Subsidies

From The New Zealand Herald, Tuesday 22 July 2010 on Page A9

Billions wasted on roads while rail is run off the tracks.

Dean Scanlen responds to critics of rail funding and the costs of state highways to taxpayers.

Several commentators including Luke Malpass and John Roughan have complained about spending by the New Zealand taxpayer on Kiwi Rail. The suggestion, albeit somewhat veiled, is that our rail operation should stand on its own as a commercial operation.

But such people seemed to have completely missed two factors that destroy their arguments. The first is that any rail operation is as much part of the transportation infrastructure as the roads. The second is that our road network (and its use by motorists) is subsidized much more heavily than rail.

I acknowledge that rail does lend itself to privatization more than roads. As some of us remember, the Labour government of the1980s did privatize rail. Perhaps not so well known is the operation was virtually asset-stripped by its private owners. It is tempting to blame those owners for short-term thinking and/or poor planning and there might be some justification for that response.

But I believe there was another factor at play. In the economic environment of the time, most of the rail operation could only be commercially valuable if the assets were stripped and/or run into the ground.

This all raises the question is it better to subsidise our rail operation to keep it viable or leave it to make its own way in the market (and almost certainly be run into the ground on all but a few routes in high demand)?

It may only be worth leaving rail to its devices if we are giving it a “level playing field” to compete in. But we certainly don’t do in this country. Our road network and road users are, and have always been, much more heavily subsidized. A report commissioned by the New Zealand Transport Agency (October 2009) found a shortfall of $1.5 billion a year between what is collected from the state highway network and what is being spent on it.

That shortfall, made up by taxpayers, is already several times what is proposed to be spent on the rail operation and is far from the only taxpayer subsidy given to roads.

Our local road network is also heavily subsidized through local authority rates – about another $1 billion per year. There are the “externalities” – road trauma, health problems caused by air pollution, noise, loss of amenity, severance of communities and damage to the environment (including greenhouse gas emissions, which have increased by more than 70% since 1990).

These costs are either funded by the taxpayer or individuals (particularly the owners and occupiers of land alongside busy roads) or they are essentially withdrawn from ”our” environmental bank account.

Such costs amount to many more billions of dollars. Road trauma alone is estimated to have a social cost of more than $3.5 billion a year. Some is funded by ACC levies, the rest by taxpayers and individuals who weren’t directly involved in the crashes. Also motor vehicle pollution is estimated to kill about the same number of people as road crashes.

Despite the high subsidies our roads already use our government is planning to spend $21 billion on road upgrading, more than half of which is earmarked for “roads of national significance”. Is this a more effective use of taxpayers funds than the few hundred million some are complaining about rail receiving? I think not. I have examined the trends at traffic control sites near the government’s seven “roads of national significance”. I found that that since 2005, the traffic at three of the locations has been trending downwards. At the other four the growth is well below what NZTA states the average for the regions in which they are located. The Auckland Harbour Bridge is particularly interesting, since 2006, the traffic has been trending downwards by an average of one million movements per year.

Even if those routes were experiencing high and positive traffic growth, any good traffic engineer would tell you it’s probably a waste of money upgrading them anyway.

Upgraded roads almost always attract traffic from every other route and/or trip that wouldn’t have been made during congested periods. This is known as “triple convergence”. It causes most up graded road routes to become congested again within a relatively short time.

It is time for the people criticizing the Government funding of our rail operation to turn their attention to the much larger sums being wasted on our roads.

Dean Scanlen is a professional transport engineer based in Whangarei

Comments: This article was neither challenged nor supported when it was printed.

If Mr. Scanlen’s figures are correct it seems:

*The taxpayer is subsidizing roads by $1.5 billion per year prior to the introduction of heavy and longer trucks. A report commissioned by the New Zealand Transport Agency (October 2009) found a shortfall of $1.5 billion a year between what is collected from the state highway network and what is being spent on it.

*The ratepayer is subsidizing roads by $1 billion per year prior to the introduction of heavy and longer trucks.

*Road trauma alone is estimated to have a social cost of more than $3.5 billion a year prior to the introduction of heavy and longer trucks.

*Pollution costs the health system and therefore us about $3 billion per year.

*Social costs for dependents of those killed or crippled by exhaust fumes is about $2 billion per year.

*The effect of a large proportion of investment in roads is nullified by the “triple effect” or induced demand resulting in another endless round of widening costing the taxpayer more to fund it at $1.5 billion per year in unnecessary investment that could be rendered null by an efficient passenger and freight rail system.

That’s $12.5 billion per year attributed to road subsidies and costs.

The Minister of Transport’s response to Rod Oram was inadequate. *The taxpayer is subsidizing roads by $1.5 billion per year. A report commissioned by the New Zealand Transport Agency (October 2009) found a shortfall of $1.5 billion a year between what is collected from the state highway network and what is being spent on it.

Queensland Narrow Gauge High Speed Rail

System Operator: Queensland Rail

Opening date: 1998-2001

Route length: (Brisbane-Rockhampton) 639km electrified. Compare (Auckland to Hamilton) 106 km. (Auckland to Wellington) 492 km

Route length; (Rockhampton-Cairns) non-electrified 1,042km Compare (Picton to Invercargill) 693 km

Maximum line speed: 160km/h..

Gauge: 1,067mm (3ft 6in)

Voltage: 25kV.

Total Capital Cost: 1,681 km for $590 million

Population: Brisbane Metropoliton 1.5 million. Compare Auckland 1.4 milllion

Population: Queensland 4,279,400. Compare New Zealand 4,332,631