JOHN AUSTEN. Road spending incurs billion dollar new debts annually – nobody notices (Repost from 27 June 2016)

It’s traditional that election time in Canberra brings out the road lobbies who ask for ‘all that extra cash’ which governments raise from fuel excise to be ‘put back into our roads’. The problem is that the facts no longer bear this out. Australia is spending more on roads than it collects from fuel excise and vehicle registrations. It is going into more and more debt to build roads. What is worse, it appears that official figures are being fudged to obscure this inconvenient truth from scrutiny – lest it get in the way of more promises for more and more multi-billion dollar road projects.

The Australian Automobile Association are running an election advertising campaign[i]. According to their view:

“Australian motorists will this year pay more than $18 billion in federal road-related taxes and they are currently getting a very bad return on that investment, mainly because too little of this enormous financial contribution is finding its way back into our infrastructure budget”.                                                                                                                

The AAA voices what many Australians would take to be axiomatic: government raises far more in road taxes and charges than it gives back to roads.

This was indeed the case in decades past (and, it should be said, for good economic reasons to do with the cost of offsetting negative externalities of car use). The problem is, the official figures – at least those published up until last year – no longer bear out the logic: governments now spend far more on roads than they collect in road revenues and they have been doing so for almost a decade:

Road spending and revenues 2013-14, $m, current prices

  Road revenue* Road spending Net position
Commonwealth 10,908.9 5,667.4 5,214.5
Other ** 10,254.9 20,679.0 (10,329.1)
Total 21,163.8 26,251.4 (5,087.6)

*Using Bureau of Infrastructure, Transport and Regional Economics (BITRE) definitions of previous years. Includes private sector expenditure.

Source: https://bitre.gov.au/publications/2015/yearbook_2015.aspx

So why does the motoring lobby have it wrong? The answer lies in the accounting.

Traditionally, road revenues have been defined as overwhelmingly fuel excise and state vehicle registration fees. Other vehicle-related taxation – such as goods and services tax ($3,889m collected from motorists in 2013-14), fringe benefits tax ($1,387.8m in 2013-14), luxury car tax ($463m in 2013-14) and passenger motor vehicle customs duty ($920m 2012-14) are appropriately general tax revenues, not road taxes.

It is inappropriate to attribute any of these latter items to road revenue. For example: goods and services tax is also payable on cups of coffee; should the Commonwealth be forced to spend all such revenue only on morning teas? Motor vehicle fringe benefits tax is a concession from income tax (with no equivalent available for public transport); if anything, foregone revenue should be added to the road spending column, including private sector spending.

Here is where the creative accounting begins: if you included all the aforementioned general revenue as ‘road-related expenditure’, you would arrive at 2015 Commonwealth road expenditure of $17.568 billion dollars.

This looks remarkably like the ‘$18 billion in federal government road-related taxes’ that the AAA is reportedly so eager to see ‘returned’ in roads.

Except it doesn’t exist. The $18 billion is general revenue, not roads revenue.

This is an important distinction: in effect, AAA is asking for the health budget or the education budget to be raided to find ‘their’ $18 billion[ii].

It gets much worse.

It is one thing for a lobby group to misinterpret figures and broadcast them as fact. Not unusual.

It is quite another for the Commonwealth statistical reporting agency to do so. Very unusual.

In 2015, BITRE chose to recast drastically what it included as ‘road related revenue’. All of the aforementioned general taxation revenue was recorded as ‘road related revenue’ – a shift of billions of dollars overnight. This had the effect of sparing the blushes of Australian governments: instead of the statistics recording that these governments had continued to spend billions more on roads than they actually collected from motorists, the new BITRE figures suddenly painted the opposite picture: road spending was ‘in credit’ – there were billions in excess motorist revenue sloshing around. Let’s spend more of it!

Last year Dr Michael Keating AC and Luke Fraser, writing on infrastructure for last year’s Fairness, Opportunity and Security series, cited the official BITRE figures of 2014 and raised serious issues about road spending greatly exceeding revenues: they produced astounding analysis to show that an enormous, growing road fiscal deficit had already reached over $26 billion in aggregate since 2007 and was likely to head to $140 billion dollars within a decade, without a fundamental change in government direction[iii].

It is interesting indeed that BITRE chose to reinterpret its definition of road spending so drastically (and questionably) in its first major road spending publication after Keating and Fraser’s article. Nothing to see here?

These issues and concerns remain unaddressed, apparently ignored.

This matter should not be left to lie. The official statistics lead governments and the public to assume that there remains money to burn from road revenue. This encourages more and more reckless spending on major road projects. Projects like Westconnex –a $17 billion dollar motorway which is already under construction but which can’t yet even identify where its off ramps are going to finish.

Governments and voters need to appreciate that this road and so many others are being funded with government debt. If debt and deficit are such big issues, Canberra must be brought to book on this matter.

John Austen is a happily retired, Sydney western suburbs dweller. He was Director of Economic Policy for Infrastructure Australia from its inception in 2008 until his retirement in 2014.

[i] http://www.news.com.au/technology/innovation/motoring/advertising-campaign-keep-australia-moving-calls-for-more-transport-funding/news-story/bf9c47f5ce6de05ac67aaee4f56fc8b0.

[ii] Given the recent High Court Williams and Williams2 school chaplaincy decisions limiting Commonwealth grant-giving, sending all this money to roads would be Constitutionally fraught as well. See http://johnmenadue.com/blog/?p=6688

[iii] http://johnmenadue.com/blog/?p=3834

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