JOHN AUSTEN – Road pricing; an update

Oct 19, 2017

Reports about the Grattan Institute’s assessment of Sydney and Melbourne traffic is the latest re-ignition of road pricing arguments.  However, the risk that policy falls further into the hands of vested interests needs to be addressed.  There is an urgent need for Commonwealth advisers to lift their game.

Periodically there is a flurry – quickly forgotten – about the ‘urgency’ of road pricing.  Pricing – as distinct from charging – involves location and time of day road use fees, usually in the middle of big cities.  Revenues can be much greater than the financial cost of providing a road.

Various precedents are promoted along with new suggestions for places to  introduce road pricing. Grattan suggested inner Sydney and Melbourne.

While Grattan should get credit for again raising the issue, I am concerned that a lack of follow-through involving research, testing and analysis will result in governments being trapped into poor policy via headlines generated by those with less lofty motives like the motorist organisations and the  road construction companies.

‘Road pricing’, like ‘infrastructure investment’, is akin to motherhood in the transport fraternity.  Therein lies a problem; the terminology can be used to advance powerful vested interests when advisers do not undertake necessary groundwork before politicians are ready to consider  the issues.

We can see the effect of a lack of such groundwork in other transport matters.  Reasonable ideas are reduced to slogans and hijacked by special interests or those benefitting more from transactions than progress.  The results can be disastrous.  Examples include some toll roads and port sales.

Australia suffers from several factors that lead to this; especially in road policy which  require complementary actions by the Commonwealth and States.

While the public wants Commonwealth-State transport cooperation, in law and practice the Commonwealth Government usually competes with, if not opposes, the States.  This  causes public confusion and reduces  accountability.

In ersatz transport cooperation, the Commonwealth exudes arrogance and States become secretive.  Catchwords can replace analysis and reflect the lowest common denominator. They deflect attention.  Public interest takes a back seat to organisations who can stir up trouble, and ideas /projects which ‘pop-up’ are hastily endorsed.

Another factor behind good ideas turning bad is the loss of direction in national transport policy.  Gone are practical, measurable aims of rail standardisation, national highways and national ports.

Attempts at bringing transport policy into the mainstream, such as competition principles, are vehemently resisted. The most blatant example are officials torpedoing the national framework all Ministers wanted to adopt.

Instead governments appear to be fed and talk in clichés; productivity, seamlessness, logistics etc. Despite the best efforts of people who understand this stuff, the nomenclature often is deployed  to confuse. For example, shipping cabotage (domestic trade handled by local ships) is damned by those who do their best to protect aviation cabotage – both in the name of ‘productivity’.

How is this relevant to road pricing?

An environment in which advisers can ignore basic principles of government, mislead the public and eschew tangible objectives is open to manipulation by the powerful and the connected.  This is especially the case for proposals with uncertain purposes and which have economic rents up for grabs – like road pricing.

The most basic thing needed before anyone starts a road pricing scheme is a firm Australia-wide tangible purpose – to ensure policy makers are held to account. But little progress on this  has been made.

Road pricing is needed to tackle congestion near big city CBDs.  However, other things are needed : good road planning; proper rail networks and better public transport.  A conversation limited to shaking money out of road users is asking for trouble.

Real trouble lies in the clandestine view that pricing should raise money for roads unfettered by independent scrutiny or transparency.  This is the likely position Australia is sleepwalking towards.  This view must be repudiated before road pricing becomes a serious proposition.

Hence the critical matter is how road pricing will address attitudes that bedevil transport policy such as opacity, truculence, anti-democratic sentiment and fleecing the poor to pay the rich.

Such problems have already surfaced in ‘road reform debates’. For example the official proposal was for an economic regulator who would effectively be precluded from reviewing ‘prices’.  Dr Henry’s 2010 tax review noted other such issues.  Even the infrastructure industry’s peak body/lobby group is aware of attitude problems. It asked future road policy processes to be conducted honestly.

The key issue is public trust.

The Commonwealth has the critical honest broker role in this.  However, it has let Australia down.

Last year’s promise of appointing an ‘eminent Australian’ to lead road debates has not been fulfilled.  Commonwealth advisers have done nothing to bring big States into line over road debacles that are eroding public confidence. Westconnex is a prime example.

This failure virtually guarantees any discussion of road pricing for Sydney will be perverted into how to fund Westconnex.  Parts of that project are a major problem because of cost blowouts and re-negotiations of other toll road concessions.  Then the formidable roads propaganda machine will ask how to fund new roads to deal with all the traffic Westconnex creates near the CBD, in a city where motorists already suffer from ‘toll fatigue’.

In short, a continuation of the Commonwealth’s failure will lead to the hijacking of policy in order to help the infrastructure ‘club’. Not surprisingly the club wants to build more roads to the detriment of most of us. This will kill road pricing ideas for some time.

Given this disturbing situation, road pricing trials might be in order but should be limited to the desk top.  Money should not change hands.  This is in line with Infrastructure Australia’s self-forgotten suggestion of assessing projects as if there was road pricing.  These will inject much-needed reality into the equation.

They will expose the question occupying the ‘insiders’: who gets the revenue from real world pricing?

Grattan says revenue from ‘network wide’ congestion charges should go to public transport. Many insiders and powerful players will disagree.

With that central contention yet to be determined, there are obvious risks of a misstep with consequences including a blowout in the already enormous road fiscal deficit..

Despite what some ask, we should shy away from introducing road pricing until there is a very clear idea of what we want, what we must avoid and who gets what.

A definitive national, not State policy framework, trusted by the public, and backed by proof of concept is badly needed.  It has been a high economic priority for some time but,  there has been no apparent progress in well over a year.

Also, more work is needed on congestion policy.  Given the potential equity effects of road pricing, advocates should show how much inner-city traffic arises from tax-avoiding car/parking space salary packages, and how compensation for low income people might be addressed.

In the meantime, there is plenty to do on road charging – cost recovery and improving road services, on highways competing with railways.  Practical trials, such as on the Hume Highway, while straightforward and fully designed, are years overdue.

John Austen was head of economic policy at Infrastructure Australia until 2014.  He is now a happily-retired Sydney western suburbs dweller.  More details are at his website The Jade Beagle.

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