Road Transport Forum's Ken Shirley offers some 'far better' alternatives to the Regional Fuel Tax

Road Transport Forum's Ken Shirley offers some 'far better' alternatives to the Regional Fuel Tax

By Ken Shirley*

It is no secret that I have been one of the most outspoken critics of Auckland’s Regional Fuel Tax (RFT). Supporters of the tax may simply put that down to self-interest due to my position as a representative of the road transport industry. However, I invite them to consider the tax against what I consider are the preferable alternatives to it.

Firstly, it is worth stating that along with most other people involved in the transport industry I fully understand the need to invest in Auckland’s transport infrastructure, including the provision of better public transport. New Zealand has for many decades neglected its infrastructure needs and the pressures that sustained economic growth has placed on what is a fairly stretched transport network.

As Auckland expands rapidly, it is essential that significant investment is made to helping people and goods move around and through the city. Unfortunately, however, Auckland Council and the Government have chosen as one of their funding tools probably the least practical and most complex mechanism they could possibly have come up with in the RFT.

The problems with the tax have been well-traversed over the last few months so I won’t dwell on them too much here, but the whole scheme can be summarised as inefficient, difficult to administer and economically regressive. It will also, by necessity, be full of loopholes and exemptions (think boaties and off-road vehicles for example) and will in all likelihood result in major inequities between those who are in a position to work around it and those, particularly people on fixed incomes, who can’t.

So, what are the alternatives?

The first thing that should have been considered, and I know this will draw the ire from my friends on the left, is a realignment of Auckland Council’s considerable asset portfolio. Auckland Council is sitting on billions of dollars’ worth of assets in the Ports of Auckland alone. A partial sell-down of the Port could free up significant capital for Auckland to invest in assets that its ratepayers will directly benefit from, including new transport infrastructure.

The fact is that the RFT is only predicted to raise $1.5 billion over 10 years. Selling a minority of POAL will raise many times that and will provide the capital in a far shorter timeframe. It is also fair to say that an injection of private capital and partial private ownership would have a very positive outcome for the Port too. You only have to look down the road at the Port of Tauranga to see what this has done for that organisation, now the largest and arguably best performing port in the country.

In the medium to long-term variable road pricing or congestion charging should also have come into the equation. Not only could this be developed to raise the necessary revenue but it is far fairer than the RFT and has a direct relationship with traffic congestion. As long as the system devised is fair and equitable across all road users then using pricing to help raise revenue for the city’s much-needed transport projects as well as helping to manage demand on the busiest routes at the busiest times is a win-win. Conversely the RFT will of itself do nothing to ease congestion.

Congestion charging is used fairly extensively overseas meaning that the infrastructure required for it can be obtained fairly easily, basically off the shelf, and it is also future-proofed for the EV revolution in a way that the RFT, by definition, could never be.  

Finally, if the Government had the political courage they would have been far better off just increasing the general fuel excise, which is applied as a one-off transaction at the refinery, and specifically target that small component to Auckland’s transport needs. Yes, there would be some squealing out of the provinces but most people these days understand the economic importance of Auckland to the country and with the Government constantly raising general excise anyway a few cents extra would hardly have them marching in the streets.

The fact is that easing congestion in Auckland brings benefits to all New Zealanders from the perspective of the freight task.

Regardless, it is likely that fuel companies will spread the cost of the RFT around the country to even-out the impact it has on the Auckland retail fuel market anyway. The Government and Auckland Council will pretend that the money comes directly from Auckland but the reality is that they have almost no control over that.

With the legislation being rushed through Parliament and an implementation date of 1 July the time for Government to consider these more practical alternatives has probably passed. Unfortunately, come 2021, when the legislation allows, the RFT will almost certainly be extended to other local authority areas that have just as much need for transport infrastructure as Auckland does.

In summary the RFT is a sham. It is all about political posturing, not prudent public policy.


*Ken Shirley is the Chief Executive of Road Transport Forum NZ, the national body representing the commercial road freight industry

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64 Comments

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You mentioned the comming EV revolution, I reckon that a fuel tax is an excellent way to simultaneously drive the adoption of EVs and public transport. I would support a fuel tax over other forms of taxation, because it is user pays, saves the environment, improves road safety (by reducing the number of older less fuel efficient cars with fewer / outdated safety features) & reduces road congestion at all times!

There is no EV revolution coming. It is a fad. It is uneconomic, arguably as bad for the environment (if you factor in production costs) and the raw availability of the rare earth metals that are required to produce some of the componentry are limited.

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Mark this one in your diary, this is your "Nobody will ever need more than 640k of RAM." moment. You'll look back and laugh at yourself.

Maybe if you followed the development of these things a bit closer you wouldnt be so "yesterday"

a) EVs by around 2024 will be cheaper that ICE.
b) Battery technology is moving at an astounding rate, not which is the lab development of battery's not needing rare earth metals (as just one example) and there are several parallel developments racing to make money which will end up competing with each other.
c) With Peak oil and CC the running costs of ICE is going to climb.

... some would argue that EV is the wrong technology .... that hydrogen powered cars are far more practical and environmentally friendly ....

Where does the hydrogen come from? There is no good economical source of hydrogen, and storing and distributing it has plenty of issues. (LEL/UEL of 4%/75% being one) Have they solved the issue where if you park your hydrogen car up for two weeks you need to get a tow to the filling station as all the hydrogen has bled off?

Double phasing?

I'd wonder on who is doing the arguing and their basis for it. Maybe you can point me at such an argument?

Otherwise,

https://evobsession.com/hydrogen-cars-vs-electric-cars-detailed-comparis...

Thanks Steven

Can someone explain to me why someone who still uses the road should not pay for maintenance of the road?

It seems a fairer way is to remove the Road User Tax component of fuel, as has been done on diesel, and introduce user pays in the same way (per km). Deal with EV incentives, if required, in a different way, eg tax deductible purchase. At the moment, it seems patently unfair and essentially a tax on poorer folk who cannot afford a newer vehicle.

You can buy second hand EVs for roughly the same price as second hand petrol cars of the same year. https://www.trademe.co.nz/motors/used-cars/nissan/auction-1620150828.htm
2011 car for $8,xxx

yeah, but this line in the ad is key ** 94km Range!! (8 bar battery life) *

You are going to have to fork out for a new battery (and the replacement battery is worth 12K+) or dump the car very soon.. 8bar battery on a leaf is like 250,000km on a petrol car..

EV vehicles are subject to RUC just like diesel cars, only as an incentive it has been suspended until such time as they make up 2% of the fleet

I am in favor of user pays . RFT is not that - the main resource being used is space on the roads during rush hour. RFT does not differentiate between a drive down Dominion road at 4 pm and the same distance driven on the motorway at 4am.

NB : I will be a" net" beneficiary of RFT myself - I do not buy much petrol . Still a bad idea to have it.

Sell down a key money earner
Sounds like someone greasing the wheels for him & his colleagues to buy part of a key strategic asset
Once Auckland sells it will sell again until it will own no part of its Auckland Port.
It is central government which has milked Aucklanders through excessive taxation which is as much to blame as the incompetence of the cities leadership over the decades.
Fuel tax was implemented by that other star of finance Johnny boy Key
Beware anyone with a hidden agenda advising Auckland City sell part of its cash cow it’s Port Services
Do not sell until first consulting guru Mike Hosking first ( is he still around ? )

Mike Hosking is a moron who opines on much more than he is qualified for.

Could not agree more. He has been heard to boast he could not pass School Certificate and look where I am now. Just trying to reinvent himself.

Couldn’t agree less. My mate Mike has enjoyed more success in life than most of the supposedly highly educated New Zealanders will ever experience. His clarity of thought in pulling apart the lefty spin and clearing a path for others to head towards the political truth is without peer. Those are the very reasons that the Left hate and fear him with a vengeance.

Heavily biased op-ed full of conflicts of interest.

RFT is more targeted than a general excise tax increase, although I would be in favor both.

Selling off the port? Uh, no thanks that belongs to me and you - the citizens of this country. Not for you to sell it off.

You talk about the difficulty of charging the fuel tax in Auckland, which is simple as adding it to the retail level but yet you think a congestion tax like the one in London would be easier to administer?? Also unlike the Auckland fuel tax, a congestion tax would not reduce harmful oil/fossil fuel consumption.

Thanks for your opinion, but your promotion of a special interest agenda invalidates most claims made.

A congestion charge would reduce fuel consumption, and would in fact be targeted at the least efficient use of fuel. All those cars in stop/go traffic get the worst fuel consumption figures.

happy to pay to use the motorway if it decreases travel time.

edit: typo

Well I just scanned your comment after writing mine !
Fancy that we both converge Canton ( is that Wanton ? )

"In the medium to long-term variable road pricing or congestion charging should also have come into the equation"

The medim term being the last 9 years when Kens mates sat on their hands

But what about the short term? A RFT is the simplest, quickest, cheapest to implement and most effective I would have thought?

As for the asset sales rant...whats that in there for?

Looks like Ken has been lined up by the COL.

Did we not get a whole host of roads of national significance in the last 9 years? I quite like the water view tunnel & SH20!

I don't think Auckland needs more roads. It just needs to use the ones it has more efficiently and in particular Aucklanders need to stop treating vehicle transport as a luxury, especially when their travel plans aren't ad-hoc and they're going to the same place at the same time on the same days - i.e. work.

when there is no good public transport or the density to support regular public transport this argument is useless.

Bus today - Birkenhead to Glenfield at 9:45 - only one other passenger; return at midday 4 of us.
I like PT, I use PT but it has one big problem - how to get people to use it.

And how many of those were likely Goldcard holders?

Nah leave the gold card holders alone

Build more density?

99% of cities in the world with a population like Auckland build with greater density than Auckland. The argument is only useless, because Auckland Council is so wildly useless. Auckland has pro-sprawl/anti-density in its core policy settings.

And here we are getting into the debate as if a highly regressive fuel tax is better or worse than an asset sell off.

Thanks to the baby boomer NIMBYs who cry foul when the subject of dense housing is raised. Good public transport works well when

1) you don't have to live in a house 40km from the CBD if you were born any time in the last 35 years
2) employers arent obsessed with having HQs in the CBD
3) its quicker and more efficient than private transport

Dont worry , we will be forced to sell the Port by the time this administration is over .

They will have bankrupted us completely, run out of our money that they have taken from us , and our creditors or the IMF will be telling us what to do

Yes, or bailed out by the govt.

They won't have any money to bail out unless they invent a new tax

So let's go through the arguments;
1. Asset sales -right wing wet dream -not going to happen

2. Congestion road pricing -excellent idea with cross party support. But only for one designed to minimise congestion not maximise revenue as Ken wants. A congestion minimising system will decrease the demand for new projects, which will help NZ get ahead of the infrastructure demand curve rather than being stuck in deficit.

When Congestion road pricing is implemented it will complement the current fuel tax and the Road User Charge (RUC) system (which EVs will go into once the they are greater than 2% of the vehicle fleet).

Maybe one day a nationwide GPS/electronic RUC system will be implementable but there certainly is not a off-the-shelf system available now.

3. National fuel taxes means the rest of NZ subsidises Auckland for the cost of its new infrastructure. This is inequitable and poor politics. It is asking for a backlash from the regions. That risks underfunding the infrastructure deficit, which alongside poor planning rules is one of causes of the housing crisis.

4. Ken Shirley complaining that Auckland's fuel taxes will cause fuel price rises elsewhere is crocodile tears. Petrol prices for several years have been higher in Wellington and the South Island due to the lack of competition from Gull and Ken and his right wing mates have done bugger all about it.

5. New Zealand needs to stop this pathetic navel gazing of how much 'such and such' will cost and lift its head up and look at what the opportunities are and how to maximise them. Infrastructure is an investment and we need to maximise our returns from it.

For instance, whether people like it or not, this government will double down on the last government's investment on public transport in Auckland. This will open up large areas for intensified housing. How will Auckland best take advantage of that. Check out my article about this here
https://medium.com/land-buildings-identity-and-values/how-to-bring-hobso...

This will open up large areas for intensified housing.

It won't.

I read your article. And congratulations for getting it published on the Greater Auckland lobby page. I've been banned from their site, so I'll leave my comment here.

Yes, better public transport will put effectively more of the city in closer proximity to the centre. However while Auckland builds density in the centre at only the slowest of slow rates, investment in public transport can only result in the most minimal of returns.

Only if Phil Goff stops building sprawl will an investment in public transport pay dividends.

Unaha-closp there is lots of moving parts in this system and I agree with you the net result is we encourage sprawl AND high prices. It is all a nonsense. I would like to jump the canyon back to sanity but it is proving difficult....

... whatever happened to the idea of electronically monitored toll roads .... and private equity working in partnership with national government funding to get them constructed ...

I'm not seeing a taxation overhaul from this government ... I'm just seeing more taxes increased overall ...

Generally as PPP seem to be disasters.

... generally speaking , the transportation and electricity infrastructure of Orc Land are already disasters ..

Would PPP make it much worse ?

All monopolies are potential disasters whoever owns them.

... exactly .... so why keep doing the same old boring rubbish from the past ... bit by bit jacking up taxes ... a few pennies every 3 years ...

Throw out the olde ways ....

... try summit new .... get some toll roads , bridges , and tunnels built ... PPP ... anyway that might work ... give it a burl ...

Ken, why not consider also re-pricing Road User Charges to reflect the real costs those road users place on infrastructure? At present everyday Kiwis are socially subsidising for-profit transport companies because the RUC do not compensate for the cost of damage caused by heavy trucks.

Surely we should be ending this social subsidising of for-profit businesses?

1) Wouldn't selling the port would mean less revenue for council and hence a rates increase. I think I'd prefer a fuel tax thank you.
2) Congestion charging is probably the long term plan but will take a while to decide how to do it and how to charge for it. Auckland needs this investment now, not in 10 years time. Congestion charging will be much less efficient (collection will probably cost 30% or more of the takings) and much more regressive. I imagine they would need to charge at least $2 each way to make a dent in congestion, that's $20 a week, much more than fuel tax for most.
3) General fuel excise is a better option, if you want to be voted out

1) depends what it is sold for.
2) Not long term, not even medium or short term. No excuses do it now. No need to think how - just invest in the equipement and software now and then work out how it is to be used later - as per TradeMe developing their systems. And if you spend a few hundred million and it isn't very successful than (a) I'll be surprised (b) they have wasted more money for less potential gain many times.

In this context , what do you mean by "regressive" ? why is congestion charging "regressive" ? Is it even relevant ?

Regressive taxes hit poor people much harder than rich people. In this case you are taking a hugely expensive publicly owned asset and setting a charge at the exact level which will banish poor people so that rich people get a nice quick journey. I would argue it is the most unfair tax ever dreamt up, window tax made more sense.

is RFT a regressive tax ? it probably is ( poorer people do not tend to live in inner-city villas .. they have to drive farther - yet you seem to support it ( do correct me if I got that wrong) .
We should not even consider if a tax designed to reduce congestion or to fund public transport is "regressive" or not when designing it . If the electorate favors keeping it "progressive" tweak the rest of the tax system to compensate ( through change in income tax rates or thresholds ) - and yes I oppose that - but keep it as a separate decision.

When a city is a sprawled out mess a fuel tax is highly regressive. In a sprawled city poor paying jobs are dispersed as costs drives low profit businesses away from relatively scarce CBD office space and into the much more plentiful sprawl. Poor people have to travel vast distances to get to low paying jobs.

When a city is a sprawled out mess a congestion charge is hardly regressive, because the CBD where congestion is charged is home to high paying jobs. 95% of poor people won't be paying the congestion charge.

Since Auckland is one of the leading contenders for worst sprawled out mess on the planet, this fuel tax is highly regressive.

This is essentially a tax on poor people to keep Auckland land prices high.

Agree both taxes are regressive. But a 10c fuel tax is only $5 a week on a full tank of fuel (which is a lot of driving in a week). Congestion charges in London for example are $22 a day or $110 a 5 day week.
If congestion charging is limited to just the CBD I have no problems with it (although like London it will need to be extremely expensive to have much effect - parking is already expensive in the CBD and yet people still drive). But I think the plan is to apply it to all motorways.

Also the purpose of each tax is different. In the case of congestion charging the sole purpose is to remove poor people from roads they have already helped pay for and build, and from land that they are part owners in. The tax is designed to force people onto non existent public transport or into unemployment.

Since Auckland is one of the leading contenders for worst sprawled out mess on the planet, this fuel tax is highly regressive.

Evidence, please.
Given that Auckland is considered a high density city by American standards, I fail to see the logic.

At a guess I would say Auckland is about middle of the pack of bigger cities in terms of density. Most European cities are more dense, most American and Australian cities are less dense.

Exactly.

These 'expert urbanism commentators' (ironically, who get banned from urban blogging sites) really know their stuff, don't they.

I'm not sure how a PPP can be more sucessful than a public project. If there's enough profitability to keep the private side happy then it should also be profitable for a purely public effort - and even more profitable without the complex contractual arrangements needed for a PPP. Unless of course the whole PPP is a secret plan to benefit the private contractors.

Yes it is

Following this logic no private business of any kind should even exist -if it its profitable the government should do it.

1) Congestion Tolls - Ken is right. Much of the Auckland transport spend on roading is congestion related. Simple gantry based congestion tolling could easily be put in place & ramped up from a low starting point until the point is reached when it manages the congestion level. It can then be reviewed every 6 months or so like in Singapore. Congestion tolls would spread out future capital expenditure needs.

Complex GPS based road user charges can wait. Congestion tolls are fiscally regressive and require supportive social welfare and a comprehensive PT system, and as a possible alternative High Occupancy Tolled lanes so those not able to pay have the option.

2) Regional Fuel Tax - Ken is half right & half wrong. Fuel tax is useful as it reflects access to & use of the roading network excluding congestion. If it wasn't for the boundary effects and cross subsidization all fuel tax should be regional to reflect user costs, e.g. for road maintenance & access/use. However in NZ I understand Aucklander's already pay more than is spent in the Auckland region & thus a general increase in the excise tax is probably justified.

The base assumption here is that the council should not be forced to become more efficient. ie Sack half its staff.
That should be the first thing to look at in my view.

Users pay, full stop. If you can't afford to buy a house and live in the inner city suburbs like Herne Bay or Ponsonby so that you can walk/cycle to work then suck it up and pay the fuel tax!

Fixed incomes and little to no disability/mobility accessible public transport to 1/2 of Auckland will make it an even worse city to live in. $180 airport transfers today with extremely limited availability, no options for regular work transport except a private vehicle & private monthly car parking today so yeah I can see a lot of families getting hit hard by this. But then again AC & AT reduced & cut the disability consultation so that there would be less ability to actually get involved with consultation. Pressure on charities & ACC for increased costs is one of those hidden costs all NZ ends up paying double for, both in the original RFT hike and the taxpayer covering increased social ills from the RFT & ATs new initiatives.

All for transport improvements that actually cut & reduce accessibility across the board. But good news the chances of them suing for injury & reduction in access caused from AT developments are very limited, even when safe access to their homes & medical services are lost. Even council rates have rebates, even across the ditch they consider carer costs & PT access a right, mass transport is one of the best investments followed by the road networks, and residents have the right to sue when they are physically harmed due to mistakes and faults by the company. Yet NZ cannot even make accessible footpaths preferring uneven slate & calf height inaccessible seats blocking the way to actual accessible footpaths, seats & kerbs. Public car parks owned by the council are being built without any disability access at all, where they are not just removing disabled access altogether & NZders do not even have the right to sue for deadly mistakes. If I sent the bills to AT it would amount to over $250k which could have been saved per injury by not having such a rubbish urban design team. Pretty obvious except to the dolts who think wheelchairs can leap over barriers they add to the road design which cause serious injuries & loss of access in less than a month of being installed.

If half of what they did was even decent engineering I would not worry so much. But everything they touch turns rotten. An RFT is not an RFT for better transport, it will encourage more removal of access & corruption in AT, and will harm those on fixed incomes & more vulnerable transport users who literally have no other options & no PT they could use. (Even cyclists could walk on the footpaths & catch the buses).

This is why I despise the CoL, and AKL council. All they do is look at new taxes/rating systems, or ways of extracting more money from constituents. ..as opposed to looking at their own state of affairs/inefficiencies etc. Not only is it inefficient, it wastes an enormous amount of time to implement, is top heavy compliance wise, and has almost negligible financial benefit. Companies lose focus on growth, and improving productivity. Common sense dictates that these long term capital raising could be managed either through debt, ppps, and general tax. It’s no wonder business confidence is down, along with our exchange rate. Nz is now a laughing stock.

Sorry but you can't build billions of dollars of transport projects through efficiencies.
National were elected last time on the promise of saving billions through efficiencies, I'm not sure they would have save a billion in their entire 9 year term.

The CoL don't just look at ways to introduce new taxes and extract your hard earned money. They are also busy pretending to care about those who are less wealthy or less advantaged - they showed they will favour their ideology above education and common sense when they decided to close the charter schools.