Transport figures are notoriouslyfudge-able and confusing. Sometimes they use 10-year figures, sometimes just three-year figures. Then there’s the funding, which comes from almost innumerable sources: fuel taxes, road user charges, Crown loans.
The National Land Transport Programme (NLTP), which sets out how NZTA (NZ Transport Agency Waka Kotahi) will spend its budget for the three years 2024-27, is indeed a “record” spend in nominal terms when compared with other NLTPs. Its $32.9b spend is $8b more than Labour’s NLTP for 2021-24 and almost twice the $16.9b spend of the 2018-21 outlay.
Inflation takes the edge of some of those increases, but it does not undo the total scale of the spend.
The real question isn’t so much whether the programme spends enough money, but where that money comes from and whether we can afford it.
At least every six years (although this tends to happen every three years in practice) the Transport Minister writes a Government Policy Statement on Land Transport. It sets out how much money will be taxed from fuel taxes and road user charges and how it should be spent. It does this by identifying a “range” of funding levels for maintenance, walking and cycling improvements, and public transport.
NZTA takes this document and turns it into what is essentially a three year budget (that’s the NLTP announced this week) setting out how much money it will raise, where in the country it will be spent and on what. It means you can turn to the Auckland section of the plan and see $8.4b will be spent in the city. It’s directed by the minister, but also independent from them.
The system is meant to ensure that transport washes its own face. It means it is theoretically inaccurate to say, as some occasionally do, that governments choose to blow money on roads rather than schools or hospitals. Road users pay for roads. Hospitals and schools are funded by the core Crown finances, by taxpayers - big difference.
Since the 1920s, road users have paid for the transport system in the form of fuel taxes and road user charges. The more you use the roads, the more you pay. Councils also chip in. The most recent plan has a contribution of $5b from ratepayers to jointly-fund transport projects in their areas. This gets spent on things like local road maintenance (about 88% of all roads are local roads and are the responsibility of councils) and subsidising bus fares.
When NZTA was created in 2008, one of the Clark Government’s great promises was full hypothecation (ring-fencing) of fuel taxes into the fund administered by NZTA. Road users were grumpy at fuel taxes being pilfered by the Government for non-roading purposes.
“Funds collected from road transport users will be used to fund activities which benefit those same users, whether the activities concern roading or public transport,” said the Transport Minister at the time, Dame Annette King, who added road users would benefit to the tune of $600 million by 2016 under the new regime.
In practice, the flow of funds has gone the other way (as it did a bit during the Clark Government days). Governments, keen to cut ribbons on new roads, top up the fund with money from taxpayers.
In previous NLTPs, this occurred at relatively small scale. The 2018-21 programme included $225m of Crown funding for recovery from the Kaikōura earthquake, a $109m loan for housing and $94m to accelerate the delivery of some regional highways.
The 2021-24 plan included about $3b in loans and grant funding from the core Crown balance sheet for various infrastructure projects. The plan released on Monday increases that even more, with a Crown grant of $3.1b, a Crown loan of $3.1b and a Crown contingency of $1b.
Transport spending will vastly exceed revenue. Graphic / NZTA
Those numbers tell a clear story: road users are no longer paying for the transport system, which is now being heavily subsidised from the pool of money that is actually intended for the likes of schools and hospitals. The subsidy is enormous (the current cost of the new Dunedin hospital is about $2b – less than the Crown subsidy for this NLTP).
The problem is about to get much, much worse. Green Party transport spokeswoman Julie Anne Genter drew attention to a graph in the most recent plan, which shows that NZTA’s revenue, mainly from fuel taxes and road user charges, will fall vastly short of its estimated expenditure. By the end of the decade, net revenue (minus debt servicing costs) is forecast to be $6b a year, but NZTA’s costs – mainly road building and maintenance – are expected to be $12b a year – a $6b gap. This is despite big fuel tax and road user tax hikes towards the end of the decade. For all the attacks on the Greens’ fondness for unfunded spending commitments, the NLTP Genter worked on as Associate Transport Minister in 2018 barely included any Crown funding at all.
Now, taken at face value, these figures are slightly misleading. By 2030, NZTA will have higher revenue than shown in the chart. The Government is keen to shift drivers to road-user charges by then, meaning the slow atrophying of fuel tax revenue as drivers switch to more fuel-efficient cars, will no longer have an significant impact on revenue. This has been a big problem since the last NLTP and it will be one NZTA will be glad to have solved.
Nevertheless, it’s hard to see – beyond hiking fuel taxes and RUCs even more than what is already signalled – how the Government will make the transport plan add up in the 2030s beyond topping up the fund by billions of dollars of Crown money each year.
That is hardly sustainable. This year’s Budget included a $7b top-up to capital funding – money to be spent on new schools and hospitals. It will be difficult for the Government to justify spending a significant portion of that funding each year on schools and roads, particularly as funding needs in the health sector only grow. Unless voters want to tolerate significantly higher road charges and Crown debt, they may have to begin choosing between new transport infrastructure and hospitals – or at least being more selective about what we build.
There is an economic problem here, too. Fuel taxes and road user charges have not increased since 2020 and will not increase until 2027 – this during a period of historically high inflation. If road users are unwilling to pay higher costs for some of the costliest parts of the transport network, policymakers need to ask whether those things are worth building in the first place.
Thomas Coughlan is Deputy Political Editor and covers politics from Parliament. He has worked for the Herald since 2021 and has worked in the press gallery since 2018.
