How should we fund the transport system in the future?
Te Manatū Waka Ministry of Transport is undertaking a long-term programme of work to engage with different people, industries, and local stakeholders. It is testing a different way to engage with stakeholders and the public on complex issues early, to help inform future policy work. Such engagement may contribute to dealing with big issues like climate change resilience and the design of our cities.
We want to enable New Zealand to move with confidence and certainty towards a new, or renewed, transport revenue system that will be fit for purpose for the next 30 to 50 years. This recognises that any change to the system is a major undertaking that will affect all New Zealanders.
What are we doing?
In stage 1 we ran an innovative public conversation forum called Pol.is that allowed us to listen to a wide range of people and understand different perspectives.
In stage 2 we will host a set of deliberative workshops, where a select group of citizens will join the conversation in person and learn more about the issues.
The workshops aim to gather groups of 20-30 participants who reflect the population, to engage in constructive discussion about what is a reasonable and fair way to fund the transport system as we move towards a zero-carbon future.
Workshops are being planned for February and March 2023, in North and South Auckland, Waikato and Christchurch. Register your interest here if you would like to participate.
Pol.is is an online tool that helps gather and make sense of open-ended feedback from large groups of people. Participants added their own short statements for others to ‘vote’ on (agree, disagree or pass). This approach combines qualitative and quantitative methodologies.
What is the conversation about?
This conversation is about how we will fund our land transport system into the future. This includes:
- making, repairing and maintaining the roads we drive on,
- developing and operating our public transport networks,
- creating walking pathways and cycling lanes.
We need to think about not just cars, but motorbikes, trucks, buses. trains, walking and cycling, and newer forms of transport like e-scooters and car-sharing services. We’re particularly interested in thoughts about how funds should be raised and allocated, and the ideas behind why people think what they do.
How is the transport system currently funded?
Anyone using New Zealand’s roads contributes towards their upkeep. Most road users pay levies when they buy petrol (fuel excise duty, or FED). Others, such as drivers of light diesel vehicles and heavy vehicles like trucks, pay through road user charges (RUC). Some funding comes from general taxation and local government rates. Electric vehicles don’t currently pay RUC, but will from 2024.
The National Land Transport Fund (NLTF) is a dedicated fund that pays for state highways and motorways, about 50% of local roads, cycling and walking infrastructure, and more than 50% of public transport subsidies. It also funds traffic policing. 95% of the revenue for the NLTF comes from FED and RUC.
Usually (covid aside) the NLTF collects around $4 billion annually to be allocated for the transport system. The amount collected depends on the number of kilometres we travel. If road vehicles are used less in future, less revenue will be collected.
Rail is able to receive funding from the NLTF but is largely funded by the government from general taxes. Other large projects can also receive separate government funding.
The other half of local road provision is funded by local councils. The remaining share of public transport subsidies are funded by Regional Councils. Most of this local share is raised from property rates. Rates are based on property values that reflect how accessible the property is, so act as a proxy for transport system use.
This funding partnership between central and local government reflects the decisions that are made at national, regional and local levels.
Challenges to the current funding model
While the revenue system has functioned well over the last four decades, it is facing funding challenges to pay for the maintenance and improvement of roading, to accommodate the shifts in travel that we are expecting over the next 10+ years and to meet rising expectations that the transport system promotes well-being, equity, fairness and participation.
In planning for a future revenue system these considerations (and more) will need to be taken into account.
- Our system relies on revenue coming in from road-based travel by vehicles. This has provided a stable and increasing source of revenue over many years, but…
- To meet our emissions reductions goals, New Zealand will need to achieve a 20% reduction in Vehicle Kilometres Travelled through improved urban form and providing better travel options, particularly in our largest cities. This will reduce the amount of revenue coming in. This isn’t a problem yet, but will become increasingly felt over the next 10 years and beyond.
- We are seeing also increasing demands for:
- a range of investments, including replacing big investments from last century
- new developments like light rail that shape urban growth including encouraging denser housing and new commercial opportunities
- more public transport
- Our current revenue system has been world leading, but it wasn’t designed to meet these emerging needs, and it relies on road-travel.