Both the Government and Auckland Council are determined to impose a regional fuel tax on Auckland by the middle of 2018.
The problem for transport minister Phil Twyford and Auckland mayor Phil Goff is that regional fuel taxes have always been a nonsense.
The premise behind the policy is reasonable; that the rest of the country does not tolerate paying for Auckland’s infrastructure needs and the city needs to raise its own revenue.
However, in an attempt to achieve this, the council and the Government could hardly have come up with a worse way of doing it.
The Government’s best-case scenario is that the tax will deliver $150 million per year of the annual $1.5 billion needed for Auckland’s transport infrastructure projects.
So, despite the significant administrative hassle and political risks that both Twyford and Goff are willing to take with this policy, it will barely deliver 10% of the revenue required.
Regional fuel taxes are notoriously inefficient. They take a lot of resources to administer and never really deliver the outcomes and revenue promised.
In a blatant display of populism, Goff said he wanted to see the tax applied to commercial vehicle operators particularly and that the scheme should be structured in a way that penalises them over the average mum and dad commuter.
It is unclear how Goff wished to achieve this discrimination but it’s clear he was trying to play on a perceived public prejudice against trucks.
Unfortunately for him, even if he could design the scheme to unfairly target commercial vehicles, the reality is that operators have no choice but to pass the extra cost on to their customers anyway.
Margins in the road transport industry are extremely tight so any additional costs must be reflected in higher freight rates.
What this actually means is that Auckland consumers, when they drive down to the supermarket to buy their Weet-Bix, would effectively be paying the fuel tax twice.
They would pay it on the fuel they use to drive to the shops and again on the products they buy once they get there.
Because Auckland is New Zealand’s largest import port, the impact of the regional fuel tax won’t be limited to the city.
All goods transported from it to other parts of the country will have the tax added to their freight costs.
So even though the Government wants Auckland to contribute as much as possible to its own infrastructure issues, it is effectively setting up a funding mechanism that would spread much of the cost around the rest of New Zealand.
The disappointing thing is there is considerable work going on by officials to do with the efficacy of road pricing mechanisms, which as far as I can tell has far greater potential than regional fuel taxes.
Over the past couple of years, the Government and Auckland Council have stuck their finger in the air to read the public mood on road pricing and I think they have been surprised at the reaction.
Very few people have voiced their opposition to it, with most realising that a form of user pays is required to help manage traffic demand and perhaps pay for the infrastructure a growing population requires.
Although the Road Transport Forum is far more enthusiastic about the possibilities of road pricing than a fuel tax, we have so far narrowly confined our support to demand management objectives only.
However, if it is done fairly and equitably, road pricing is a far more sustainable and equitable revenue raising toll than a regional fuel tax.
It is well known that a high proportion of peak time traffic in Auckland is single-occupancy cars. Charging on the basis of causing congestion can have a direct impact on this as it financially encourages people to car pool or travel at different times of the day.
Without question, a system of road pricing also has far more integrity than a regional fuel tax. It is incredibly difficult to dodge, prices would be structured to charge the most to those who use the network at its busiest times, and it does not include the distortions and opportunity for gamesmanship that regional fuel taxes do.
Support exists for road pricing across the political spectrum and the road transport industry should be open to the idea – as long as the system devised is fair and equitable across all road users.
The forum’s often-stated position is that the principle of user pays must be extended across all modes of transport so that government and private sector investment can be made on true comparative advantage, rather than on whichever mode is the major beneficiary of cross-subsidisation.
That would allow for a truly self-funding, sustainable transport fund that all modes financially contribute to and benefit from.
