THE PUBLIC FINANCE DEBATES:

“It’s time…New Zealand extended charging for public infrastructure”

Commentator:

Chris Money

Three Questions

The VUW-GEN Public Finance Debates November 12, 2013

1. What does “It’s time….” mean? 2. What are we actually charging for? 3. Is directly charging the best response?

Now or Never or At Some Stage?

The VUW-GEN Public Finance Debates November 12, 2013

• 4 major concerns with the current system:– Increasing reliance charging to achieve multiple policy

objectives– Intergenerational funding inequities– Net revenue efficiencies now, but technology is moving

fast– Do sustainable networks need demand management?

Net

Inve

stor

s

Now or Never or At Some Stage?

The VUW-GEN Public Finance Debates November 12, 2013

Palm SpringsPortland

Detroit

Direct charging for cities is already happening

Proposed and implemented schemes

Singapore

Stockholm

Milan

Edinburgh, ManchesterWest Midlands, Bristol

Cambridge, Telford

Auckland

NetherlandsNew York

Serious proposals not progressed and unlikely to come back soon

Recidivists

London

The pipeline of potential schemes Potential schemes

USA

Copenhagen

France & Germany

Tel Aviv

Toronto

Guangzhou & Hong Kong

Sydney

What are we charging for?Construction Maintenance Consumption

Roads Road users/ratepayers Road users/ ratepayers No one

Public transport Road users/ratepayers Road users/ratepayers Users (40-60%)

3 Waters Users Users No one

Power Users Users Users

Telecommunications Users Users Users

The VUW-GEN Public Finance Debates November 12, 2013

The arguments summarised

Proponent Opponent

Efficiency 1. Critical to managing long-term service levels

2. Fairly apportions costs where they lie

3. A more sustainable funding path

1. Pricing will reduce mobility and therefore economic activity

2. Restricting access at point of use is sub-optimal from a revenue perspective

3. High transaction costs

Equity 1. Sub-optimal outcomes for those with higher values of time.

2. Those that don’t create the externality costs “overpay”

1. We’ve already paid2. Alternatives are critical –

disconnect between viability of alternatives, incomes and origins/destinations.

Other points 1. Proof is there for all to see. 2. Not an answer on its own.

Scheme Design is critical to outcomes

The VUW-GEN Public Finance Debates November 12, 2013

So is it time to charge?

• Direct charging doesn’t wholly replace current funding and pricing systems

• The shift in emphasis has to be demonstrably better than the alternatives

The VUW-GEN Public Finance Debates November 12, 2013