2002 National Local Roads Congress

National Local Roads Congress 2002

Better roads: A whole-of-community approach

John Metcalfe
Director Research and Policy
Australian Automobile Association

Outline

Fuel taxation and charges
Investment in road infrastructure
Benefits of better roads
Road safety and the community

Fuel Taxation Inquiry

The Fuel Taxation Inquiry Report was released by the Government in May 2002
The Government effectively rejected all recommendations of the Inquiry
The Terms of Reference limited the Inquiry to working with the current system

Key recommendations from the Inquiry

the current system is complex and in need of reform
excise rates should be based on energy content (with excise applied to all fuels)
indexation should be re-introduced
existing subsidy and grants schemes should be abolished and replaced with new schemes

Reasons to reform the current fuel taxation system

Rates of taxation on fuel are too high

the Commonwealth fuel taxation component of petrol represents between 90% to 120% of fuel costs
compare against the 10% GST on most goods and services

The current system is regressive and penalises regional road users relative to urban road users

costs of road use in the city are greater than those in the country, yet country motorists pay more for fuel

Charges for light vehicles are excessive compared to heavy vehicles

NRTC has determined a road user charge of 20 cpl for heavy vehicles
using the same formula, a road user charge of 7.4 cpl is appropriate for light vehicles (compare with 38.1 cpl fuel excise)

What would an ideal fuel taxation system look like?

Fuel taxation and road user charging are separate concepts - they need to be treated as such
With GST, fuel excises are no longer justifiable to raise revenue

Fuel Taxation Inquiry

Finding:
The proposition that other forms of taxation are able to raise revenue more efficiently than fuel excise raises issues of overall tax system design...The Inquiry acknowledges that this may be worthwhile, but it is clearly beyond the Inquiry's somewhat constrained terms of reference.

Source: Fuel Taxation Inquiry Report, March 2002

What level of fuel taxation is justified?

10% GST on all fuels (no exemptions)
No indexation (GST is a growth tax)
No on-road / off-road distinction

How an ideal road user charge would be set

An ideal road user charge would have two components

an access charge to cover the right to use the network (via a registration charge)
a charge to cover road use (instead of excise)

A road user charge would consist of:

a road wear charge (based on vehicle mass, axle load and distance travelled)
an environmental charge (based on engine and fuel type)
a charge covering external costs of vehicle crashes

Revenue and investment

Revenue collected from road user charges and expenditure on roads need to be linked

revenue from safety charge could be directed to black spots

Charges on road users and road funding

Spending on roads is falling behind what is needed to accommodate the demands of a growing economy

the gap between excise revenue and road spending continues to widen

Benefits of investment in roads

Better roads mean reductions in:

travel time
vehicle operating costs
crash costs
environmental costs

Improved regional and equity outcomes

Road funding benefits the economy

Investment > Improved productivity > Increased export volumes > Additional taxation and government revenue flow-on economic activity

Roads are self funding

Investment is self funding from whole-of-government point of view.

taxation revenue is greater than annual funding charge (including maintenance)

Source: AAA/Allen Consulting Group

Better roads and road safety

618 600 crashes each year
17 500 people seriously injured
18percent disabled
1727 fatalities
Cost $15 billion

National Road Safety Strategy (NRSS)

40% reduction in road toll per 100,000 population by 2010 - from 1,763 in 1999 to 1,087 in 2010
Many countermeasures identified to improve the safety of new and existing roads

Recent research on rural safety

Crash rate factors by road category (rural roads)
Road type	Surface	Surface width (metres)	Relative crash rate factor
Unsealed	Gravel	> 4.5	1.40

Source: Economic Evaluation of Road Investment Proposals, AustRoads 2001

Whole-of-community approach

Can NRSS target be achieved if we treat each aspect of road use in isolation?

Road funding is seen as unrelated to:

health and hospital costs
social welfare
emergency services
motoring taxes
environmental outcomes

Cost of road crashes in Australia

Human costs - $8.4 billion
Vehicle costs - $4.1 billion
General costs - $2.5 billion
Total Costs - $15.0 billion

Human costs of road crashes ($ million) Medical/ambulance/rehabilitation - $361 Long term care - $1990 Labour in the workplace - $1625 Coroner - $1 Labour in the household - $1493 Quality of life - $1769 Legal - $813 Correctional services - $17 Workplace disruptions - $313

Human costs of road crashes and road funding

Government disability support and long-term care of road crash disabled - $2 billion
Federal road funding - $1.3 billion

Medical / ambulance / rehabilitation costs - $360 million
Local government financial assistance identified for roads - $407 million

Legal cost of road accidents - $813 million
Federal Government Black Spot funding - $40 million

Road safety as whole-of-government issue

If NRSS target were achieved, imagine for example

how many fewer hospital beds would be needed
how much less pressure there would be on casualty and trauma units
how much shorter hospital waiting lists would be
how much less pressure there would be on police, ambulance, fire and other emergency services
the impact of fewer long-term or permanent injury cases on the social security budget
the impact of fewer workdays lost to business

Environmental benefits - Intelligent Transport Systems

Manual toll booth - 400 vehicles per hour (vph)
Automatic toll booth - 600 vph
ETC Free Flow tolling - 2,100 vph
Automated highway - 6,000 vph

Source: Maquarie Infrastructure Group; University of California

Conclusion

Need Governments to adopt a whole-of-community approach to road funding because it has an impact on:

taxation and charges
health and social welfare
emergency services
environment
intelligent transport systems