Around $5.5 billion a year is spent on transport in New Zealand. This is a lot of money and usually makes up the largest proportion of budgets for local councils, as well as being the fourth or fifth largest area of spend for central government. Most of that money comes from fuel taxes, vehicle licensing fees and road-user charges – although a big chunk also comes from property taxes (in the form of local council rates) and from general government funding (itself largely from income taxes, company taxes and GST).

With the change of government in 2017 came quite a different approach to thinking about what we as a country are trying to achieve from this investment in the transport system. Instead of a narrow focus on conventionally measured transport outcomes, like faster freight journeys, travel time savings and reduced vehicle operating costs, the current Government Policy Statement focuses more on the role transport plays in contributing to the big outcomes we want to see as a society. Like improved safety and public health, more vibrant and liveable cities, better access to social and economic opportunities, thriving regions and reduced environmental harm.

This new approach of investing in transport to deliver the greatest broad benefits to society is a challenge to how the transport funding system has been set up, and also an important challenge to how we think about transport funding more generally. In a simple sense we can think about transport investment in two different ways:

  • As a ‘user pays’ system where fuel taxes and other charges are essentially an “access payment” to use the transport system, and money raised from these charges needs to be spent on investments that benefit those who pay the charge.
  • As just another part of government where fuel taxes and other charges are just another form of taxation, and money raised from these charges should be spent on investment that provide the greatest overall benefit to society.

Interestingly, while the up front strategic part of the GPS talks a lot about the need for transport investment to deliver on key broad outcomes, funding principles at the back of the document remain relatively fixed in the ‘old mode’ with a user-pays focus. I’ve highlighted what I think is perhaps the most ‘out of date’ principle below:

This distinction may at first seem a bit academic, but it plays out in some really practical ways when you start thinking about investments we make in say looking after footpaths, or making our streets nicer places to be in – not just faster places to move through. These are all well established and sensible things to spend transport money on, but often end up running into brick walls in terms of their funding because someone gets concerned about whether or not the investment is creating a ‘transport benefit’.

For example, amenity upgrades to footpaths in town centres, or even footpath renewals have generally not received NZTA funding. This is despite pedestrians obviously making up a critical part of the transport system and creating safe, attractive and walkable streets being key to some of the broader outcomes we want as a society through developing vibrant cities and towns and a more healthy society. The GPS sends a strong signal that these kind of investments should be funded from ‘traditional transport funding’ – so it’ll be interesting to see which part of the GPS is given greater weight:

I think it would be good for the Government to more explicitly move to thinking about transport charges as just another form of taxation and transport investment as being just another area of expenditure where the goal is to maximise overall benefits to society. My main reason for this is that I don’t think the current system has worked, as I explained in detail in this post last year.

In some respects the impact and benefits of all this spend is obvious. Auckland now has a functioning rail system, a completed motorway network, a great Northern Busway, integrated ticketing, a few high-quality cycleways and more. But in other respects we have gone backwards:

There are a few obvious contributors to these issues. In a fast growing city like Auckland “standing still” can be an achievement. But I think this is only part of the story. To provide an analogy, it is as if we increased education spending four-fold, had really complicated systems in place to project where that money would be best spent, but then found out a decade later that kids were actually getting a poorer education.

Ultimately we should expect more from such a massive spend on transport and we need to understand what’s stopping this from happening. Given the huge amount of spend on transport over the past decade, at a high level it’s difficult to say that we have achieved “value for money” in an overall sense.

We should demand more from such a large area of public expenditure. Spending billions of dollars a year should show up in meaningful improvements to the outcomes that transport affects, and which are important to us as a society. To get there, I think it will be necessary for us to think differently about transport funding.

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28 comments

  1. I’d like to see more money spent maintaining and upgrading footpaths. However even if funding is available, whether it gets spent depends on how motivated the relevant local authority is. The urban cycleways programme has NZTA heavily subsidising cycleways but the implementation has varied widely across the country. Christchurch has already opened a few cycleways and is building a bunch of others. Wellington built one and it was so divisive they seem to have given up. Auckland is building cycleways at a glacial pace.

    If more money is to be made available for active mode infrastructure then there also needs to be some incentive to use it. Preferably central government giving local government a statutory obligation to maintain their infrastructure to a safe standard. What some local authorities consider acceptable footpaths is currently a bad joke.

    1. Wellington cycleways: glacial progress rather than completely stalled.

      Out east, Kilbirnie has a few separated cycleways progressing currently (some nearly finished):
      – Rongotai Rd (both sides)
      – Crawford Rd (uphill only)
      – Evans Bay Parade (section opposite Kilbirnie Park)
      – Cobham Drive & Calabar Rd (next to Evans Bay)

      A few other short bits have been completed recently (eg near the Basin & at Oriental Bay). Plus ~1.5km of separated path along the Hutt Road at finished a little while back.

      Island Bay = totally toxic & mired in legal action (Hopefully IBRA lose & go bust)

      1. . . . yet my cab driver in Wellington yesterday complained bitterly about the number of cycleways that Wellington already had. I defended the active transport corner, even though I’m not a cyclist myself. I genuinely don’t think the cabbie had ever considered the vulnerability of cyclists on the road, from the way he was talking.

    2. The figures above show 2.3% of transport budget is spent on walking and cycling.

      The UN says it should be 20%.

      I’m not sure how we think we’re going to meet our safety, access, health and environment goals until we start taking this seriously.

  2. A key part of what you say is reliant on NZTA accepting your statement: “This is despite pedestrians obviously making up a critical part of the transport system”. I think it is pretty obvious that they do not agree – i.e. they think that pedestrians are NOT transport. They think that pedestrians are just walking, but not getting anywhere significant. If you can change that thinking, then maybe there is a chance…. but then will we not hear that old bugbear we hear about cyclists: “they don’t pay user charges.” ?

    1. Why are user pay taxes viewed as who should get benefit?
      Transport taxes are charged to cover the cost to society.
      I understand $1 spend for cars resulted in a negative return, while return for cycling are positive, so why would cyclist pay (even though most do as have cars).

      1. Or if you think of it another way – if there were no cars and no fuel taxes, and instead we spent all of the other transport income (rates and general taxes) on walking and cycling, I’m pretty sure we would have some pretty spectacular walking and cycling infrastructure. In fact it would be almost impossible to spend that much.

        As for cycleways, before cars existed people could cycle around pretty much anywhere in safety. Cars are the reason we need cycleways, not cyclists. Cars should be paying for cycleways, not cyclists.

        1. +1

          Motor traffic has intruded insidiously onto the public street-environment over a period of about 100 years. This would never have been tolerated if it had been imposed suddenly. But rather like the ‘boiling frogs’ syndrome, it crept in gradually. Society simply got used to the pain and trauma, the danger, the loss-of-amenity, the pollution, the poisoning and the demise of alternatives. Now we are addicted and dependent. We don’t know how to stop the scourge. Instead we merely fiddle at the fringes and tinker with transport-funding, while blindly continuing to feed the habit.

          Unless something radical changes, 380 people will die and 3,800 will be seriously injured on our roads in the coming 12 months. This is aside from all the environmental, social and other health problems caused.
          We have a massive problem, but we are too impaired and intoxicated to face up to the gravity of it.

        2. “Cars are the reason we need cycleways, not cyclists. Cars should be paying for cycleways, not cyclists.”

          Exactly this.

      2. “Why are user pay taxes viewed as who should get benefit?”

        Neoliberalism – we’ve been soaking in it since 1984.

      3. The flaw in the argument is viewing them as “user pays” charges – motorist fuel excise and road user charges are essentially “damager pays”. Half of the cost of land transport is maintenance, largely due to the wear and tear that motor vehicles inflict on roads. The relative effect is exponentially proportional to the weight of the vehicle. That’s why trucks pay lots, cars a lesser amount, and peds/bikes: well, you could throw a dollar in the kitty every year… Meanwhile everyone also contributes to land transport funding via local rates and a bit of contribution from general taxes too.

        1. That suggests the funding assistance rate for maintenance and renewals *should* be 100% (i.e. road users should pay all of the cost rather than property taxes).

  3. Great post Matt. I wonder how it would shift too if the transport strategy broadened its scope but also demanded a transition to carbon neutral in a decade. Fundamentally shift the aim of the game.

    1. Yeah there are several problems that need to be addressed here:

      1. Transport is not an end in itself. It is, when done well, a means to increasing prosperity and wellbeing of society, all society; it is absurd to talk of ‘transport benefits’, this is a circularity.

      2. Worse. It has been the habit of our institutions to narrowly define the phrase ‘transport benefits’ to mean specific groups only, or even more peculiarly, often the same people in different states, ie a citizen when in a car has been redeemed worthy of receiving these benefits, but not when walking. And commercial users of our roads have benefited doubly by being subsidised not only by ratepayers but also by private road users.

      3. Further; everyone in the nation subsidises ‘motordom’ by absorbing all the externalities of this punishingly expensive mode, by absorbing the costs of all the public health and environmental disbenefits, inefficient and wasteful land use, etc… To claim that road user charges and fuel excise must be used to fund more roads is like demanding that alcohol excise must be used to build pubs and bars. Tobacco taxes to recruit more smokers… this is also clearly absurd.

  4. In the world today where every cent of public expenditure and taxation is scrutinised (sometimes to the level or absurdity when compared to private companies approaches), how would viewing as just another form of taxation help?
    Keeping them ring fenced and then adding from general taxation helps to ensure special interest groups can’t justify their removal. I believe this was one reason why Auckland rates used this approach.

    I would suggest the bigger issue is the view that user pay taxes means those who pay get the benefits. Taxes are not a purchase payment taken to get better service, but rather a bill received to pay for societal costs, and make those who cost society the most pay for that additial cost caused.

    As an example try considering fuel tax as a pollution tax. If viewed this way then providing trees to clean the air for pedestrians is justified, as it is reducing the societal cost, even if footpaths/walking themselves not funded.

    1. Yes. Polluter pays is an important point. I think taxes are also a way to charge more to those who are able to pay more. Usually, these will be people who have benefited most from previous investment, when they were not being taxed appropriately. Eg historically not having pollution taxes has allowed some people to acquire wealth while others were suffering from that pollution.

  5. In the 1870’s Vogel just went out and borrowed to build the roads and railways the country needed. How much money do we need to build the cycleway’s and foothpath’s we need in Auckland would it be $500 million. So here’s the plan. Work out how to retrofit them and go out and borrow the money and just do it. And we need overbridges and underbridges so that the motorways and railways are not barriers between going from A to B on foot bike or scooter. In today’s herald Lucy Coulston 17 years old from Gisborne asked James Shaw what can “normal people” do to offset climate change. His answer was “The main thing is pay attention to transport. Use petrol and diesel powered vehicles less and take options like walking, cycling and public transport. If the family car is being changed over. Lucy could ask her parents if they are considering a hybrid or electric if they are able too.”
    If it was good enough for John Key to borrow $70 billion for a General financial crisis its good enough to borrow how ever much for a climate, obesity and congestion crisis.And it would probably be a lot less political than trying to introduce new taxes to discourage people from driving like congestion charges or fuel taxes.

    1. “The main thing is pay attention to transport. Use petrol and diesel powered vehicles less and take options like walking, cycling and public transport. If the family car is being changed over. Lucy could ask her parents if they are considering a hybrid or electric if they are able too.”

      James Shaw perhaps should have added, “Join with your school mates next Friday and protest about climate change.” With the current government inertia huge protests are the most likely method to move this government. Those of us who are a bit older will remember how protests at rugby games moved a government that didn’t want to be moved.

      The impetus for change regarding emissions has stalled. It seems that consensus on the way forward is hard. There are those pushing their own agenda.

      How could Shane Jones think that it is in any way helpful to attack Air NZ regarding its fares? First it was a campaign so that the average NZer could travel to a funeral, or whatever, if they had to. As soon as Air NZ addressed off peak fares then it became about regular travellers who use the airline week in and week out. Yep, the people who can afford to travel regularly; the ones who are probably claiming the fare against their tax; and the people who are contributing massively to carbon emissions. The revenue from these travellers is going towards the Air NZ profit, half of which goes to the government as shareholders, who could perhaps build regional rail with that revenue, that in turn would help reduce carbon emissions.

      What NZ requires foremost is a coherent policy on how it wants to spend in the transport area given that there is a huge need to reduce carbon emissions. For me the starting point is whether the balance between these two numbers is right?
      $3924 million Public transport etc
      $5280 million Local, regional roads etc

      1. When I recently went to Timaru I found the fare very expensive so I flew to Christchurch instead. I told my brother I could catch a bus but he just drove up to pick me up. So not good emission wise but I wonder if the bigger plane on the Auckland Christchurch flight plus the road trip generated less emissions than the smaller plane flying Auckland Wellington then Wellington Timaru. Jetstar doesn’t fly direct to Timaru so I wonder if it could run Auckland Christchurch with a shuttle to Ashburton Timaru and perhaps Oamaru. I know you could get a shuttle but what if it offered a through fare to match the Air New Zealand one or better it. I would use it as I am not in a hurry.

  6. It is a double edged sword. If you claim that it is no longer a user pays system and the fees charged to road users are just a general taxation then those fees would need to be assessed in the same way as any other general taxes. Are they regression or progressive, are they fair, do they focus unduly on one particular group? This government might have one view, but the next government might say ok transport is part of general expenditure so they might get rid of road user charges and pay for a major roads programme from income tax. Be careful what you wish for.

  7. User pays for smoking doesn’t mean that the tax dollars raised on tobacco taxes only get spent on Quit smoking programs or better health care only for the smokers – just because they “paid” some money in taxes by buying fags.

    Nor do alcohol taxes get used solely to benefit just drinkers.

    So arguing that User pays for Transport where the money raised, is used only to provide benefits the users of the road, is a position that has clearly had its day, if indeed, it ever should have had a day to start with.

    However, it is also important to ensure minimum spend levels on important transport areas are maintained.

    And its important to note that minimum spend levels doesn’t mean we continue to squander huge gobs of money on Gold plated RONS or fixing up state highways that are annihilated by larger and large trucks in the guise of “efficiency” who are not paying their way even with Road User Charging regimes in place. Just because its decided thats “more important”.

    Instead we decide where best to spend the money taking an holistic approach, and if its decided that fixing up the Northland rail line over a Motorway between Puhoi and Whangarei then thats a value judgement someone has to make.

    But we need science behind those trade offs not the current system where some modes projects are excluded from funding consideration, no matter how worthy just because some minister says so. And other projects are considered “politically positive” so get pushed ahead of the rest on that basis (That “10 new bridges in Northland” promise – looking at you here).

    One is certain the present way of raising transport taxes mainly from fuel taxes will have to be revamped in the next few years. Or we will end like the US with their gas taxes causing their transport spending to plummet as more and more money is diverted away from roads by political meddling while inflation and fuel economy increases further kills the meagre amount of money “gas taxes” raise.

    I don’t know what the perfect tax system looks like, but we don’t need to let perfect be the enemy of better.
    And we so badly need a much better transport funding system than what we have now.

  8. I wish there was more education and understanding from the public about how much transport related decisions affect our lives. I know anyone reading this blog will appreciate how complex and far reaching the outcomes are for transport choices… I guess it’s just like politics today, trying to keep people engaged and interested [in policy, not people] when people are so busy we often just think about what affects me versus the best outcomes for society as a whole.

    I’ve been hoping that the current GPS would help transport agencies better allocate funding to support efforts that produce benefits across the board instead of just theoretic time savings for the next 800 cars that week joining the network.

  9. 1) “Despite enormous efforts, congestion is getting worse rather than better.”

    Yes, because we don’t have congestion tolling yet. NZTA/AT should just get on with implementing it in Auckland using a gantry based system. The more complicated GPS based road pricing/congestion tolling can wait.

    2) “The road toll has spiked upwards alarmingly over the past few years, increasing more rapidly than population or total travel.”

    Yes, because our transport system design standards are way too low.

    NZ immediately needs a nationwide design standard for new transport system infrastructure base on vision zero, with all upgrades & retrofits having to meet the new standard.

    3) Carbon emissions from the transport sector have continued to grow, despite commitments to reduce emissions.

    The NZ carbon price is close to international prices. We’ll have to wait for the prices to rise. Electric vehicle prices are still falling & it would be possible to implement a feebate scheme where reductions in the price of new electric vehicles are cross subsidised by a levy on new fossil fueled vehicles.

    One could also remove the ratepayer transport funding subsidy & increase the fuel excise tax.

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