Pundit

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Who Pays for the Roads?

The proposed infrastructural spending on roads leaves open a whole range of issues such as who pays and who benefits.

The issue today is not whether the government should borrow and spend rather than just paying off debt. It can make sense to do that. At which point the issue becomes what the borrowing should be spent upon.

Borrowing now is a tax on future generations, for they have to service the debt. They have no say in current decisions, so the temptation to current taxpayers is to exploit them – say by giving ourselves a tax cut now for a big selfish spend-up and let the kids pay for it in the future.

The practical moral response is that any borrowing today should be used to enhance the quality of life of the future generations who will be servicing the debt. That does not mean that the spending has to be on capital which adds to productive capacity. Some could be on the acquisition of heritage assets, on conservation and the improvement of the environment. But typically a big borrowing program will involve physical investment.

The government’s recent announcement involved vast outlays on building new roads. Superficially it seems like a good idea but careful analysis suggests some road-spikes.

Over the years we have evolved the policy principle that, roughly, motorists should pay for their roads. We mainly implement this through a petrol tax. It is a crude approach. Congestion charges would be better except that in most circumstances they are difficult to implement. (Recall the Minister of Transport in the 1990s who was an enthusiast for satellite surveillance of motoring.)

Instructively, when the government allowed regions to impose an extra petrol levy to fund their local roads, most councils – Auckland was the exception – rejected the opportunity and promptly demanded the government fund their roading ambitions. The National Opposition has promised to repeal the regional levy, but still wants to build more roads.

So the pressure is to fund roading from taxpayer contributions rather the motorist ones. In the case of the recent announcements, the burden is on future taxpayers rather than future road users.

How obsequious we are toward cars. The big increase in greenhouse emissions in the last three decades has been from the transport sector. But the (farting) elephant in the room is ignored; instead we pour scorn upon farmers for their belching livestock, even though net methane emissions have been zero over the period.

The stories a couple of paragraphs back of how everyone wants more roads but not to pay for them belongs to the same political pressures. This is not to be anti-car any more than arguing people should pay for their groceries makes one anti-food. (Yes, there is a small vociferous anti-car lobby; their responses are not always rational.)

Why do we need more roads? It is easy to cite congestion. We have been extending the roading network for some decades and yet the congestion continues. Why?

The answer is complex but a major factor has been rising population. Not only does that increase car usage, it is forcing more of us to live further out from the urban centres so we are driving longer to get anywhere. Meanwhile, the physical configuration in many places makes increasing capacity very expensive.

Some of the population growth is from the natural increase, but over half has been from net immigration. So part of the infrastructural spend is complementing the migration inflows. It’s back to Wakefield and Vogel – borrowing to fund the consequences of increasing population.

Is this a good strategy in today’s circumstances? Any answer is more complicated than a column can cover. We ought to be having a national debate on the topic. Not a xenophobic one, but trying to think through all the issues, which extend to upskilling the labour force and the pressures on land resources as well as transport congestion. It is far from clear which parts of the population benefit from immigration – and how they benefit.

At the very least we ought to be thinking about whether we are loading up future generations with debt servicing to fund the roads that the additional immigrants are demanding but may hardly pay for.