Steven Joyce: Road users paying their way

Steven Joyce. Photo / Martin Sykes

Who is subsiding who in our transport system is a debate that comes up regularly, but reheating the argument won't change the facts.

Some simple back-of-the-envelope calculations show that, contrary to NZ Shipping Federation executive director Sam Buckle's view, road users do pay their share of the costs of our roading system.

The roading network - which takes most of the load in keeping New Zealand moving - does, in fact, pay its own way.

Using the latest National Land Transport Programme, we can see that road users will pay approximately $8.7 billion over the next three years for the country's roading system by way of petrol taxes and road-user charges.

Under the hypothecated road revenue system that is now operating in this country, all of this money generated by road users is reserved for the maintenance and development of the roading system, as well as other related costs - like road policing and supporting public transport services that reduce congestion.

We wouldn't normally present this in strict profit-and-loss terms as Mr Buckleseeks to do, but let's give it a go and see how it looks.

The national operating costs of the roading system - that is, everything except investment in new roads and ratepayers' contribution towards local roads - adds upto around $5.2 billion (over the next three years).

That means the "revenue" exceeds the "operating costs" by around $3.5 billion, or 40 per cent - that's a pretty good margin in anyone's language.

Of course that doesn't include depreciation, which for the state highway network is about $378 million a year.

Even including that and a contribution by central government for the depreciation of local roads, you're still looking at a pretty good "profit".

As a country we made the decision to invest all the money obtained from the road back into further developing the roading system - but only where the benefits outweigh the costs. We can treat that broadly like our investment case.

As an alternative, the Transport Agency could pay the Government some in tax and the rest in dividends; and then the Government would reinvest it again, and given the return on investment we would.

But that would be a money-go-round that I'm picking taxpayers would consider unnecessary.

Of course we then get into the argument about whether various transport users pay their external costs.

While it's always hard to nail down exact amounts for social costs, road users pay their licensing costs, they pay ACC to cover accident costs, and they will pay a carbon charge through fuel prices when the Emissions Trading Scheme commences (as will other transport modes).

Let's compare the roading network with rail's profit and loss.

The problem for the country with the national rail network is that currently its revenue, once general operating subsidies are excluded, only exceeds the operating costs by about $80 million a year.

There is not enough surplus currently to cover the capital infrastructure renewals we need to keep the network going (something like $200 million a year), let alone further investments we need to make to increase rail's competitiveness.

In short, the roading system today is largely funded by road users, but the costs of the rail system are certainly not covered currently by those that use rail.

While I'm not privy to the situation for coastal shippers, I note Mr Buckle's comments about coastal shipping targeting a commercial return and being required to meet "commercially established port charges".

My response to that is that's as it should be - not just for coastal shipping but for the entire transport system.

The Government wants to see subsidies minimised and decisions based on commercial realities.

As Transport Minister I strongly believe that we will need all three transport modes - road, rail and maritime - performing well if we are to boost productivity and continue to grow as a trading nation.

Being productive as a country means having all your assets working well.

All of the cogs need to be turning together. However, you also need to ensure the right goods are being sent to market via the right transport modes, otherwise you risk getting an inefficient result which lowers productivity and limits growth.

There are some goods that are suited to rail, some to ship, some to road, and some to a combination of all three.

It's the transport industry's job to ensure that each mode provides its clients with the lowest reasonable costs so they can choose the mode for their goods and pay the right price.

Taxpayer support for one mode ahead of another will screw the scrum and create costs in the system that will detract from our country's goal of economic growth and productivity.

All modes and operators need to focus on being efficient and competitive, and providing the best service they can - without subsidy - to get our goods and people to market.

* Steven Joyce is the Minister of Transport.