Whether Labour’s policy, capping public transport fares in Auckland, Wellington, and Christchurch at $20 a week, is the best way to achieve that aim is another question.
Very few people commute regularly by public transport.
Data from the 2023 Census shows only just over 130,000 people regularly took a bus or train to work (Labour’s policy covers some ferry commutes too, and 2023 figures will be a tad low thanks to the slow pandemic recovery).
About 90% of these commuters live in Wellington and Auckland. Wellingtonians are almost guaranteed Labour-Green voters at this election, but the 64,000 people who commute by public transport in Auckland may be persuadable, although a small number will already get free public transport anyway through their SuperGold cards.
The big question is whether it persuades the tens or hundreds of thousands of people who potentially could commute via public transport but don’t.
There’s no easy way of knowing how many people in our cities currently commute by car, but might be tempted to hop on a bus or train if the price were right.
Labour has itself been sceptical that low prices would encourage people to get on a bus.
In 2022, Labour Transport Minister Michael Wood looked at ways to reduce bus fares. Photo / Georgina Campbell
In 2022, the then Transport Minister, Michael Wood, took a paper to Cabinet seeking to make permanent a policy which temporarily halved fares. He was overruled.
A separate paper, which contemplated making public transport free, noted that price alone was not enough to encourage people to use public transport more, arguing that investment in more frequent services and services that reached into places with poor public transport was equally important. This justification was used at Budget 2023 to justify the decision not to keep fares permanently lower.
“There is also research indicating price alone will not encourage greater public transport patronage, particularly for low-income households. Public transport also needs to be convenient and frequent to be more attractive to potential users.
“Research indicates that areas of higher deprivation or lower incomes are not as well served by existing public transport services, limiting their access to employment opportunities,” the paper said, in remarks rather similar to those made yesterday by Transport Minister Chris Bishop.
A separate paper on half-price fares, written by the NZ Transport Agency (NZTA), found that they did boost ridership, but more people (15%) switched from walking and cycling to public transport than did from cars (12%) – although this was at a time when driving was also subsidised through lower fuel taxes.
But the big problem for the policy isn’t actually whether it’ll work in shifting people out of cars, it’s the way Labour intends to pay for it: $65 million a year from the National Land Transport Fund (NLTF) – or $195m over the three-year period covered by New Zealand’s three-yearly National Land Transport Plans (a kind of transport Budget, which, frustratingly, doesn’t use the three-year periods used by Treasury for the main government Budget).
The NLTF is funded mainly by fuel taxes and road user charges.
National’s campaign chair, Simeon Brown, alluded to the problem on Tuesday, saying the fund was “oversubscribed”.
That’s a gross euphemism. The land transport fund has always been “oversubscribed”; the problem now is that it’s effectively insolvent, requiring multibillion-dollar cash injections (itself a euphemism for bailouts) from the taxpayers every time a new transport budget is signed off by the NZTA.
Since 2021, Finance Ministers from both sides of the House have signed letters of comfort to the NZTA, the entity that administers the NLTF, promising grants, debt facilities and reviews of the organisation’s funding to keep it afloat.
The problem is a simple one: fuel taxes are not adjusted for inflation and have been frozen since 2020, eroding in real terms, while infrastructure investment is extremely exposed to inflation and has spiralled out of control. If fuel taxes had kept pace with inflation, they’d be about 20c a litre higher.
Simeon Brown (left) was succeeded as Transport Minister by Chris Bishop (right). Photo / NZME
Add to that the political dimension. Infrastructure costs seem to move in tandem with politicians’ appetite for promising investment – the more expensive infrastructure gets, the more politicians tend to promise it.
When the Government changed, transport officials briefed the incoming Government on $200 billion worth of unfunded transport policy commitments from Labour, which would have drawn on funds in the NLTF (spent at about $7-8b a year).
The projects included the Auckland Light Rail plan ($14.4b), the new Waitematā Harbour bridge or tunnel ($48b), upgrades to the rail network ($37.4b) and the Strategic Investment Programme ($59.3b), which was Labour’s name for what the current Government calls the Roads of National Significance (RoNS). Many of the roads are the same, although the RoNS programme is even larger and more expensive.
Nearly half of the hole came from promises made during 2023, which proved to be a very expensive election year.
The coalition took power and made great hay from the $200b funding hole, which formed the centre of Christopher Luxon’s first state of the nation speech as Prime Minister.
But the coalition didn’t close the hole – it only changed its composition.
There’s a strong irony in the fact that Brown, as campaign chair, was the MP complaining about the NLTF’s oversubscription. He may not have been the one to take the subscriptions out in the first place, but he certainly renewed them.
As National’s transport spokesman and later Transport Minister, Brown campaigned on and later implemented even more spending, cutting public transport investment, but increasing spending on roads.
When the NZTA set out its most recent spending intentions, which factored in Brown’s priorities, it included the astonishing chart which warned that by 2030, the land transport plan will be spending $6b more every single year than it will receive in revenue from fuel taxes and road user charges.
The deficit begins opening up next year and never really closes.
That’s $6b each year that the Government will need to send to the NZTA to keep its transport plans afloat – that’s $18b for each three years in Crown grants for each three-year transport plan, a sum just shy of what the Government spent on Covid-era wage subsidies. The deficit is the equivalent of a new Dunedin hospital every six months right out to the end of the forecast period in 2034.
By the 2030s, the NZTA’s spending of NLTF funds will exceed revenue. Graph / NLTP
So to say there’s $195m in the NLTF for this public transport policy is a nonsense. Tens of billions of dollars of spending needs to be cut before the fund even breaks even – and then, a further $195m could be found to fund the policy.
The coalition can’t point the finger, because it’s the one that campaigned on and committed to the most expensive parts of the plan. Drawing attention to the fund’s crisis begs the question of who left it in such a state to begin with. The RoNS programme may cost over $50b, as of the most recent figures.
But nor can Labour point the finger back at National and complain that it was the RoNS programme that tipped the fund over the edge. Labour’s Strategic Investment Programme did the same, and cost even more.
Something’s got to give – and something probably will. Bishop, even before the fuel crisis, was alluding to the fact that the Government will be making some adjustments to its transport pipeline – a euphemism which, in reality, may mean projects get kicked out so far into the future that they’re effectively cancelled.
There doesn’t look to be much hope those roads will get built. The politics around them has shifted considerably. In 2023, both Labour and National had expensive roading policies. This year, both seem more sceptical.
The other big problem is revenue. The NZTA’s $6b deficit projection included an assumption that fuel taxes will rise 12 cents a litre next year, then 6c a litre in 2028, and 4c a litre in 2029 and every year after that.
Labour has already said it won’t be following through on the 12c a litre hike, which Treasury thinks will cost the NLTF $300m every six months, or $1.8b over the course of the next transport plan, meaning that $6b deficit would be more like a $6.6b deficit.
These deficits aren’t included in Treasury’s core forecasts for the Crown’s overall fiscals, meaning the Government’s obegal (operating balance before gains and losses) and net debt forecasts don’t actually assume any money will be sent over to prop up the NZTA (this is only counted as a “risk”).
The fact that billions of dollars will probably be sent in the NZTA’s direction calls into question how much money will be left in the Government’s tight capital allowance for anything that isn’t transport.
That’s not just a problem for Labour – the coalition parties haven’t outlined their policy on the planned hike, but Finance Minister Nicola Willis has been quite explicit that if fuel prices stay high, she won’t hike fuel taxes.
In all likelihood, the future of the NLTF over the next few years is probably continued Crown debt funding, massive cuts to infrastructure spending, and eventually tax hikes, a fairly grim cocktail.
Labour’s public transport policy might actually help close that deficit if it shifts people into public transport, shifting the investment case for more expensive roadbuilding and making it more politically palatable to axe new roading projects.
But making it cheaper for people to bus in cities only makes it harder to hike fuel taxes for everyone else – and there’s no way of getting around the fact that those taxes are going to need to rise, and soon.
Labour and National both need to get on top of the issue quickly. As the Infrastructure Commission warned in its report earlier this year, Governments’ fondness for big transport spending has crowded out investment in other areas like health and education.
There’s only so long you can do that before you create some real problems in social services.
Sadly, until these problems are fixed, the best transport investment for most New Zealanders remains a one-way ticket to Australia.