Road pricing debate shrouded in smoke and (rear-view) mirrors

Dr Matthew Birchall
12 March, 2024

Transport policy increasingly resembles a culture war, with Lycra-clad cycling enthusiasts pitted against V8-loving, gas-guzzling motorists. To put it another way, Kiwis are either champions of light rail or proponents of Roads of National Significance. There is no in-between, or at least that is how it seems.

I was hardly surprised then, when last week’s long-awaited draft Government Policy Statement (GPS) on Land Transport was inundated with exaggerated rhetoric and hyperbole. Matt Lowrie, writing for popular transport blog Greater Auckland, even suggested that Transport Minister Simeon Brown’s GPS was “probably the most ideological, unbalanced and petty transport policy the country has seen.” Green Party transport spokeswoman Julie Anne Genter, meanwhile, dubbed it “extreme” and suggested on X (formerly Twitter) that it condemned kids to be driven everywhere.

Such is the tenor of the times.

However, amidst the hysteria, I was surprised to find scant commentary on arguably the most significant message emanating from Minister Brown’s flurry of transport announcements: the commitment to comprehensive road pricing. Far from a road to nowhere, as Cycling Action Network branded the draft GPS, Brown’s intention to replace fuel tax with an electronic road user charge system by the end of the decade and progress congestion charging represents the most ambitious transport reform undertaken this millennium.

To understand why, it is necessary to have a clear grasp of the problem facing Waka Kotahi NZ Transport Agency (NZTA), the Crown entity responsible for managing New Zealand’s land transport network. In its briefing to Minister Brown last November, NZTA noted that the “current funding situation sees much of the planned future investment currently under or unfunded.” Over the next decade alone NZTA observes it will have to invest around twice as much as it expects to receive in revenue. This results in an estimated funding shortfall of between $4-5 billion annually.

As the briefing note makes clear, the magnitude of this funding gap raises urgent concerns about the viability of the revenue model that helps pay for New Zealand’s roads, rail, public transport, and other essential transport services. In other words, the current set-up is simply unsustainable.

This is where road pricing comes into the picture.

Road pricing – a system where road users pay charges based on mileage, time of use, route, and vehicle type and weight – can encourage more efficient use of the transport network and alleviate congestion. Additionally, it can provide valuable insights into road user behaviour, enabling transport officials and politicians to make better-informed decisions regarding future investment.

There is nothing remarkable or novel about road pricing. Indeed, Adam Smith, the father of modern economics, observed in 1776 that it seemed “scarce possible to invent a more equitable way of maintaining” a road network. Transport economists in the wake of Smith have not conjured up a better model.

However, it is not just economic theory that supports road pricing. Countries as diverse as Austria, Singapore and Sweden have all implemented road pricing to great effect, and Iceland, in a world first, is currently exploring how to extend road pricing to cover all vehicles.

While New Zealand’s Road User Charge (RUC) system is more developed than comparable systems in Australia and the United Kingdom, we should follow in the footsteps of Iceland by including the entire fleet.

Currently, drivers of light diesel vehicles and heavy trucks pay a distance-based charge. The revenue generated from these charges contributes billions of dollars annually to the National Land Transport Fund, helping cover vehicle depreciation and general road maintenance costs. From April 1, owners of electric vehicles will also need to buy and display a RUC license.

If New Zealand rolled out a universal RUC system, it would help plug the $4-5 billion funding gap that is contributing to the poor state of our road network. It would also ensure that critical road maintenance was covered by those who benefited from the asset.

Regrettably, the current set-up is becoming more, rather than less, detached from pricing signals. Fuel excise duties and motor vehicle registration fees are inadequate tools for accurately assessing the costs imposed on New Zealand’s roads by light vehicles like mine. And the long-term viability of this model is only expected to decline further as car manufacturers enhance fuel efficiency and as road users transition to electric vehicles.

A more sustainable funding system would see my car fitted with an electronic distance recorder. The transponder would capture information about my road use, and a digital payments system would send me a bill at the end of each month – much like we already pay for internet use or electricity. Companies like EROAD have the technology ready to go.

Congestion charging in major cities like Auckland and Wellington would also help. Indeed, it should be the top priority for the new government, as it would do more than anything else to unblock New Zealand’s roads. By charging drivers a fee for entering a specific area or zone, congestion charging helps manage demand, thereby ensuring that more trips can be successfully completed at peak times. Better traffic management could also help reduce the need for costly investment to increase road capacity.

International experience, coupled with a paper mountain of reports into its application in New Zealand, shows that congestion charging works. The challenge for Minister Brown will be building public support through an effective communications strategy. Road users must be certain that the charge is aimed at reducing traffic, not gathering revenue. If implemented correctly, road users will be able to see the benefits of reduced congestion, leading to an uptick in public support. This is precisely what happened in Stockholm.

For too long, discussions about transport policy in New Zealand have been framed as a cultural battleground. Yet, considering the clear funding gap confronting NZTA, it is high-time we insisted on a more rational transport debate. This means shifting to a universal road pricing system that is more responsive to user demand – the alternative is a debate shrouded in smoke and mirrors.

To read the full article on the Newsroom website, click here.

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