Tuesday 21 June 2022

A permanent petrol holiday?

Just a terrible dynamic here.

New Zealand’s road transport industry has today called on the Government to extend the reduction in fuel excise and road user charges (RUC) indefinitely.

“Extending the reduction is vital in order not to increase the pressure on hardworking families and struggling businesses,” says Ia Ara Aotearoa Transporting New Zealand Chief Executive, Nick Leggett.

“Many kiwis are only just keeping their heads above water at the moment and we need the Government to do what it can to help them through.”

The current fuel excise reduction scheme is set to come to an end in the coming months.

Mr Leggett said 93% of New Zealand’s freight travels on the back of a truck and the road transport sector continually strived to drive efficiencies in their businesses.

And the railways want a subsidy to compete with the now-subsidised trucks, and the ports will want the same. Nick Leggett is helping to push us back to the bad old days of a government-directed transport system. 

A clean system would start from user-pays. Roads would be built when they could pay their way. Users would cover their costs. Goods would ship by rail when that was the most cost-effective, as judged by users, facing the real costs of transport. And same for coastal shipping. 

There's some work to get there. Congestion charging, with fees set to maximise system throughput, would help. It would also provide a price signal about places where more investment might cover its cost. Flipping petrol excise over to RUC, and then looking at getting more tolls on roads as a way of financing the things. 

But Leggett's path doesn't lead to any sensible system. If you run land transport out of general revenues or the Covid fund instead of out of fees from users, why should the system even care about driver demand? If government decides to ban trucking between places that could be served by coastal shipping, regardless of cost, what principled leg does Leggett have to stand on?

The best thing that happened in the 80s reforms was that businesses all agreed to stop doing this kind of thing. Leggett is trying to push us back to a rent-seeking equilibrium, and probably has no clue that he's doing so. 

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