Monday, May 05, 2008

So what IS happening with fuel tax?

First, the government announces, some time ago, that to fund more inefficient public transport, and roads that are politically driven, it will allow regional councils to levy fuel taxes on petrol AND diesel (diesel typically has no tax usually).
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Helen Clark says on the 6th that the new regional fuel taxes to subsidise public transport (and fund more roads) wont happen.
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Dr Cullen then says they will. However the government wont agree to a "full tax" immediately. He says that without a regional fuel tax in Auckland, rail electrification can't proceed. You might ask why those who would benefit from rail electrification - users and operators of the commuter rail service - can't pay for it themselves? You might ask by how much congestion will drop because of electrification? You wont get an answer.
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Now Helen Clark says it wont include transport in the emissions trading regime until 2011, so that the punitive 8c/l levy would be delayed. Note the word delayed. She also said the government wont approve a regional fuel tax as high as 5c/l, which means you might get one less than that.
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However, one thing you can be certain of - Labour will increase fuel taxes or levies. You might ask how good the "investments" are that it expects the taxes to be used on.

3 comments:

john-ston said...

"You might ask by how much congestion will drop because of electrification? You wont get an answer."

"You might ask how good the "investments" are that it expects the taxes to be used on."

I would suggest that congestion (and I am including potential congestion here) would drop by plenty over the coming years as a result of rail electrification. I suppose it is time for you to hear a tale of three cities; three places where different decisions have been made over the last forty years and the effects that they have had on those cities.

These three cities are Adelaide, Perth and Brisbane. In the early 1970s, each city had diesel train services; Adelaide had the Redhens, Perth the ADGs and ADKs, and Brisbane had diesel locomotives hauling around the Evans and SX Sets. Each city had low levels of rail usage; approximately ten million passengers a year.

The hope for the future of rail in these cities was bleak. In Brisbane, there was a proposal to truncate Ferny Grove services to Keperra; Beenleigh services to Kingston and close the Lota Line completely. In Perth, the Fremantle Line was closed in 1979, and in Adelaide, the Semaphore Line was closed in 1978, followed by the Finsbury and Hendon Lines in 1979 and 1980 respectively. The only expansion of those networks had occurred in Adelaide with the extension of the Halletts Cove Line to Noarlunga Central in 1978.

In 1975, Brisbane, with the possibility of hosting the 1982 Commonwealth Games, and facing a need to retire its sixty year old Evans carriages, decided to electrify its network and construct the Merivale Bridge. It did that, and the first electric line opened in November 1979.

Now fast forward a decade to the 1980s. In Brisbane, rail was coming out of the gloom. Millions more passengers were using the network, and by 1987, Brisbane's network had patronage of 43 million (that must have taken a lot of cars off the road, wouldn't you think?). All this was done on the existing network, except for the extension of the Lota Line back to Cleveland. There were even calls by then to extend the Beenleigh Line through to the Gold Coast.

Meanwhile, Adelaide's and Perth's rail networks were still stuck in the gloom. In Perth, the Fremantle Line had re-opened in 1983; while in Adelaide, the Bridgewater Service ceased in 1987; and the future of the Penfield and Northfield Lines was up in the air. Both Perth and Adelaide still had annual patronage of ten million passengers.

Now fast forward a decade to the 1990s. In 1988, with the experience of Brisbane, Perth decided to electrify its network as well. Along with electrification, there was to be a new line built to the Northern Suburbs. By the end of the 1990s, Perth's rail patronage had jumped to thirty million per annum; with the Northern Suburbs (Joondulup) line causing a doubling in patronage when it opened in 1993. There were calls for an extension of Perth's network to the Southern Suburbs.

In Brisbane, growth still continued. The last of the diesel locomotives hauled services stopped in 1999, and with that, came the end of that era. The line from Roma Street through to Northfield was quadruplicated and solved congestion problems around Brisbane Central. The Gold Coast Line, which had been closed in 1964, was reopened to Helensvale in 1996, Nerang in 1997 and Robina in 1998.

Meanwhile, in Adelaide, the gloom continued. The Northfield and Penfield Lines both closed. Even today, there is still a large question mark over the future of rail in Adelaide.

To bring it up to the present, in Perth, the Southern Suburbs (Mandurah) line has been opened. In Brisbane, track improvements have continued. Brisbane now had sixty million rail passengers per annum, Perth has forty-five million (although that is set to increase with the Mandurah line), and Adelaide has ten million.

While I never mentioned Auckland in this post, Auckland is very similar to each of these cities. Had rail electrification not happened in Brisbane, what would have happened to those million trips a week? Car? Bus? Imagine trying to fit 200,000 passengers down Adelaide Street, all waiting for buses. It just couldn't work. You would have had high levels of congestion, and also probably greater car dependency as workplaces migrated to the suburbs. The rail passenger network would have probably keeled over too; given time, the Ferny Grove, Shorncliffe, Lota and Pinkenba Lines would have all closed to passenger runs. Similar in Perth.

Auckland has two choices. We can end up like Adelaide, or we can end up like Perth and Brisbane.

libertyscott said...

John-ston. The problem you have is the counter-factual. Adelaide does not have worse congestion than Perth or Brisbane, indeed Brisbane's is arguably worse. You can make a pretty sound case that economic growth in Perth has far outdone both of those cities in any case.

You assume the rail patronage increase involves trips that would have gone by other modes, I'd suggest much of it is also induced. Heavily subsidised passenger rail induces people to live near it and use it, whereas they may otherwise have chosen to live elsewhere and do different trips by different modes. Part of what you say is true, but the cost of doing this is enormous compared to alternatives. Many of the rail trips wouldn't have happened otherwise (don't forget the high proportion of concession based trips children/elderly), so rail becomes a gold plated social service, not so much a car commute replacement.

The only sure way to address congestion is to price the roads, leaving space for buses to operate at competitive speeds. You know yourself the congestion wont be relieved by rail electrification - simple as that - it wont work. You can argue it would be worse but even the ARC's own figures argue the difference is negligible.

Why should people who choose to travel by rail get a mammoth subsidy to travel at all?

john-ston said...

"The only sure way to address congestion is to price the roads, leaving space for buses to operate at competitive speeds. You know yourself the congestion wont be relieved by rail electrification - simple as that - it wont work. You can argue it would be worse but even the ARC's own figures argue the difference is negligible."

However, remember that the ARC is looking at today's congestion on tomorrow's population. If you had left the rail network to rot, as has been done in Adelaide (literally!), then the level of congestion would invariably have increased. Of course, the other thing is that something must have caused the massive jolt in patronage that Brisbane saw in the 1980s, and Perth saw in the 1990s, and it certainly could not have been as the result of the loss of 30 million bus trips per annum

In terms of road pricing, while that may be an option going forward, you need a viable alternative - and for most people, buses are not an alternative. Why? Because they are extremely slow - even bus lanes do very little. All you'll be achieving is having an angry population and a spike in the inflation rate.

"Why should people who choose to travel by rail get a mammoth subsidy to travel at all?"

Because it has been proven to work - you cannot put it Further to that, you have to remember that some of the accounting surrounding railways is not a true reflection of reality.

For instance, rail equipment is depreciated in New Zealand (IIRC) over 25 years, with a similar figure in Australia; however, if you look at it, rail equipment can last between 40 and 60 years and even beyond. Here are some examples

- Adelaide's Redhens lasted 41 years
- Adelaide's 55 and 75 class RMs lasted about 40 years
- Sydney's Single Deck Steel Cars lasted 67 years
- Sydney's Single Deck Interurban Cars lasted 38 years
- Melbourne's Taits lasted 63 years
- Melbourne's Swing Door stock lasted nearly 90 years
- Brisbane's 2000 class RMs lasted about 45 years
- Wellington's English Electric Units have lasted nearly 60 years

There are of course more examples.

If you altered the depreciation figure from 4% per annum, to a figure of 2.5% per annum (i.e. depreciate over 40 years), your profits and losses would become more interesting.

Further to that, bear in mind that Brisbane's City Train manages to recover about 65 cents in the dollar, and this includes capital investment. Modify the depreciation figures, and that figure would increase. If Brisbane had more efficient staffing practices, then they would be able to break even (at which point the population would force fares down, since they would think they are being overcharged). I am not sure about Sydney or Perth, however, I wouldn't be surprised if their figures were similar or higher (because Brisbane also has two long intercity lines to cater for).

"You assume the rail patronage increase involves trips that would have gone by other modes, I'd suggest much of it is also induced. Heavily subsidised passenger rail induces people to live near it and use it, whereas they may otherwise have chosen to live elsewhere and do different trips by different modes."

If that is true, then I suppose that whatever losses from rail services could be recovered from a Capital Gains Tax or something; after all, if your argument is true, then a rail line should increase the capital value of your property. Funnily enough, I have seen evidence that is exactly what has happened in instances.

"Part of what you say is true, but the cost of doing this is enormous compared to alternatives. Many of the rail trips wouldn't have happened otherwise (don't forget the high proportion of concession based trips children/elderly), so rail becomes a gold plated social service, not so much a car commute replacement."

I suppose it seems like enormous costs because of the unrealistic accounting involved, inefficient staffing practices, and the fact that the subsidy isn't properly recovered from the people that benefit in terms of land value increases. The other thing you have to bear in mind is that rail is acceptable to the middle classes; these same people would not be seen dead in a bus

"The problem you have is the counter-factual. Adelaide does not have worse congestion than Perth or Brisbane, indeed Brisbane's is arguably worse. You can make a pretty sound case that economic growth in Perth has far outdone both of those cities in any case."

While you comment on congestion, you are missing out on a very important fact - each of those cities had ten million rail passengers a year prior to electrification, and Perth and Brisbane's patronage suddenly took off in the years immediately after electrification. While I'll grant that some of it was a move from bus to train, you cannot account for a surge of 30 million trips per annum on that basis alone. It couldn't have been congestion alone that entirely drove them to the rail option, there must have been something else.

I even had a Brisbanite once tell me that had Brisbane not electrified, but instead improved their diesel network, there would have only been twenty million passenger trips per annum today.