Fuel tax increases delayed.... but the central planning isn't going away

As many of you will know, I could write a lot about this, but I want to make two related points....

The land transport funding system as it stands is largely dependent on motorised road users being charged a mix of taxes and fees, for using the roads and owning vehicles. From that state highways are funded, local roads are around half funded (rates contributes the rest) and public transport is subsidies (with around half of the subsidies coming from rates). Because the fees charged for road use and vehicle ownership are collected nationally, everyone pays the same per litre of fuel, kilometres driven regardless of where they are. What varies is how much based on vehicle fuel consumption or vehicle class/weight (for road user charges).

What this means is that although money is collected from all over, the money is distributed on the basis of need and on the basis of government priorities.  This means cross-subsidies all over the place. Regions that are poor with high costs (think Tairawhiti) get their roads subsidised by motorists in regions with lower costs (think Canterbury).  Some regions get very little new capital spending (think Southland) but have high costs of maintenance because a lot of roads have to be paid for by a low population.  Some get a lot of new capital spending (think Auckland), but pay a lot as well.  

What this means is as costs go up, and political demands to spend more (driven by people voting for politicians who promise new roads, new railway lines, new busways), the main way this is paid for is taxing motorists more. ALL motorists more.

So the first point is simple, any government has three choices, without reforming the system:

• Don't raise taxes/fees to respond to those demands including inflation, and cut capital spending. It would be entirely possible to fund maintenance and existing commitments without increasing fees, but spending on capital improvements for any modes would start to dry up and over time maintenance ;
• Raise taxes/fees, and face backlash from people in regions who arguably get nothing more for their money, and see those who benefit the most from new spending contributing little towards it;
• Pour in money from general taxation (money that otherwise might be spent on health, education, law and order, defence, welfare, or returned to taxpayers in tax cuts), creating the obvious opportunity cost of increasing land transport subsidies.

Bear in mind that the debate around this isn't so much about what it is spent on. Labour and the Greens rarely talk about how almost all land transport spending is dependent on people driving and freight going by road, because if that dropped significantly, then so would available funding. Despite some ludicrous claims, especially from the anti-car Green left, if people drove 20% fewer kilometres by car, it would make virtually no difference to road maintenance costs. Cars create very little road wear per kilometre driven.  The two big impacts are the weather (roads deteriorate due to exposure to sun, rain, snow, temperature changes) and heavy vehicle axle loads. Fewer heavy truck movements slows down road maintenance, but it also reduces road user charges revenue, so it's not much of a net saving (although few trucks on local roads will save ratepayers). Furthermore, unless fewer movements are due to more productivity, less road freight is generally a result of economic recession.

So when anyone is debating this point, if they don't want the system reformed, then either they want ever decreasing spending on road and public transport improvements, higher fuel tax and road user charges, or (on average) higher general taxes.

The second point is more fundamental, there is a choice of deeper reform. Such a reform would stop treating roads as a political football, or indeed public transport. It would see people paying more directly for the roads they use, based on the costs of providing them in the region they are in.  It would see direct feedback loop between what is paid and what is spent. It might see road providers responsible for footpaths as well, but treated as regulated utilities rather than political footballs.  Big new roads would be justified only as long-term investments in corridors, but with better pricing the demand for these may ease.  Likewise, better pricing of road use would see public transport needing fewer subsidies until it could stand on its own, as it does in multiple jurisdictions such as Hong Kong and Japan, with specific subsidies only to support those who can't afford it. 

No longer should the ute driver in Gore pay for the public servant in Wellington to walk from his $1.5m house in Khandallah to a train for a $200k p.a. job, because the public servant would pay more driving on a heavily constrained road. Likewise, no longer should the ratepayer in suburban Gisborne pay for the forestry company to get its road sealed, because road user charges only pay part of the costs of local road renewal.  

The politician promising a four-lane highway from Piarere to Taupo would have to assert that it was going to be funded from general taxes to support the Highway 1 road provider, because the Highway provider wont get enough money from motorists to pay for such extravagance.  However, so would the politician promising a tram line to Auckland's North Shore through a tunnel, having to justify to small business people in Henderson why their taxes should pay to give Takapuna homeowners a massive uplift in their property values - although an entrepreneur might decide it is worthwhile to do so, if her company invested in properties along the route on the basis of that uplift.

Whether or not speed limits went up or down, or cycle lanes were installed, or parking remains, or a lane, or space for outdoor dining, would depend on the road provider deciding on tradeoffs between land owners, transport users and property owners along the corridor who contribute towards the infrastructure outside their businesses or homes.  It wouldn't be driven by an ideology of banning cars, vs. an ideology of hating cyclists, but rather one of value, determined more or less, by market conditions - the choices of millions.  

It wouldn't please those who want to build lots of big new roads at anyone's expense, but it also wouldn't please those who call motorists "car fascists" (like the MP for Rongotai, soon to be Wellington Bays), those who think railways have been cheated out of their prime position as the mover of millions of people and more freight, in other words central planners of all stripes.

It ought to be time to stop paying obeisance to the fraternity of transport planners, town planners, environmental activists, public health experts and other busybodies who think how people choose to move about is something that needs "correcting".  This trend has only been fuelled by universities who nurture central planning.

Consider this. There are few transport planners who work for airlines nowadays, since that entire sector has effectively become a largely open market in most developed countries. There are even fewer who work for shipping firms. Virtually no transport planners anticipated what would happen with the rise of the internet, the smartphone and the effects on logistics including disruptors like Uber.  Uber destroyed central planning of taxis in those jurisdictions who have it.  No transport planners would have advocated for it. 

That's not to say there isn't a role for planning, designing and engineering in land transport infrastructure, but it should be led by market disciplines - what users want, and what they are prepared to pay for, compared to the cost of providing it.  Consider that virtually nobody involved in transport planning knows a thing about how modern freight logistics companies work, and indeed most never even think about freight.  Virtually nobody involved in transport planning thinks about aviation or shipping, and how those businesses price, supply, inform the suppliers of their VERY expensive vehicles, and how airport planning is focused on what airlines want and how to make that infrastructure profitable and attractive.

So maybe it's time to take a pause and think long and hard about whether the traditional thinking around land transport should move on. I'm not sure the political incentives are quite there for it though.