08 October 2009

No service means no subsidy

Again, rare for me to agree with Idiot Savant, but whilst NZ Bus services are suspended due to strike action, it shouldn't be getting subsidies for services not being provided.

Funny how the ARC Chair Mike Lee is pointing this out, but admitting that ARTA, which is a branch of the ARC, is still doing it.

Does he not realise how this strengthens the case for the abolition of the ARC?

Indeed it strengthens the case for abolishing bus subsidies. I'm neutral on the industrial dispute. That is between two groups of people negotiating payment and conditions for the provision of services.

However, part of the leverage in that dispute is that NZ Bus loses fare revenue when services are not provided. Yet, when it gets subsidies of, on average, $2 a passenger trip from ARTA, regardless of whether services are provided, then the main losers are Auckland ratepayers (who pay 60% of that subsidy) and motorists/commercial road transport operators (who pay 40% of the subsidy through fuel tax and RUC). It used to be that around half of all bus services in Auckland were fully commercial, in that fares more than covered costs and that the market was open to competition.

Now the proportion is much less, I have heard an estimate of around 20%, but it isn't clear. ARTA has "contracted over" commercial routes, so that one subsidised operator is paid to provide a set of routes. This effectively shuts out competition, which ARTA can prohibit if it undermines a contracted service.

Now, if NZ Bus relied wholly on fare revenue it might seek a settlement more quickly, as the business would be dependent wholly on pleasing customers, not a bunch of transport planners.


Anonymous said...

It's not a strike, it's a lockout.

Libertyscott said...

Yes, apologies, indeed you are right.