How Labour’s water tax stacks up

Labour leader Jacinda Ardern says her party would impose a royalty on commercial use of water and use the revenue to clean up New Zealand’s rivers, lakes and streams.

National MPs, NZ First leader Winston Peters and industry groups say the proposed royalty would badly hurt farmers and the cost of waterintensive products such as milk, meat and wine would skyrocket.

The Herald has fact-checked those claims to see if they are accurate. Claim: Labour’s water royalty will cost farmers $50,000 to $100,000 a year (Finance Minister Steven Joyce). The facts: Labour says its price on water would be set after consultation, but it has suggested that it will be around 2c per 1000 litres for irrigators. The amount of water used by farms varies depending on several factors — location, type of farm, and whether they use irrigation. Labour’s tax would apply only to water sourced from waters and aquifers (but not town supplies). According to Irrigation NZ, the average, irrigated New Zealand farm uses about 4000 cubic metres of water per hectare. The typical farm size is about 100 hectares, meaning one would use 400,000 cubic metres of water a year. If Labour’s tax was set at 2c, then the average farm would pay additional tax of about $8000 a year. Conclusion: Partly fictional. Large farms (600 hectares or more) would pay close to $50,000, but it would not be the norm. However, an extra $8000 in tax could be a huge amount for a marginally viable farm. Claim: Labour’s water tax will add $75 to the cost of a bottle of wine (Primary Industries Minister Nathan Guy). The facts: A 2013 Massey University study found that it takes about 900 litres of water to make a litre of wine (or about 650 litres of water for a typical 750ml bottle of wine). In making the claim, Guy applied a tax of 10c a litre — a price previously proposed by the Green Party for bottled, exported, spring water. Labour has since said its price would be 2c per 1000 litres for farming, and lower than 10c for bottled water. Of the 650 litres of water it takes to make a bottle of wine, between 80 litres and 400 litres of that water comes from rivers, lakes, streams or aquifers. That means a tax of 2c per 1000 litres would add a cost of about 0.16c and 0.8c to a bottle of wine. Conclusion: Fiction. The price of wine could rise if winemakers passed on the cost, but the change would be negligible.