As discussed in this morning’s post, the Labour/Green confidence and supply agreement will lead to major change in transport investment priorities going forwards. Especially the following:
National Land Transport Fund spending will be reprioritised to increase the investment in rail infrastructure in cities and regions, and cycling and walking.
This goes to the heart of the question of what currently can and can’t be funded by the National Land Transport Fund (NLTF). The NLTF is the pool of money from fuel taxes, road user charges and vehicle licensing fees and which the NZTA are in charge of distributing. Most transport projects can be funded by the NLTF, however, some rail infrastructure (but not other types – I’ll explain) gets funded from general taxation. Let’s take a look at what can and cannot be funded from the NLTF under current policy:
- State highways
- Local roads
- Bus lanes
- Train stations
- Integrated ticketing systems
- Ferry wharves and terminals
- Public transport operating costs (including for rail services)
- Light-rail (presumably)
- Railway tracks
- Electrification wires, signals and other equipment
There is not an entirely logical distinction between the two lists. Money from the NLTF is not exclusively spent on roads – it goes on a whole pile of different elements of the transport system like rail operating costs, cycleways, bus interchanges, train stations, trains, ferry terminals and so forth. This makes sense because a functioning transport system is crucial to our success as a city and as a country. Furthermore, people who pay fuel taxes, road-user charges and the like benefit from other people using trains, bikes or whatever to travel around – because that’s one fewer person clogging up the road for them.
Unfortunately, over the past few years the roads lobby has created a myth that the NLTF is a simplistic user-pays pool and that as it is paid for by road-users it should only be spent on roads. Here’s the latest edition of that argument from the Road Transport Forum in their response to last week’s election result:
“The road transport industry is equally as adamant that the National Land Transport Fund must remain a ring-fenced, user-pays fund that is reinvested back into roading and not used to subsidise other transport modes that make no contribution to it.”
And again from the Road Transport Forum in response to yesterday’s announcement:
“Prioritising use of the NLTF towards rail infrastructure, cycling and walking shows contempt for the user-pays integrity of the fund,” says Shirley.
The National Land Transport Fund is currently ring-fenced for roading projects and paid for by road users through petrol excise and road user charges.
“Unless Labour and the Greens have plans to start making rail users and cyclists contribute to the fund then this deal is a real kick in the teeth to motorists and the road transport industry.”
These statements are full of lies. Fuel/road taxes may be hypothecated but the NLTF is not a “ring-fenced, user-pays fund” that only pays for roading. As highlighted above the NLTF is already used (quite justifiably) to help fund things other than roads. However, the current division over what the NLTF can and cannot fund is pretty messy and inevitably means that funding for rail projects gets left behind. As an example, look at all the problems with getting the Third Main funded over the past year or so.
Furthermore, funding rail out of general taxation creates quite a few further distortions. Although road users are clearly beneficiaries of rail investment (less congestion on urban roads, fewer big trucks tearing up rural roads and crashing into people) it’s the general taxpayer that picks up what is actually a pretty big tab. Here’s the spending in the 2017 Budget on rail:
- $436 million for the Crown’s share of costs for the Auckland City Rail Link
- $220 million equity investment to finance capital expenditure on the national freight network
- $163 million to roll over an existing loan from the Crown to KiwiRail. An appropriation is required for this transaction
- $26 million for metro rail projects in Wellington
- $12 million from property transactions by New Zealand Railways Corporation, reinvested in KiwiRail Holdings Limited, and
- $4 million for public policy projects and rail safety.
Overall that’s $861 million spent on rail out of general taxation – although this is probably an unusually high year because of the CRL contribution. For a bit of context that’s nearly half the amount spent on all early childhood education in 2017/18. Clearly there is a huge opportunity cost to other areas of government expenditure from rail not being eligible for funding from the NLTF.
One of the most important tasks for our next Minister of Transport is to get rid of the stupid distinctions that have been created between rail and other transport modes. This doesn’t necessarily mean there shouldn’t be any funding for transport from general taxation (better transport clearly supports economic growth and a growing tax take), but means putting road, rail and all modes on a level playing field. There’s a lot to do in this space that could involve ownership of the rail network shifting from KiwiRail to NZTA as well as opening up rail projects to being eligible for NLTF funding.
Inevitably the roads lobby will scream about such changes, but they won’t impact on the integrity behind the NLTF. This is because the fund is already used for a very wide variety of different types of projects – as it should be.