearch, I trust the Minister will at least go away and give some help -

Mr Schipp: Not on your say so; I would not go away and do anything.

Mr McMANUS: The Minister for Housing interjects -

Mr ACTING-SPEAKER: Order! The honourable member for Bulli will address the Chair.

Mr McMANUS: - and this gives me the opportunity to elaborate once again. If the Minister accuses me of some underhand action in this House as a member of Parliament, my next course is to ask him to withdraw those comments and I suggest that any further interjections should cease.

Mr ACTING-SPEAKER: Order! The honourable member for Bulli will return to debating the matter before the House.

Mr McMANUS: Some discussion has taken place about other aspects of the bill. I would like to home in on what will happen to plumbing inspectors in the Hunter. In the first five minutes of my speech I alluded to my 14 years' experience with the Water Board and the fact that at the time I was a practising drainer. The Hunter Water Board will be in desperate straits. It is suggested by this bill that only five inspectors will be responsible for the plumbing inspection work in the Hunter region, or so I understand from my colleagues in the Building Services Corporation. The work is similar in Sydney and in the Hunter. Inspectors have a major job to do. Their range of work extends from cross-connections to sewerage overflows, and to the conservation of water. Just as important, they have a specific regulation that requires them to maintain garage arresters and restaurant arresters in their region. I know full well how many restaurants and garages there are in the Wollongong region, and I assume the number is similar in Newcastle. For the life of me I cannot understand how the Minister can expect that sort of work to be undertaken by five inspectors of the Building Services Corporation.

If this is what corporatisation is all about, it will mean there will be one loser and that will be the consumers and the ratepayers in the Hunter region. It is important that the Minister for Housing understand the work that has been done by plumbing inspectors, and the Government needs to ensure the protection of residents at all times.
Page 5136
I have some concerns about how the volume of work that has been done in the past will be undertaken by these proposed five inspectors. As the honourable member for Charlestown said, these inspectors have expertise in finding things such as defective house drains. As the honourable member pointed out, it is true to say that the smoke testing carried out by the Water Board and the Hunter Water Board has the effect of picking up more than 50 per cent of defects in house drains both in the Illawarra and in the Hunter. But that work takes manpower and expertise. One thing that has been lost through the corporatisation of Sydney and will undoubtedly -

Mr Schipp: The corporatisation of Sydney?

Mr McMANUS: Your semi-corporatisation of the Water Board - you have to look only at what you are doing with contractors. Let us talk about plumbing inspectors in general and what will happen if there are five inspectors. What will happen if a house drain is found to be defective, as happened only a week ago?

[Extension of time agreed to.]

Last week I had a report from a plumbing inspector who has spent the past six months before, first, his own hierarchy in the Water Board and, second, before the Ombudsman. The reason that he is before those two groups is because he did his job of random testing - the thing the Government intends to introduce in the Hunter region. This man carried out an inspection and found a defect. But he did not inspect five or 10 other properties, so a complaint was lodged by the builder-plumber himself who was able to prove that five other properties had similar defects which had not been picked by the Water Board inspector. As a result of that the builder made an official complaint that the inspector had been charged but that no charges were laid in respect of the five other cases. The inspector has spent the past six months under the stress of appearing before the Ombudsman and before his own hierarchy to clarify his own position. He had to justify his position as a plumbing inspector because he did his job properly. That is exactly the sort of situation that will happen in the Hunter region. If the Government causes the demise of plumbing inspectors in the Hunter region and hands over the inspection services to five inspectors - and if I am wrong the Minister will correct me in his reply - the Government will find that the people of the Hunter will have serious health problems. Plumbers and drainers will do their own work. The Government calls that self-regulation, but self-regulation on the Sydney Water Board does not work.

Expertise cannot be removed from something like the Water Board and responsibility for carrying out its tasks handed over to those who make money from what they do. The Water Board has always been a regulatory body, and to make it an advertising agency is to do totally the wrong thing by the people of New South Wales. That is the crux of the matter. By corporatising the Hunter Water Board the Government effectively will do what it has done to the Sydney Water Board. It will turn what used to be a service industry into an advertising agency. It will make redundant the people at the bottom of the ladder - the water service operators, the maintenance men, the plumbing inspectors, and the wastewater inspectors. They will all go out the door because there will be self-regulation. A couple of weeks ago I picked up the job criteria for the Water Board in Sydney. Jobs with salaries of $40,000 and $60,000 are being advertised to replace the jobs of people with expertise with others who have no expertise. These people will sit at a desk and shine their backsides while they pick up big money, and call themselves administrative officers. But the expertise will be thrown out the door and the Hunter Water Board will become simply an advertising agency, just like everything else this Government has touched in the past three years.

Page 5137

I warn this Government that if it keeps going the way it is going, two things will happen. First, it will go out of office backwards, and the sooner the better. Second, and more important, the health, well-being and environment of the people of New South Wales will be destroyed. That will result in the destruction of the Greiner Government because it has spearheaded this so-called corporatisation of the Water Board. The Government must get its act together. It should start looking at what is happening with the system in Sydney and relate that to what will happen in the Hunter. The Government should stop thinking about its bank-books because that is its problem. It has spent the past three years wondering how to resolve its deficit problems. It says the way to do that is to save money by putting people with expertise out of work. The problem is we will be faced with serious health and other problems in the Hunter and, by the time this Government has finished, in the whole of New South Wales.

Mr GAUDRY (Newcastle) [9.0]: There is no doubt that the Hunter Water Board (Corporatisation) Bill is keynote legislation in that the corporatisation will not involve open competition of a utility in the commercial market but the corporatisation of an absolute monopoly. This bill is extremely significant not only to the people in Newcastle but to all the people of New South Wales. The ordinary consumer takes as a baseline standard of living the provision of electricity, water and sewerage and drainage services. This is fundamental. People see the provision of such services as a community service obligation of government. Such services must be affordable and secure and they must meet the environmental standards which are becoming increasingly important to the quality of life that people expect in a modern urban society. People in the community expect the Hunter Water Board to provide a high standard of environmental protection in the provision of all its services. I am sure the Minister for Housing accepts his responsibility to ensure that the Hunter Water Board maintains the highest environmental standards.

In the past decade there has been extreme conflict between the community and the Hunter Water Board in relation to its provision of services and particularly its control and care of sewage disposal services. Going back to 1983 and the clean oceans committee, many people in the Hunter felt that the Hunter Water Board was deficient in its provision of services to the community. People made very clear their feelings about the pollution of Newcastle beaches and the failure of the Hunter Water Board to address the problems. The board put forward a series of proposals for improvements in sewage disposal. It is an argument for more economic responsibility and managerial control in the Hunter that at the time the Hunter Water Board was forced to accept a less satisfactory method of sewage disposal in the four options it put to the community. It was constrained by economics, I guess because of its tie to the State Government, to accept a lesser method of disposal: off-shore sewage disposal without treatment. It has moved over time to do something about that. Community input, commitment and concern have continued. Changes in the input of the State Pollution Control Commission and changes in the attitude toward environmental protection mean that the Hunter Water Board is no longer able to proceed with the proposal to dispose of sewage sludge off-shore and has had to look at other means of disposal.

Many people in the Newcastle area have been extremely concerned that, despite the Minister's protests and the use of consultants who claim to have proved that there are no problems associated with the disposal of sewage down mine shafts, this method of sewage disposal is not environmentally guaranteed. Were sufficient finance available, the Newcastle community could have a sludge treatment plant. For $5.8 million a sludge disposal treatment plant could be built at Burwood Beach. It will be remembered that the Government has taken $8 million to $10 million in dividends from the Hunter Water
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Board. About $50 million worth of essential environmental works could be done in the Hunter given the available finance. There is concern about the mains in the distribution system as a consequence of the earthquake. These factors bring into question the proposal to take the Hunter Water Board from ministerial direction and control and establish it as a State owned corporation under the 1989 Act. I refer to the speech of our shadow minister. Many of the principles in the Act are acceptable to the Opposition. We want to see effective management with 1990's approaches. We want the most efficient organisation possible. We think that is possible without going to the extent proposed in the bill.

Bodies which have been corporatised to date include the Grain Handling Authority, the State Bank and GIO Australia, although it was corporatised without reference to the Act. As has been shown by other honourable members, the GIO and the State Bank were operating in an open, competitive environment, on a level playing field. They are competing against the private sector and they sink or swim according to their competitiveness in the open market. There is no way that we can say that those bodies are an essential service. The Hunter Water Board provides an essential service to consumers. One would have to go a long way within my electorate to find a consumer who does not tap into the Hunter Water Board supply system or use the sewerage and drainage system. Some people have a clear and independent approach but I am sure very few of the 400,000 or more people who use the services of the Hunter Water Board see themselves as participating in a voluntary organisation. They believe that the services of the Hunter Water Board are essential.

The Minister in his second reading speech said that there were five clear principles to establish in order to corporatise an agency. He said, first, that there must be clear and non-conflicting objectives. I have no argument with that. The objectives of the Hunter Water Board are to serve Hunter consumers; to maximise the asset in the Hunter; to make sure that there are plans for depreciation - I am glad that there is now sensible, economic depreciation - to prepare for future capital investment; and to ensure that it does not bear the cost of political decisions. I refer now to the fringe area sewerage scheme, an issue that is dear to the heart of the General Manager of the Hunter Water Board. The Hunter Water Board has been forced to carry the Government's decision to extend the fringe area sewerage scheme. That cost will be an impost on Hunter Water Board consumers. The honourable member for Waratah pointed out that there will be a huge increase in costs for Hunter Water Board consumers not just now but in the future. Whether or not the Hunter Water Board is corporatised, there is no doubt that consumers in the Hunter will continue to bear the brunt of that Government decision.
[Extension of time agreed to.]

It is a marvellous idea for the Hunter Water Board to be set up in such a fashion that consumers in the Hunter area do not suffer as a result of government decisions when services are extended. I congratulate the board and the Government on that objective. The Minister, in his second reading speech, said that the second objective - which is interesting to me - is that government trading enterprises must be placed on an equal footing with private organisations. That is the greatest rubbish I have ever heard. There is no competition. The Hunter Water Board has been set up more or less as a monopoly organisation. One of the fears of consumers - the ordinary people in the street - is that there might be competition in the future and that the setting up of a ministerial corporation that controls the headwaters, dams and water sources of the Hunter -

Mr Schipp: Only in the transition period.

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Mr GAUDRY: The Minister for Housing says that would be only in the transition period. Nevertheless, that is the position. The Minister states clearly in his second reading speech that other entities are not precluded from entering into competition with the Hunter Water Board. People might then be faced with a playing field that is not level. The Minister also said in his second reading speech that managers must have the authority to manage. I certainly would not disagree with that. In fact, I compliment the Hunter Water Board, the managers of the Hunter Water Board and Dr Paterson for their managerial approach over the past few years. Unfortunately, as other honourable members have said, the Hunter has borne the brunt of the user-pays experiment. Neither this Government nor the previous Government has had the courage to include that user-pays system in the major metropolitan Sydney Water Board. Will the Minister for Housing do that? There is no doubt that the management of the Hunter Water Board is to be complimented on its different approach. I compliment Mr Paul Broad and Mr Glen Turner, the present Chairman of the Hunter Water Board. As the honourable member for Port Stephens has said, I compliment them not only on their management approach but also on the free and open discussions that they held with parliamentarians in the Hunter. It does not mean that we necessarily agree with those people, but there has been free and open discussion about the approach the Hunter Water Board has taken.

We now have - we have had for some time - a strong environmental focus in the Hunter Water Board. Brian Gilligan has been appointed to the board and Bruce Peterson has been appointed environmental officer. They hold strong views about environmental protection. I commend the board on those appointments. However, this commendation does not mean that the Opposition will accept full corporatisation of the Hunter Water Board. All the steps I have referred to can be taken. Rewards and sanctions can be based on performance. The Minister, in his second reading speech, referred to adequate regulation of monopoly power. I have seen the proposed operating licence, which is quite comprehensive. One thing that concerns me and other members of the Opposition is that although the operating licence makes it clear that increases will not exceed the consumer price index, that is not enshrined within the legislation. If we are to have a Hunter Water Board (Corporatisation) Bill let us enshrine in it adequate protection for consumers so that there are no increases beyond the consumer price index.

Consumers in the Hunter region fear that they will be faced with such increased charges. Statutory bodies have been commercialised and then corporatised. Perhaps the next step is privatisation. We would object to that. We want it enshrined in legislation that Hunter consumers will not be adversely affected or exploited down the track. Much has been said about customer contracts. It is interesting to note that customer contracts will be published in the newspapers a week before actual corporatisation. That is an affront to the people in the Hunter even though that may not affect in any way the comprehensive set of charges to be paid by Hunter consumers. I congratulate the Hunter Water Board for introducing customer contracts but my information, which I pass to the Minister for Housing, is that consumers in the Hunter will get only one week's notice of these mafia-style customer contracts when they are published in the newspapers.

Mr Graham: Like "The Godfather".

Mr GAUDRY: Of course, the honourable member for The Entrance has a knowledge of that sort of thing. Consumers in the Hunter will be subject to godfather legislation. A matter of concern to me that was referred to earlier is asset revaluation and repatriation of dividends. The assets of the Hunter Water Board have been increased from about $0.6 billion or $0.8 billion to $1.5 billion. The repatriation of dividends will be worked out in accordance with the bond rate. Half the bond rate might be repatriated
Page 5140
and prudential matters might be taken into account. The Opposition would not be against all these activities. It is important for the management of the board to be given a chance to manage and a chance to look at the assets of the board. It should be given a chance down the track to look at the investments that are required. Many people in the Hunter region would ask who actually subscribes to the assets of the Hunter Water Board. I have been told that 90 per cent of the assets of the Hunter Water Board are subscribed by the people of the Hunter, not by the State Government.

Mr ACTING-SPEAKER (Mr Chappell): Order! The honourable member has exhausted his time for speaking.

Mr MILLS (Wallsend) [9.20]: The Opposition supports the intent of corporatisation as represented by this bill, but it intends to propose an alternative structural approach to achieve that corporatisation. In this debate Labor members have argued and will continue to argue that the Hunter Water Board should remain a statutory body and should not be converted to a share-based private company as is proposed by the bill. In particular the Opposition wishes to keep the Hunter Water Board one step further away from privatisation than the Government wishes. Despite the contrary claim by the honourable member for Maitland, it is clear from the history of corporatisation in New South Wales that the next step is privatisation. The Greiner Government would appear to have four stages of microeconomic reform. The first stage is user-pays; the second is commercialisation; the third is corporatisation, with a view to the fourth stage, privatisation. That process is at the heart of Greinerism. Since 1983 the user pays system has operated in the Hunter region. At the time of last year's Budget I calculated that for a 250 kilolitre annual usage of water - that is about the average taken in both the Hunter and Sydney - the cost of water supply in the Hunter on average was $105 per residential customer greater than it was in the Sydney metropolitan area.

The Minister formerly responsible for water services often promised the user-pays system for Sydney but ultimately squibbed that decision with the result that people in the Hunter region pay considerably more for their water usage. To give an example of the sort of impact that system can have on a non-residential property, the quarterly service charge for a 250-pupil primary school in my electorate is $1,200 and the average for water usage is $759, a total of $1,959 per quarter. The second step, commercialisation, has been in existence in the Hunter since about 1987. I understand that the process of commercialisation is effectively complete at the Hunter Water Board. For example, the increase in the levy from $38 to $69, which was intended to cover pensioners being exempted from the environmental levy and the additional works required at Swansea and the Port Stephens end of the fringe area sewerage scheme, is a good example of how commercialisation proceeds. At this stage it is worth noting a paper entitled "What is privatisation?" produced by the Minister for Sport, Recreation and Racing and Minister Assisting the Premier concerning the GIO Australia privatisation. In part the last page of the paper reads:
      What Are the Steps on the Way? The first step is commercialisation. In other words, organising the way in which the business is run along commercial lines, making it compete fairly in the open market, and make a profit! . . . Closer to the privatisation itself the true value of the business needs to be established.

I will refer to that later in my remarks. The paper continues:
      Once privatised, instead of being at the whim of Government, the enterprise is finally free to chart its own economic course.


Page 5141
On that latter point Government members have said that that is what they intend to achieve by corporatisation. One can understand the scepticism people feel when the Government says that the Hunter Water Board will not be privatised; that it will be stopping at corporatisation. The third step in the four-stage process is corporatisation. We are debating the model of corporatisation that is being proposed in this bill and its supporting documents. I suppose honourable members should consider the advantages of corporatisation: the water supply organisation will assume responsibility for the service - the Government will not have the responsibility. A second advantage is that it formalises commercialisation. The fourth step that I referred to was privatisation. The words of the Minister for Sport, Recreation and Racing and Minister Assisting the Premier in another debate a month or two ago leave us to consider whether in the case of a monopoly we should really be looking at privatisation. Basically the Australian Labor Party is not willing to privatise. The Opposition views water supply as a vital public service. It is not a truly competitive environment. No other private sector organisation will be able to compete in water supply in what is essentially a large mainly urban area. The Hunter water supply will remain a monopoly whether it is corporatised or privatised. Governments have a social responsibility and when the enterprise is a monopoly it is wrong to corporatise or privatise for the purpose of removing government control. The sole supplier should retain some non-commercial basis so that government responsibility can continue to be exercised.

Mr Cochran: What about Telecom?

Mr MILLS: Telecom is not being privatised. Government can continue to dictate occasional requirements for social matters, not just commercial matters. The honourable member for Blacktown referred to the visits by Hunter Water Board officers to the United Kingdom to study its privatised water authorities. Remarks in the documents indicate that the Hunter Water Board officers were not impressed with the way things happened in England. In fact the privatised water authorities were in a mess. The problems remain and the resource has been essentially mismanaged in a country which is almost never subject to drought. That fourth step of privatisation is not wanted in the Hunter region. Other State owned corporations established by the Government have been referred to, such as GrainCorp and the State Bank. In successive budgets we have had a couple of promises that the State Bank will be sold off. The GIO is to be privatised. At present the Hunter Water Board and Electricity Commission are being proposed for corporatisation, but who can say that privatisation is not on the agenda? The foreshadowed Opposition amendments will keep us one step back from privatisation. In November last year the president of the Hunter Water Board Employees Association, when speaking about corporatisation in a discussion with me, referred to the danger of corporatisation, that it was too close to privatisation. He referred to talk around the town that privatisation was on the agenda, probably within four or five years. That association was concerned that some business units of a new corporation would be sold off, that is, privatised. In October last year the secretary of the Hunter Water Board Employees Association wrote a letter in the following terms:
      Such a move as corporatisation will cause an increase in dividends from the Hunter region to Macquarie Street.

Management believes that corporatisation would reduce that possibility. Perhaps it will, and I shall deal with that soon. I have nothing but praise for the manner of presentation of the bill, supporting documents and other information supplied. I pay tribute to Paul Broad, the general manager, Glen Turner, the chairman, Peter Michel, the deputy manager, and Dave Evans, the general manager of services, who has been in the House
Page 5142
today. They have been most co-operative and helpful, and their briefings have been constructive. A large range of instruments has been presented, including a draft operating licence in detail and in plain English, a customer contract, environmental licences, a memorandum of understanding with the State Pollution Control Commission and with the Department of Water Resources, and the draft statement of corporate intent. All the issues have been presented for discussion, as they should be. I commend the Minister and the officers of the Hunter Water Board for their openness and attention to detail. That has enabled us to discuss the measure, and even to be critical, but in the interests of the people of the Hunter it has been most constructive. This bill has been a good example of presentation of information. A frankly abominable example was the Elcom corporatisation legislation, where almost none of this information was supplied.


A perusal of the bill and the documents reveals that some matters have not been addressed. The honourable member for Waratah referred to assets to be transferred to the ministerial corporation. He raised questions about the lack of detail as to that matter. Questions have been raised as to whether the bill provides for equal employment opportunity, freedom of information availability, a requirement for an annual report and an employee representative on the board, and so on. The honourable member for Charlestown spoke about the role of plumbing inspectors with regard to repair services. The bill and the draft operating licence are relatively silent about the drainage and total catchment management aspects of stormwater drainage. Clause 13(1)(b) of the bill provides that the operating licence must include terms or conditions under which the corporation is required to provide, operate, manage and maintain a drainage service within the capacity of the drainage service included in the business undertaking transferred to the corporation. Clause 5(1), dealing with the transfer of the business undertaking, provides that the Minister is empowered to direct that the business undertaking of the Hunter Water Board be transferred to the corporation.


[Extension of time agreed to.]


Clause 3.3 of the draft licence relates to drainage service. It provides:
      The Licensee shall provide, operate, manage and maintain a drainage service within the capacity of the drainage service included in the business undertaking transferred to the Licensee from the Hunter Water Board under Part 3 of the Act as at the Transfer Date.

That is fine. It deals with the drainage aspect, but it does not include much detail. I am aware that the Hunter Water Board is considering stormwater flooding correction programs at a cost of about $50 million. The programs relate to Ironbark Creek, part of which is in my electorate, Winding Creek, most of which is in my electorate, Dark Creek, a little of which is in my electorate, and Throsby Creek, a large portion of which is in my electorate. Ironbark Creek and Throsby Creek have total catchment management committees. I ask the Minister who will fund the total catchment management studies after the board has been corporatised, and who will fund the necessary improvements, at a cost of about $50 million? At present the board imposes a drainage levy in some of the drainage catchment areas, but will the proposed corporation impose a significant additional levy to fund the stormwater works? That is the question I ask. Or, will yet another rating body such as a total catchment management authority be established to raise funds? If that occurs after the passage of this bill, will the Government of the day be responsible, or will decisions be made at arm's-length by the corporation? Further, will the community have any opportunity for input on drainage matters, which are quite important with regard to the flooding of suburban homes?


Page 5143
Corporatisation of the board could have an unfortunate result in that regard. Already the Hunter has the State's most expensive water and probably, as a result of the sewerage levies, the most expensive sewerage. I am most concerned that as a result of this bill the Hunter may have the most expensive drainage services in New South Wales. I would object to that, as I am sure would everyone in the Hunter. During this debate the Government must address future drainage provision. Price control is said to be a feature of this bill, which pegs charges to a level not greater than the CPI. We must look more closely at this matter. All the levies mentioned by other speakers could still be imposed under this bill. Clause 39 of the bill states that the operating licence may provide that the corporation must fix charges, levies and rates on a basis that is consistent with the system employed by the Hunter Water Board before the transfer of the business undertaking or on some other basis stipulated in the licence; and, unless the operating licence otherwise provides, the corporation has power to fix contract and availability charges, environmental levies and drainage rates, and to impose fees or charges for any service or thing supplied or provided by the corporation. Clause 5.7 of the draft licence, relating to drainage rates, states:
      Notwithstanding sub-clause 5.2(b)(iv) and clauses 5.3 and 5.4 -

They are the two clauses of the licence that impose the ceiling on charges in accordance with the consumer price index:
      - if the drainage services provided by the Licensee within the Region are extended beyond those provided at the Transfer Date, the drainage rates levied by the Licensee under section 45(2) of the Act may include an amount to cover (on a full cost basis) the cost of providing the extended drainage services. Any amount included in drainage rates under this clause 5.7 in a year shall be ignored for the purposes of the application of clauses 5.3(b) and 5.4(b) in the following year.

Therefore it would seem that increases for new works are not restricted by the CPI, that the corporation could increase charges as it sees fit. Clause 5.5 of the licence relates to drought and special or additional works. Clause 5.5(ii) provides:
      clauses 5.3 and 5.4 will not prohibit the Licensee from imposing additional water use charges as may be necessary
          (aa) to recover the additional costs . . . as a consequence of the drought or
          (bb) to provide for the allocation of available water and ensure that water is put to best use but so that any net increase in the revenue of the Licensee is returned to the consumers in a manner which does not lead to any financial gain to the Licensee.

The end result is that in a drought water bills may be increased by a level greater than the consumer price index. The general manager and I have disagreed about this matter with regard to existing proposals.

Mr Schipp: That can happen now.

Mr MILLS: Yes, of course it can be done now. However, I disagree with the concept of a greater dollar per kilolitre charge, as originally proposed, and perhaps a reduced service charge so that at a time of drought the overall charge does not increase. That can cause severe hardship to pensioners and other people on low, fixed incomes, who already use a minimum amount of water, and also to large families who, if they already are using a minimum amount of water, cannot reduce that amount significantly. Unfortunately that approach, which is incorporated in the draft licence, will provide an

Page 5144
advantage to people who at present may be wasting water. People who now are not wasting water will be able to save relatively little; but those who are wasting water now will be able to save a great deal under that proposal. This bill will not necessarily provide for the people of the Hunter the expected relief from a continual increase in charges for water, sewerage and drainage by way of levies and so on. Clause 18 of the bill provides for the cancellation of the operating licence. It is difficult to conceive what would happen upon the cancellation of the licence. The board could be sacked and perhaps a new board could be appointed. The Government may impose a penalty not exceeding $150,000. However, who would pay the penalty? Ultimately it would be the people of the Hunter, who would pay through their charges or through a reduction in services.

The downsides to corporatisation include the mechanism to set up the Hunter Water Corporation as a share-based private company under Federal law; the potential for a legal extravaganza in a new, private style company; the expenditure of funds and the time of management in all the legalities; and the additional costs associated with the change of name. Throughout the past couple of years we have seen a number of examples of waste through costs associated with changes of name by Ministers. A further downside is the opportunity of the next step towards privatisation. The Minister must inform the electorate about the impact of equal employment opportunity and freedom of information provisions. I am pleased that today the Minister introduced an amendment dealing with freedom of information. The provisions of the annual reports legislation and the Independent Commission Against Corruption Act need to be addressed also. I wonder whether my constituents in Edgeworth who consistently experience low water pressure will benefit from corporatisation?

Mr ACTING-SPEAKER (Mr Merton): Order! The honourable member has exhausted his time for speaking.

Mr NEILLY (Cessnock) [9.40]: I oppose the bill. Though the Opposition subscribes to the concept of corporatisation, I subscribe to logical corporatisation. Though it may be appropriate to corporatise commercial organisations that are managed by the Government, it is not appropriate to corporatise some public sector organisations that are non-competitive but which provide a service to the public. Rather they should be aimed in a corporate direction. By that I mean the organisation should subscribe to a corporate view without being corporatised. Inherent in corporatisation is the danger of privatisation. The honourable member for Blacktown referred to the privatisation of the Hunter Water Board, the guinea pig of principal water supply authorities in New South Wales. Neither Labor nor Liberal governments had the intestinal fortitude to take similar action with regard to the Metropolitan Water, Sewerage, and Drainage Board. Though the Hunter Water Board may be small in comparison with the Sydney Water Board, it provides water services to 425,000 people, 85 per cent of whom receive sewerage service. Each year it issues in the vicinity of 168,000 assessments. It is, in reality, a substantial organisation.

The honourable member for Wallsend in the latter part of his contribution referred to the problems associated with sewage disposal in West Wallsend, a suburb that was formerly in my electorate. If we are to corporatise, we should look at corporate intent. A prospectus should be made available to the public. Even the Minister would have to acknowledge that the Hunter Water Board has not been financed by the State Government only. It has been financed also by the ratepayers in the region and, in 1975, by a contribution from the Federal Whitlam Government to finance a sewerage extension scheme. A statement of corporate intent, even a prospectus, should be published. The
Page 5145
Government has ignored the fact that ratepayers have contributed to the assets of the Hunter Water Board. The annual report of the board referred to its accumulated assets. If my memory serves me correctly, the report stated that 38 per cent of the assets of the Hunter Water Board come from sources other than contributions. Some were gifts. I doubt that many organisations that are subscribed to publicly can claim they have accumulated assets from any source other than direct capital contributions. This public service organisation, however, has accumulated assets through contributions.

Corporatisation should reflect also competition. The corporatisation of the Hunter Water Board does not reflect competition. The board has no competitors. I acknowledge that in other countries corporatised bodies provide water services. Representatives of the Hunter Water Board examined the system that operates in England. I suspect they may have also travelled to the United States to examine the position in that country. In America, water systems are corporatised to the tap. The licence agreement with regard to the Hunter Water Board does not specify whether the corporatisation will be to the tap, to the water main or to the fence. The honourable member for Waratah expressed concern that it may extend only to the water main. In the Hunter region some pockets of population are not supplied with water, others do not have sewerage. In the past it has never been necessary for the board to make a corporate determination. I realise that in recent years there has been a profitability intent. Prior to the spectre being raised as to whether it would be profitable or otherwise to corporatise, compassionate considerations have been made. I doubt that that same compassion will be offered by a corporatised body.

I thank the Minister for providing me with the opportunity to attend a briefing about the potential corporatisation of the Hunter Water Board. At that briefing the general manager of the board informed me that the annual statement for the past financial year revealed that the board had restructured and broadened its corporate assets to the tune of $1 billion - from $450 million to approximately $1.5 billion - a 200 per cent increase. That increased the net value of assets from $250 million to $1.3 billion. The corporate directive was to try to achieve a return on investments in the vicinity of the long-term bond interest rate. Is that return assessed on the return of a government investment - and I am referring to the Government of New South Wales, not the Commonwealth Government or the contributors to the Hunter Water Board - or is it assessed on the aggregate revalued investment as reappraised in accordance with the financial statement of the board?

The Opposition is entitled to ascertain that. Other problems arise which do not directly stem from corporatisation but are associated with it. I ask the Minister directly whether the Water Board can make determinations which will go outside the realms of profitability. Can it make interpretations of its objective which will fund those little pockets of unsewered, unwatered areas which will not return a profit to the corporate body? I understand that as a corporate body the Hunter Water Board will be rating local government authorities, including playgrounds and sporting areas. That is a bona fide question. The Government in New South Wales has determined that next year no local government authority can achieve greater rating income than it did last year. Will the Government make amendments in relation to local government legislation to ensure that local government can pick up the lost revenue it might achieve if Water Board authorities are rated? Two rating authorities may be in the same area. One may not be able to achieve a greater rating income in the ensuing financial period. The other may merely have a reduced capacity to achieve rating income.

Page 5146
After discussion with the board it seems that the objectives of the legislation are acceptable. The objectives are to operate the Water Board efficiently; maximise its net worth; exhibit social and environmental responsibility; maintain and create assets; deliver a service effectively; performance target services to meet licence conditions; price; consumer price index cap and cost. An objective also is to reduce the running cost of the Water Board by 2 per cent. I do not disagree with that philosophy. I have queried the objective of returns at bond rate and how that is to be achieved, combined with community service obligations and tax. Following the State Budget being brought down, the Government said the dividend obligation of the Water Board this financial year was only $5 million. What a great comeback. It was $12 million the previous financial year.

Mr Schipp: $10 million.

Mr NEILLY: $10 million. I should like the Minister to compare that with the metropolitan Water Board because the Government is scrubbing them in the Hunter by comparison with the Sydney Water Board. Next year the objective is to achieve $9 million. The State Owned Corporations Act provides that Commonwealth tax equivalents will be given. What is the Government expecting by way of Commonwealth tax equivalents apart from its dividends? Is the $9 million a combination of the State Owned Corporations Act and the dividend expectation as a public authority? The Minister should tell the people of the Hunter what the Government wants out of the deal and why it is going to sock the Hunter and not the Sydney Water Board. The Act is to divide the assets of the Water Board. What assets will go to the Hunter water corporate body and what assets will go to the ministerial corporations body? I ask the Minister to give a reason for the division of assets. The Government has given a guarantee in relation to commitments to residents of the Hunter at least for the next three years in conjunction with the licensing arrangement to run the new organisation. This will include pensioner rebates, guarantees of whether or not to exempt properties, pay for collections, contribute to total catchment management and fire hydrant services. Beyond that period no other guarantee has been given other than the Government's guarantee towards pensioner rebates. The residents of the lower Hunter once again are being used in an experiment. Minister, please be sympathetic. The Labor Government hit them hard. I was in the election of 1988 -

Mr ACTING-SPEAKER (Mr Merton): Order! The honourable member has exhausted his time for speaking.

Mr BOWMAN (Swansea) [9.55]: I share many of the concerns of the honourable member for Cessnock that the people we represent are satisfied of the good intentions of the present Hunter Water Board, its senior executives, the Minister and the Government and that we exercise sufficiently stringent scrutiny to make sure that no errors are made, no potential danger is overlooked and that the people in the Hunter are not guinea pigs for some experiment that has not been carefully considered. These people should not be taken to the cleaners for a few dollars in order to prop up the Water Board in Sydney or some other government operations. They should be given a fair go. I am conscious that people in the Hunter can be very touchy about these matters. I do not mean to be offensive to the Minister or the Water Board by suggesting that it is incumbent upon us to be almost aggressive in demanding that our constituents receive a fair go because, rightly or wrongly, they feel in the past as to charges for water and sewerage services their interests have not been accorded the same level of priority as those of Sydney residents. Usually that is based on their paying more money for water and sewerage services than those in the Sydney Water Board area pay. They have readily told their local members when in government that members of Parliament have not been
Page 5147
sufficiently vigilant or aggressive on their behalf to ensure that they receive recognition, that dispersal of population and other geographical matters are taken into account when the ultimate system is worked out to determine how much per kilolitre of water and how much for sewerage people in the Hunter will pay. Recent experience demonstrates that people in the Hunter pay more for water and, during the last severe drought, faced restrictions which did not apply or only applied much later and in smaller measure to those people in the Sydney Water Board area, yet their overall costs were greater.

Consequently residents of the Hunter are suspicious that any significant change may not improve their lot but make it worse - and they are more suspicious of a proposed corporatisation that may distance the Government from the day-to-day operations of the Water Board. People in the Hunter fear that such distancing will lead not to greater efficiency but to their inability to exert political pressure. They fear they will have no political comeback under a monopoly. It is common ground that the supply of water and sewerage services is a natural monopoly. Residents will be subject to that monopoly but the Government will not be directly responsible. Users of those services will be less able to take political vengeance by exerting political pressure to ensure that their aspirations, interests and needs are fully comprehended and met, in the present financial climate, by the government of the day. Despite Opposition admiration for the systematic preparation of the bill, the paradigm of a private corporation model is not seen by Hunter residents as being appropriate for provision of water and sewerage services. My constituents are used to competition justifying, making tolerable and rendering reasonable the corporatisation of various economic activities. They know that if they are not getting a fair deal at one supermarket or shop they can go to another. Hunter residents want economic activity to be pursued to the maximisation of profit because countervailing factors require that businesses, to earn profits, must be efficient.

I give great credit to the Water Board, its senior executives and staff for their efforts to increase efficiency in recent years. Those efforts largely have been successful and, though a time lag has occurred, that success has been recognised is acknowledged by the people of the Hunter. They are more satisfied than in previous years with the operations of the Hunter Water Board. They have growing trust and belief in the efficiency and effectiveness of the Hunter Water Board but they are suspicious that, having accepted the short-term shock of commercialisation, they will be faced with something new. I do not suggest that the present board has been secretive. To the contrary, I agree with other members who have spoken in this debate that the board has been impeccable in its attempts to inform local members. We cannot complain at all about that. But the general public is by no means convinced or sufficiently aware of the complexity of this model or just what makes it tick. They can understand that corporations compete in the market-place in ordinary circumstances in the absence of a monopoly. They can cop an oligopoly but are distrustful of an outright monopoly. Their distrust is not based on political partisanship. Labor voters in the Swansea electorate would have the same reaction if the Labor Party were to introduce a bill to corporatise the Hunter Water Board.

I urge the Minister - and I know he will harken to my plea - to emphasise strongly in reply that he will consider proposals for amendments to the bill, and to disavow any ironclad attitude that the proposed legislation will be utterly fixed in concrete and unchangeable when future adjustment is required. Causes for that concern spring from a number of sources. Recently assets of the board have been considerably revalued and upgraded. It is suggested that the long-term bond rate should be an appropriate measure of the effectiveness of an organisation. That rate, if applied to what is declared by appropriate authority to be the assets of the Water Board, may determine, it is said,
Page 5148
an appropriate yield above and beyond the operating costs of the Water Board. But many people remain unconvinced of the need for any kind of dividend. They are willing to accept that operations should be efficient, that the Hunter Water Board should not be a cost to the Government and people of New South Wales, and that it should pay its way. But they are unwilling to accept that a dividend should be declared by a monopoly, and ask: why not increase taxes? Citizens in parts of New South Wales are better located geographically for the provision of water and sewerage services. Why should they benefit from the tax or yield that they contribute to their fellow citizens? If water and sewerage services can be more economically supplied in Sydney, why should people in the Hunter region suffer any disadvantage? It might be argued that they ought to suffer that disadvantage for being born in the wrong place, but they are unwilling to accept that.

[Extension of time agreed to.]

Hunter residents are less inclined to accept that a revaluation of assets beyond their control -assets for which they feel they have paid for many years - should require them to pay what they regard as a tax to the Government. I ask the Minister to think carefully about the relationship between the yield that it is alleged should be taken by the Government and the assessment of assets of the Water Board in Sydney, Newcastle or any other place in this State.

Mr Schipp: None.

Mr BOWMAN: If I can be satisfied by the Minister's interjection, I will pass on to suggest some of the difficulties that I do not believe have been addressed sufficiently by the proposal. For example, the freedom of information legislation ought to apply to corporations that are set up under the State Owned Corporations Act.

Mr Schipp: It does, or it will.

Mr BOWMAN: It needs to be made clear to people that that is so. People have a great distrust. I should be pleased if the Minister's interjection means that there will be no diminution in people's right to know as a result of corporatisation. I hope the Minister will be able to assure people that equal employment opportunity will be every bit as secure under a free-standing corporation as it is at present. If those matters are assured, many of the fears that people have about corporatisation will disappear. I pay tribute to the management and staff of the Water Board that the implementation of its principles of equal employment opportunity have gone hand-in-hand with the remarkable increase in efficiency of the operations of the Water Board in recent years. If the Minister's undertakings are clear, he might be good enough to pronounce them in a ringing fashion again. If he does, I shall be pleased to convey that message to the people of my electorate.

A number of people have expressed concern that although it is worthy that the Water Board has sampled public opinion and shown every indication of an earnest desire to satisfy people's legitimate claims or wishes, consultation by opinion poll and surveys is not necessarily the only satisfactory means of determining what people want and think. Even political parties and purveyors of all sorts of goods can carry out market surveys and make shrewd judgments about how to behave without necessarily feeling they should take note of the results, except in so far as they think it might be dangerous to do otherwise. That is the demur of some people about the efforts to get public input into how the Water Board should operate. It may be that a Hunter Water Corporation will be able to expand this kind of procedure and develop a culture in which people will feel
Page 5149
not only that they can complain about something but that they can make positive suggestions and that, in a way, it is their water board and not something controlled from distant Sydney. I hope the Minister will give an assurance that this sort of atmosphere will prevail.

I cannot fault the good intentions of the present management. However, I note that in relation to the plumbing inspection service, which has been referred to by other honourable members, there is insufficient guarantee that the Building Services Corporation or the State Pollution Control Commission, which one presumes is soon to be replaced by the Environment Protection Authority, or some other government agency will be able to take over this job and do it effectively. There is an argument that it would be better to have an agency that is outside the direct operations of the Water Board doing this job. It is arguable also that the Water Board as it exists is much more effectively and efficiently able to do the job. No satisfactory argument has been made out for change, and yet change seems to be happening.

Mr Schipp: Where? It is not included in the bill.

Mr BOWMAN: It is not in the bill but it is an example of change that has occurred at a sweeping rate in Newcastle and is taken to be characteristic of the change that can occur more rapidly after corporatisation. If change cannot occur even more rapidly after corporatisation, why bother having corporatisation? Why not just leave things as they are and say, "We are going to run this government organisation efficiently; we are going to make sure that the government stroke has disappeared, that the managers are on the ball and that the customers get good service". All of those things have been attempted and tremendous progress has been made under governments of both persuasions. Why not leave things as they are rather than, as many people see it, go the ideological way, invent this paradigm of a profit-making organisation, as though it is something other than a monopoly, and give some people a buzz when it is something ultimately that has to be controlled by the Government because of its essential nature? It is a kind of pretence that it is something utterly independent, like a body competing with others in the community for customers for its services. If competition cannot be achieved, people look to government especially to ensure that efficiency is achieved.

Mr ACTING-SPEAKER (Mr Merton): Order! The honourable member has exhausted his time for speaking.

Mr HUNTER (Lake Macquarie) [10.15]: In speaking to the Hunter Water Board (Corporatisation) Bill I echo the comments made by my parliamentary colleagues from the Hunter region by stating that although the Opposition supports corporatisation of a number of public authorities, including the Hunter Water Board, it is not really satisfied with the model of corporatisation proposed in the legislation. The Opposition proposes that the Hunter Water Board be retained as a statutory organisation and not converted to a public company with a share base. That would enable the Minister to continue to have some form of control, direction and responsibility and keep the board that much further away from privatisation. Many people in the community believe that the Greiner Government is using corporatisation as the vehicle for privatisation. Some people fear that under this Government the corporatisation of the Hunter Water Board is the first step towards privatisation of that board. I should state that I am totally opposed to privatisation of an organisation such as the Hunter Water Board.

I said earlier that the Opposition opposes the model of corporatisation that is proposed. The Opposition cannot see any justification for entailing enormous expense
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in management and restructuring simply to convert the board to a company. The apparent abandonment of any means by which the public and the Parliament can scrutinise the performance of the Hunter Water Board is of concern to the Opposition. As a consequence we propose that a number of provisions of the State Owned Corporations Act should not apply to this bill. These relate to the establishment of a public company, a new board of directors, removing the government guarantee, removing annual report legislation coverage, changing staff conditions, not maintaining equal employment opportunity provisions and not applying other State legislation, in particular the Freedom of Information Act. These matters should be reversed in regard to this bill. A number of other provisions of the bill would also not apply. They include references to assets that can be excluded from the new organisation, creating a separate ministerial corporation, a change of name, and the abolition of the board of directors. Of real concern is the removal of the freedom of information provisions. The Opposition strongly opposes any moves to limit access by the community to information held by what is essentially a public organisation.

There has been little consultation with the union. The Hunter Water Board said that that was because there would be little change to the industrial conditions. However, the Opposition does not believe that answer is good enough. It is obvious that there would be major change to the organisation with corporatisation. The Opposition has had discussions with the union, which is concerned about many aspects of the proposed legislation. I have a list of 19 questions to which the union has asked the Opposition to obtain answers. It shows how little consultation there has been for the union to come up with that number of questions. One question was: does the corporatisation of the Hunter Water Board reflect the first thrust by the present State Government towards privatisation of the Hunter Water Board? Obviously, the workers in the Hunter Water Board have the same concerns as many Opposition members and many members of the general public that this is only the first step towards privatisation. Another question the union asked was: specifically, how will the corporatisation benefit the ratepayers of the Hunter region? Specifically, how will the corporatisation benefit the current employees of the Hunter Water Board? Another question was: what will occur if the operating licence of the corporation is cancelled for whatever reason, and who will be required to serve the term of imprisonment referred to in section 18(1)(c)?

Honourable members will see by those questions that there has been little consultation with the workers in the Hunter Water Board. The union also asked: what will be the position of the employee representative on the Hunter Water Board? Will that be maintained? Perhaps the Minister will answer that question in his reply. I remember in the previous Parliament the Greiner Government trying to remove from the workers of the Electricity Commission their worker representative on the board. That was fought by the Opposition and, with the support of others in another place, we were able to stop the Government removing that worker representative from the board of the Electricity Commission. The workers of the Hunter Water Board fear the same fate for their worker representative. The union asked also: if the board proceeds with this proposal to significantly reduce the number of plumbing inspectors, who will have the authority to issue notices for defective work and supervise the standards for plumbing and drainage work in the Hunter region? Representatives of the plumbing inspectors have come to my office and explained to me their concerns about the proposal to reduce the number of plumbing inspectors.

My colleague the honourable member for Charlestown clearly stated the concerns of the community as to what will happen if the plumbing inspectors are removed when the board is corporatised. The Opposition wishes to see maintained staff provisions such
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as those in the existing Hunter Water Board Act and the retention of a staff-elected director on the board. I turn to my personal concerns about the legislation. They relate to the expansion of the Hunter fringe area sewerage scheme and, in particular, expansion in the West Lakes area. Why are no specific guarantees written into the statement of corporate intent for the continuation and expansion of the scheme? How will people living in towns such as Wyee West and Cooranbong be able to gain sewerage services once the Hunter Water Board is corporatised? The bill does not give any guarantees to expand those schemes. The Opposition proposes that though the body should not be structured as a public body, it should incorporate the relevant provisions of the Federal Corporations Act relating to the performance and duties of the directors. This is similar to the Queensland draft model of corporatisation. The Opposition amendments will ensure that water rates in the Hunter region will not increase over the next three years by more than the consumer price index average.

Dr MACDONALD (Manly) [10.25]: The Minister may question why the honourable member for Manly seeks to share his views on this matter with the House, but I believe that the corporatisation of the Hunter Water Board may represent, in a sense, a dummy run or microcosm of what might happen with the Sydney Water Board. The Minister has argued that the corporatisation will lead to an increase in efficiency and competitiveness and, in a sense, to an increase in productivity. But by doing so - and this applies to any corporatisation - it tends to distance the authority from government. Where the authority has a public service, social, environmental impact, it is very important that governments should retain some control. Within this particular legislation much of that control comes through the operating licence, which I shall address in a moment. The legislation should provide for adequate environmental control. I might draw a parallel with the lessons of the Sydney Water Board, though there are differences.

The Sydney Water Board has a centralised major collection system with three main outlets, whereas the Hunter region has 28 smaller units. The proposed legislation has a clear strategy for reuse of sludge and water, for which I commend the Minister. I should like to address that matter in some detail in a moment. This is very much in contrast with the lack of any strategy for such matters within the Sydney Water Board, which was highlighted in the Camp Dresser and McKee report. People from the Hunter Water Board area have supplied me with a clear environmental plan, which is a delight to read. There is a degree of enlightenment within the proposed legislation, by which I was reassured. Clauses 12 and 13 relate to the operating licence and the granting of that licence. The Minister mentioned in his second reading speech that it is a fundamental component of the corporatisation of the Hunter Water Board that water resource management and effluent disposal standards not be compromised. He went on to say that the instrument to establish the operating environment of the Hunter Water Corporation is the operating licence. He said there are five key instruments to the bill, again including the operating licence. I see that as one of the key components that has to be examined in some detail. The draft licence, which I welcome, is available. That provides an opportunity to look at some of the essential ingredients of that licence.

The principal conditions relate to the provision of services, maintenance of quality, performance standards, regulation of prices, et cetera. The summary of the operating licence states clearly that there is to be a maintenance of quality performance standards by that water corporation. Page 20 of the licence contains the clear statement that there shall be operational audits. I would like to address this matter. It is said that the licensee shall, at the request of the Minister, cause an operational audit to be performed of the licensee's performance of its obligations under schedule 4(1), which relates to the key operational standards for waste and water treatment works, service
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interruption, surcharges and pressures specified in schedule 4. It is quite clear in the operational audit that the Hunter Water Board is seeking to allow scrutiny of its performance. I am pleased to see that it has agreed to air in the operational audit that it should be done annually by an independent operator and that the results shall be made public. This is the sort of scrutiny of performance that I like to see.

The Hunter Water Board has also agreed in discussions I had with it - and perhaps the Minister will refer to this in his reply - that that operational audit will include an evaluation of the board's performance with regard to the environmental plan. I mentioned that plan earlier. It is quite an impressive document, which is an awful lot more than I can say for that of the Sydney Water Board. The plan sets out clearly the long-term goals of the Hunter Water Board. Apparently the environmental plan was put together in 1989 with a lot of public input, advertised, submissions called for, and public forums established. I signal to the Minister that the plan shows how to improve the performance of the Sydney Water Board, which is overdue.

Mr Schipp: We are trying hard.

Dr MACDONALD: That is good.

Mr Schipp: The honourable member is always prompting me.

Dr MACDONALD: I thank the Minister. Within that environmental plan, I point out two specific things that I believe are very important because they relate to the big picture of what is happening in Sydney. On the first page of the environmental plan, the seventh objective relates to the beneficial reuse of sludge, with the aim that 25 per cent of sludge will be beneficially reused by 1995. That is within the environmental plan. The environmental plan is then subject to an audit within the operating licence. I welcome that. Objective seven of the environmental plan also is concerned with water reuse, and states quite clearly that the aim in the Hunter region is to have 10 per cent beneficial reuse by the year 1995 and 25 per cent by the year 2000. Perhaps those figures will be reviewed on an annual basis or even by 1995, but the point is that the Hunter Water Board has bitten the bullet and said that it will look at sludge and water reuse. It has come down with figures and included them in an environmental plan. That is something I applaud. There is a constant need for audit and for a continual scrutiny of the environmental plan.

Clause 61 on page 30 of the bill relates to the disposal of waste products. I draw the attention of the Minister to matters of concern to me. One is the very reason why that environmental plan has to be scrutinised continually. Clause 61 deals with the disposal of waste products whereby sludge is put down mine shafts in the Hunter area. I have copies of some of the licences. Having spoken to people from the Hunter Water Board, I understand why there has to be a provision in clause 61 which gives exemption to the prosecution where that happens on somebody else's property. The licence relating to the Edgeworth municipal water treatment works shows clearly that some of the waste stream is being redirected into a disused colliery. I agree that that may well be an option that has to be exercised where each plant takes into account each site in terms of its ultimate disposal, but I argue that we have to keep all our options open. There are real concerns if we start pumping sludge and waste water down collieries when there is a commitment under the environmental plan to the beneficial reuse of that sludge, whether for fertiliser, landfill or filling open mines. A number of options remain open in the Hunter, although the 28 treatment plants obviously each pose different challenges and problems. But we need some instrument that allows public scrutiny of all processes.
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That comes through in constantly refining and fine tuning the environmental plan and having operating licences under which clients can be scrutinised. I welcome the bill and the fact that built into it is a recognition that there are environmental implications and that these will be taken into account within the operating licence.

Debate adjourned on motion by Mr Schipp.

House adjourned at 10.37 p.m.