Time to make the shift to congestion charging

Dr Eric Crampton
The Post
29 April, 2023

Everyone who contributes to traffic congestion already pays for it in about the worst way possible: through their time, and through excess wear and tear on – and emissions from – vehicles idling in stop-and-go traffic.

Shifting to congestion charging would help ensure freer-flowing traffic. It would make buses run more reliably, unhindered by peak-time congestion. Achieving net-zero climate goals would be less costly with fewer congestion-related emissions.

And by shifting some travel to times when the roads are otherwise less used, it would encourage better use of existing road capacity. The roading system could handle more trips, overall, with less need to add new lanes. If a movie theatre is full at peak times when ticket prices are zero, it makes a lot more sense to start charging for tickets than to build more screens.

The case is strong enough that there is now cross-party in-principle support for a shift to congestion charging.

RNZ this week reported on a few remaining sticky issues that seem like they should be fairly easy to resolve, if we remember what congestion charging is meant to achieve.

National and ACT have said that their support for congestion charging for Auckland is conditional on removing the Auckland Regional Fuel Tax.

ACT also would like reductions in fuel excise more broadly, with David Seymour noting that congestion charging “can’t be a way of socially engineering people out of their cars or putting extra costs on to families.” He suggested congestion charge revenues should be used to fund roads.

The Greens’ Julie Anne Genter warned that revenue from congestion charging would be unlikely to be able to replace Auckland’s fuel tax. She could very easily be right. It is hard to tell how much revenue might be collected by a congestion charge before it is implemented.

So cutting fuel excise or RUC in advance of a congestion charge could leave holes in transport funding. But adding congestion charges on top of existing road use charges could add to financial pressures. It would also leave the system open to being critiqued as a tax grab and, if charges are not set properly, as social engineering.

There are ways through this.

ACT suggested congestion charges should be used to fund roads. Dedicating any collected congestion charge revenues to the National Land Transport Fund, with offsetting reductions in other road use charges, would mean that overall monetary costs of road use would not increase. People who drive at peak times would then bear more of the costs of funding the roading network, and people who drive when roads are less crowded would cover less of the cost.

If congestion charges were used that way, the Government could avoid creating holes in transport funding by only reducing excise and road user charges after figuring out how much money is collected.

But the National Land Transport Fund is already rather opaque. Fees from road users are put into a pot, along with grants from central government for a variety of transport initiatives, and the combined pot is then used for transport projects.

If congestion charges also went into that pot, along with a promise that road user charges and excise would drop commensurately, would it be easy to tell whether the promise had been kept? If the Government needed to increase transport funding to deal with road rebuilding in Hawke’s Bay and strengthening elsewhere, it could claim that congestion charges helped to avoid an increase in petrol excise.

If critics claimed the scheme was a tax grab, proving otherwise might not be simple even if the Government played fair.

And, really, congestion charges should only be aimed at reducing congestion. Not dealing with overall road funding issues.

Setting a congestion dividend could be a reasonable alternative. At the end of the year, divide up the money collected by the congestion charging system among road users in places subject to congestion charges.

How might that work? A congestion charging system tracks vehicles entering roads subject to charging so that it can charge a pre-paid account or bill people without a charge account. At peak times it would charge a levy; at off-peak times, no charge would apply.

A congestion dividend could rebate collected revenues back to those road users scaled to their use of the roads, but without regard to time of use. Drivers who only drove at peak times would receive a dividend, but one that would be small relative to the congestion charges that they had paid. Those driving at off-peak times would receive a dividend while paying little in congestion charges. And households with Community Services Cards could receive a higher dividend.

That kind of system could not be a revenue grab. The congestion dividend would offset cost-of-living pressures. And it might help strengthen continued political support for the charging system overall.

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