How should we fund the transport system in the future?
Who is involved in this work?
Te Manatū Waka Ministry of Transport is undertaking a longer-term programme of work on the future of Aotearoa New Zealand’s transport system and how it will be paid for. This Polis conversation is being run with support from Koi Tū: The Centre for Informed Futures, which is part of the University of Auckland, in collaboration with PEP Public Engagement Projects.
The overall purpose of the longer-term project is 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?
We are running an innovative public conversation forum that allows us to listen to a wide range of people and understand different perspectives. The software behind this is called Pol.is and is fun and easy to use.
Pol.is as an online tool helps us gather and make sense of open-ended feedback from large groups of people. Participants can add their own 140-character statements for others to ‘vote’ on (agree, disagree or pass). This approach combines qualitative and quantitative methodologies.
This exercise is part of the wider approach Te Manatū Waka Ministry of Transport will be taking 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.
What is the conversation about?
This Pol.is 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…
- 20% reductions in Vehicle Kilometres Travelled 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.
Perspective 1 – Building off what we already haveclick to expand
Our system of fuel excise duty (FED), road user charges (RUCs) and rates means that those who use our roads and ratepayers pay for maintenance and improvement, as well as contributing to public transport and other parts of the transport system.
Perspective 2 – The environmental sustainability perspectiveclick to expand
Funding priorities need to shift from a focus on roads and private vehicles to more sustainable forms of transport. We need to reduce carbon emissions, the effects of pollution, biodiversity loss and harm to human health.
Perspective 3 – Societal and cultural considerationsclick to expand
There is more to transport than getting from A to B as effortlessly and efficiently as possible. The way we travel, and the cost of travel, has social and cultural consequences. If not addressed, these can lead to issues of inequality and a transport system that doesn’t serve different kinds of people.
Perspective 4 – A market solutionclick to expand
If we are serious about how to raise revenue for the future transport system, then we should get the private sector much more involved.
Findings from this Pol.is will be shared with you once available. They will be used by Te Manatū Waka Ministry of Transport as it develops policy. Further public consultation and engagement on the long-term future of the Revenue System is planned for 2024. Click here for our privacy statement.