Wednesday, September 21, 2016
Fletcher gave a speech last month in which he raised issues from which most politicians would run a kilometre. He thinks heavy vehicles – trucks weighing more than 4.5 tonnes – should pay road-use charges that more accurately reflect the huge damage they do to our roads. That's brave.
But he thinks ordinary drivers should also be paying a road-user charge. That's not brave, it's outrageous.
Fletcher, however, has his own arguments to persuade us it's really quite sensible.
He says he's worried about how the federal government will be able to maintain its contribution to building and maintaining the nation's roads when the move to more efficient cars causes its revenue from fuel excise to fall away.
He reminds us that, whatever the price of petrol, it's almost 40¢ a litre higher than it needs to be, thanks to the federal government's fuel excise.
This means, of course, that how much tax you pay is partly a function of your vehicle's fuel efficiency. So someone driving a 12-year-old Holden Commodore pays 4.5¢ a kilometre, whereas someone in a six-year-old Renault Megane pays 3.5¢.
But get this: someone with a late-model Toyota Prius hybrid pays just 1.5¢ a kilometre and someone who's paid $125,000 for one of the new all-electric Teslas pays exactly … nothing.
See the problem? As we all do the right thing and move to more environmentally friendly driving, the government's excise revenue will be going down, not up.
Today, electric vehicles make up only about half a per cent of our vehicles, but projections put that up to 30 per cent within 20 years.
Then how will we pay for our roads?
Fletcher's answer is that we need to move to funding them more directly by a user charge – say, one based on the number of kilometres you drive.
He stresses this isn't an argument for motorists to pay more. They already pay a lot more than federal excise to drive their cars, including state rego fees and stamp duty.
Indeed, if you pull together all the taxes and charges we pay that are in any way associated with cars and trucks – including under GST and the fringe benefits tax – you can get to a total of about $30 billion a year, of which fuel excise accounts for only about a third.
This compares with total spending on building, maintaining and operating roads – federal, state and local – of about $25 billion a year.
So Fletcher's idea is to rationalise this mish-mash of taxes and charges and replace them with a road-user charge that would be much more visible.
But this is where he reminds me of Keating, who often used wrong but more appealing arguments to persuade us to accept needed but unpleasant measures.
Fletcher has picked up a long-standing piece of motoring organisation propaganda – that every cent of tax paid by motorists should go back into roads – and given it the status of a self-evident fiscal truth.
The truth is there's never been any link – legal or informal – between the taxes and charges on petrol and cars, and the amount governments spend on roads.
Nor should there be. Governments have to pay for 101 services we demand of them apart from roads. So they have to raise a lot of revenue, which they do by taxing a wide range of activities and things, not just one or two.
What they tax tends to be what we're used to them taxing, since we have such knee-jerk opposition to anything we can condemn as a "new tax".
The feds' spending on roads is equivalent to only about two-thirds of what they raise from fuel excise. So should excise receipts decline in the future, this will be a problem for the whole budget, not for road spending in particular.
Fletcher is right to think that user charges would be an improvement because their greater visibility would encourage us to be more economical in our use of roads.
That's particularly true of heavy vehicles, because it's they that do most of the damage to our roads. We don't want goods being moved interstate by road rather than rail because we're charging semi-trailers and B-doubles only a fraction of the cost of the damage they do.
But if the rest of us had to pay a user charge whose purpose was to cover all the remaining costs of roads and to replace all the other taxes and charges, that might be neater and more visible, but it would be a lost opportunity to help us reduce a different, fast-growing cost for city motorists: congestion.
The cost of congestion is the cost I impose on other motorists by driving my car at the same time they do.
And the way to reduce it – as well as the spending needed for new motorways and even public transport – is to replace some of the tax we pay with a user charge that varies by location, time of day and distance travelled.
As Fletcher says, there's a lot more thinking to be done about how we pay for roads.