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Can New Zealand’s Road and Transport Issues Be Addressed With Smart Road User Charges?
In the latest report by the New Zealand Initiative, a user-pay model was proposed as a solution to improve the nation’s transport and road issues.
In his report, Dr Matthew Birchall recommends that a Smart Road User Charges (Smart RUC) pricing system is implemented on Kiwi roads. This system would charge vehicles a fee based on distance travelled, time of day, location, and vehicle type and weight. Drivers would pay the Smart RUC fee through a “pay-as-you-drive” model or by pre-purchasing an RUC license.
Currently, Kiwi drivers pay a petrol excise duty of 70 cents per litre. Meanwhile, drivers of heavy freight, diesel, or electric vehicles pay a road use charge depending on the vehicle’s weight and type.
The Smart RUC distance-based pricing system is proposed to manage congestion and ensure a fair contribution from all road users.
A critical time for our transport system
According to Dr Birchall, New Zealand’s transport system remains heavily reliant on the fuel exercise duty (FED), which is “fundamentally broken.” Congestion and road maintenance pose serious issues for many Kiwi road users.
Dr Birchall said that the current system is regressive and outdated, claiming that reforms are needed to sustain road maintenance and growth.
"When we pay fuel tax, people on lower incomes typically drive less fuel-efficient cars, so they're actually paying proportionally more for each kilometre travelled.
"I think Kiwis see the state of our roads - whether it's congestion or potholes - and think we need a better way," he said.
The report proposes that the plan be implemented gradually over 5 years. This involves slowly increasing RUC and decreasing FED, building partnerships with RUC service providers, raising public awareness, and integrating with insurance providers.
The RUC pricing scheme is not a new one, having been successfully run in countries like Stockholm and Singapore since the 1970s. The report suggests that New Zealand can adopt these success stories to implement a road pricing scheme that reduces traffic and improves urban mobility.
Transporting New Zealand’s policy and advocacy lead, Billy Clemens, agrees with the model, stating that the freight industry would welcome a user-pay system.
"There's a real pressure on transport revenue, and if we want to see the modern roading that we need and upgrades to our infrastructure, we need to look at innovative new methods of how we can raise revenue and also reduce congestion through our network," Clemens said.
Commenting on the unsustainable nature of the existing petrol tax, Clemens states that the Smart RUC system would go a long way in managing peak-hour congestion, allowing freights to move more efficiently.
"We know our road freight members operating in Auckland, Tauranga, Wellington and down in Christchurch, it's taking them longer and longer to get around. And unfortunately, when freight isn't moving effectively, that ends up costing consumers and businesses all over the country," he said.
Smart RUC may come at drivers’ costs
While many have praised the proposal, some have raised concerns about the readiness of New Zealand’s public system to handle the potential price increase.
Martin Glynn, the Automobile Association's policy director, states that the Smart RUC may cost some drivers more than they can handle. However, he agrees it could be a more sustainable funding model for the nation’s road infrastructure.
"Our concern is particularly with lower-income households, who often need to drive at peak times like the rest of us to get to work or to get to education; they often don't have good public transport options.
"Both in Auckland and Wellington, our public transport tends to be orientated towards the central city and used by office workers," Glynn said.
According to Glynn, a user-pay model might help alleviate the underfunding crisis of New Zealand’s current transport infrastructure, but its implementation can be complex. Currently, there is no clarity on how much more (or less) drivers would need to pay under the proposed Smart RUC plan.
"The inference that I take from that, is that charges would need to be a lot higher. In other words, motorists should pay a lot more to get the system that we want, and I think ultimately it comes down to how much people can afford and are willing to pay," he said.
Key Takeaway
The possible changes in the road pricing system will affect businesses in the transport industry. However, it’s unsure if these changes will present opportunities or challenges in the sector. Taking proactive steps to understand and mitigate future risks can help these businesses thrive in a dynamic environment.
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