Ending the free ride on our roads

Sometimes democracy feels like chipping away at an uncarved block with a butter-knife. The policy ends up in the right shape, but it can take years.

Will it be that way with GPS-based road charging, which the Abbott government is taking a close look at via a Productivity Commission inquiry? Fairness and economic sense say no, but the politics of the situation says ‘pass the butter-knife’.

The proposal, put forward by a working group of federal, state and local government public servants, is that the vehicles that cause the most wear and tear on our road infrastructure – heavy trucks – be tracked by satellite and charged for the distance they travel.

On top of that, the policy considers charging trucks more for using roads that have not been engineered to cope with their weight.

In a submission to the Productivity Commission’s Inquiry into Public Infrastructure, the Heavy Vehicle Charging and Investment Reform group is at pains to point out that “this submission does not reflect the views of any particular government”, but then explains in detail how all levels of government are running out of cash to build and repair roads.

The current funding system, set up in 1992, is heavily dependent on a fuel-based road user charge. If there were no RUC, trucks operators would receive a rebate equal to the excise charged for every litre of fuel used - currently 38.1 cent per litre. Since 1992, however, operators have been charged a gradually increasing rate, the RUC, which is currently around 26 cents.

Within five to seven years, the RUC will be larger than the fuel excise paid by non-commercial traffic on each litre of fuel. That’s because the Howard government froze the indexation of fuel excise (yay!) and set the clock ticking on adequate road funding (boo!).

Something must be done. We can’t have commercial enterprises paying more for a legitimate business input than consumers pay for the same commodity.

Or can we? The big differences between now and 1992 is that more studies have been done into how heavy vehicles damage roads, and the technology now exists to tell us how a truck travels; on what kind of roads, how fast and with what payload.

Crunching those numbers can, in theory, produce a near-perfect apportioning of the bill for the repair of roads, leaving aside all those consumers delicately bumping over the tarmac in their family cars.

In the land of economic theory, the costs of getting, say, a packet of Cornflakes to a local supermarket is just being shifted around. If we sting trucking companies with a high RUC, they’ll charge the supermarket/supplier more for freight, and the supermarket will pass that cost on to the consumer.

By contrast, if taxpayers stump up for the shortfall in road funding, trucking firms can deliver the goods more cheaply, and Cornflakes will be a couple of cents cheaper on the shelves. In that case, a cost that benefits nearly everyone has been socialised.

But when costs can be privatised, economies work more efficiently. So the GPS-based system offers two advantages: it can work out quite precisely which firms should pay most to fix the roads; and, because it is ‘fair’, it allows government to work out how much of the cost of road funding should be socialised, and how much should be paid by business.

All lovely theory. In practice, however, there are many problems.

The first, identified in today’s Australian newspaper by Australian Trucking Association chief executive Stuart St Clair, is that "to meet the cost of road wear, charges for local roads in rural areas would need to be 25 times higher than charges for freeways”.

That’s because a trucking firm may sometimes have to use minor roads to cut hundreds of kilometres off a journey – but the firm has no say in what kind of road is provided on that route. 

So a very heavy truck on a very small road should, in theory, be charged heavily to deter them turning that road into a long stretch of potholes. But in practice, trucking firms just won't take those jobs. 

More obviously, there is that the usual political barrier to making something ‘fair’. A number of firms will know full well that they have been receiving an invisible subsidy from other firms (or from the taxpayer) for a long time. 

Personal fortunes can be lost when such a system is reformed, so expect some heavy lobbying by those set to lose the most.

Ultimately, separating out the commercial transport fleet and developing a rational, fair, and economically efficient charging system is essential. However, there will be a lot of thrashing about, vested-interest lobbying and painful economic adjustment along the way.

What Professor John Freebairn described a few years back as a “dogs breakfast” of road charges (Greg Hunt’s road less travelled, October 2010) must be reformed. 

But from this point in time, making that change looks to be about as easy as eating a bowl of Cornflakes with a butter-knife.