ROAD TRANSPORT FORUM - Frustration at RUC increase

Wednesday, August 26, 2020

Running a business is hard work. It’s especially hard when you have to contend with a severe economic downturn. What makes it even harder is when you have additional fixed costs imposed on you that will jeopardise whatever miniscule margin you have left. Transport operators are facing that situation right now, and yet a big part of the problem could, with the stroke of the transport minister’s pen, be avoided. Every operator will be aware that despite many of them working through the lockdown as an essential service vital to keeping the country running, the government is about to whack them with a 5.3% RUC increase unilaterally across all current rates on 1 July. I first wrote to Transport Minister Phil Twyford about this just as the lockdown began. I argued that transport operators were doing it tough and asked that the increase be deferred. Unfortunately, that request was declined, with the minister reasoning that transport businesses, like other New Zealand businesses, had access to the wage subsidy and other government support and that the RUC funding was necessary to deliver the government’s transport priorities. The impact on the economy of the Covid-19 lockdown is much worse than anticipated when I first wrote to Minister Twyford. So, once we moved to alert level 2, the RTF again asked the government to reconsider the RUC increase. We believe the government has some wriggle room to accommodate this. The National Land Transport Fund (NLTF) has been underspent in recent times and funding for transport projects has also been allocated from outside the NLTF as part of the government’s post-Covid recovery package, which would more than offset the RUC increase.

With a much clearer idea of the economic devastation left by Covid-19, the decimation of our tourism industry and those offsets, I just cannot see how the RUC increase can be justified. Does this government understand the basic premise that increased costs for moving goods mean increased costs right through the supply chain and in every part of the economy? As well as the obvious effect on businesses, those costs will have a significant impact on the purchasing power of hundreds of thousands of consumers now living off reduced wage packets. I have been told that even transport companies with customer agreements that allow them to negotiate increases on government imposed charges are finding that their customers just aren’t in a stable enough financial position to incur the increased freight charges. Those transport companies will, therefore, have to bear the cost themselves, and many simply won’t be able to.

Ironically, it was on the topic of RUC that the recently released draft 2021 Government Policy Statement (GPS) on transport delivered one of its few pieces of good news, with a recommendation that there would be no increase to RUC or fuel excise duty for the 2021–2023 period. Unfortunately, that was pretty much where the good news ended. Put together in a pre-Covid world, the 2021 GPS is largely an extension of this government’s anti-road, interventionist philosophy to shift people and freight to rail and other forms of transport. In an economic environment far more dire than any of its authors could ever have imagined, the GPS is not the misguided but well-intentioned strategy it would otherwise have been. Instead it now seems so completely out of touch with the economic reality we face that it may well be completely counter-productive. The GPS, as written, will see billions of dollars taken from the National Land Transport Fund to prop up a national rail system with a history of failure, and cycling and walking infrastructure for those who make no contribution to the fund. Now, more than ever, what we need is a hyper-rational government transport strategy that simply seeks to play to the strengths of the economy and the various transport modes that service that. Yes, rail is important, particularly for passenger transport in our cities.

Yes, some cycling and walking infrastructure is important, again, mainly in urban areas. But what is really important right now is getting the economy moving, supporting our exporters, helping the private sector be more profitable, and helping businesses create jobs. There is no way we should spend precious road users’ money on pie-in-the-sky inter-regional passenger and freight-based rail that will forever require taxpayer support to survive. That money should be going where it is needed: to improve our roads and boost productivity of our primary and export sectors. Over 35 years it has been proved that the best mode for the vast majority of freight movements in New Zealand is the road. A responsible government strategy, should, as we face the greatest economic crisis in our lifetimes, reflect that reality. Instead we find ourselves begging the government not to whack us with another tax.