Should motorists pay per drive?

ScreenHunter_1650 Mar. 13 14.09
By Leith van Onselen

The Australian has reported today on a new report by the Productivity Commission proposing to charge motorists for every kilometre that they travel, in a bid to boost private investment in roads:

Central to the new report is a plan for Canberra to help the states set up pilot projects that use sat-nav systems in cars to track vehicles and apply a charge for the distance each driver travels.

This would be more efficient than relying on fuel excise to pay for roads because the charges would tell governments which roads were used most, giving an incentive to upgrade them.

“If motorists already pay their way, the greater efficiency arising from road pricing reform could be promoted as giving motorists more and better roads for a similar amount of money,” says the draft public infrastructure report.

“More widespread direct charging of light vehicles has the potential to provide a better road system for motorists, if combined with reforms that hypothecate the revenue to efficient road provision.”

While good in theory, there are some practical issues with implementing such a measure.

First, the Federal Government collects roughly three times more in excise than it spends on roads, hence road investment is already being over-recovered from motorists. Unless excise is to be cut significantly in exchange for direct road user charging, then motorists will find themselves paying even more.

Second, fuel excise works as both a road user charge and an indirect pollution (Pigovian) tax, since it favours fuel efficient vehicles. If excise is reduced in favour of direct charging on a per kilometre basis, then there will be less incentive to drive a fuel efficient vehicle, since the effective charge on, say, a Toyota Prius would be exactly the same as for an inefficient vehicle such as a Chrystler Charger.

Third, some roads, such as local streets, are provided mostly for amenity value rather than servicing heavy traffic loads. Accordingly, direct road charging could channel funding to owners of major roads at the expense of local roads, potentially leading to underinvestment in the latter.

Finally, there are obvious privacy issues with the Government (or private agencies) being able to track everyone’s movements and whereabouts.

Overall, the Productivity Commission has raised an interesting proposal, which has some merit. But there are a number of barriers that need to be overcome before such an approach is workable.

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54 Responses to “ “Should motorists pay per drive?”

  1. saintmatthew says:

    and privacy issues – who would want the government knowing their whereabouts every time they go somewhere?

    • Good point. Added to the post.

    • darklydrawl says:

      Google, Apple, Tom Tom etc already have gobs on data on this – and much of it live as well. Indeed you can even buy it off them if you want.

      This is already happening.

      Black box telematics can also be used, but that data is generally not steamed ‘live’, but can be downloaded when required etc.

    • Cornflakes says:

      I can’t exactly see the LDP senator or some of the other cross bench senators being too pleased with it either.

    • Mik says:

      One other point, what about our urban sprawl, people who are unable to afford home close to cities and have to live in the suburbs or even further out are going to be penalised, its a bit like the poor being slugged more and more while the rich people (those who live a couple of KM’S to a major city) are paying less and less. Sounds like that this research was made by rich well to do people.

      • The Claw says:

        If it was charged at a fair price, you might find the outer people would pay say 1c per km whereas the elites would pay $1 per km. This would reflect the congestion, value of the road, and cost to provide it.
        Assuming they want fair pricing that is.

  2. 3d1k says:

    Absolutely not.

    ‘Can tell governments which roads are used most…’ Technology already exists to monitor usage; the fuel excuse is impost enough. I don’t think it’ll get past the Nationals in any case.

    • migtronix says:

      Finally 3d no spin! Although I liked the unedited version better.

      “Can tell governments which roads has issues” already do!

      NB: something I did some architectural/code work on but am in no wise affiliated with.

      • Jason says:

        Mig that’s pretty nifty. I wonder if you could utilise the accelerometers of the phones within the app to track ride comfort while driving? That would really amp things up a notch.

      • migtronix says:

        @Jason: Hey! Not bad. I’ll run it past the dude that owns it next time I see him down the pub — I don’t need the work but he’ll probably try and sucker me in again, if I do I’ll post your name on the code :)

  3. outsidetrader says:

    Interestingly, the report indicates that more than the entirety of the fuel excise is currently spent on roads (in contrast to previous debates about the mining fuel rebate which indicated that only one third of the fuel excise goes to roads)…

    Perhaps our desire for more road spending has finally caught up with the failure to index the excise?

  4. migtronix says:

    Don’t they already? Perhaps government should be paid per session.

  5. passivereader says:

    A question: When the report states that only 33% of fuel excise revenue is spent on “land transport” projects, is this referring to just the National Land Transport Network (ie: only federally controlled road corridors, which represent only a fraction of the overall road network). Are there any figures that outline how much the fed distribute to state and local governments for roads infrastructure?

    • Good point. I don’t have the data on hand, but remember when I worked at the Vic Government that roads were over-recovered. Car rego charges (which flows to the states) also needs to be included in cost recovery.

      • passivereader says:

        Just quickly looked this up on the RACQ’s State Budget Comment. QLD government alone has $4.4 billion in cap and op expenditure in 2014 programmed, but will only recover $1.5 billion from registration charges. I suspect that roads revenue may not be as lucrative as it seems.

      • outsidetrader says:

        As I noted above – the report says that Government road funding already matches the entire fuel excise (and rego costs) and is growing faster than these…

        “The commission says at the moment the fuel excise and registration charges, drivers licence fees, stamp duty and tolls amount to $18 billion per year. GST on cars and fringe benefits tax would add about $1 billion more. Spending on roads amounts to $19.5 billion, and is growing faster than funding.”

  6. The Claw says:

    the charges would tell governments which roads were used most, giving an incentive to upgrade them.

    A very naive comment.

    Speed cameras tell the government where motorists would like to drive faster, giving government the incentive to improve the roads and raise the speed limits at that point.

    Yeh right.

  7. Rhett Morson says:

    I am a heavy road user and vote for:
    - increasing petrol tax
    - scrapping rego costs
    - compulsory e-tags with more toll points

    • The Claw says:

      I am a light user and agree with these. Also in most cases the toll should be very low or zero when the road is lightly used (off-peak)

      A further improvement would be to make yearly insurance illegal. All insurance must be distance based.

      • drsmithy says:

        A further improvement would be to make yearly insurance illegal. All insurance must be distance based.

        How does that work ?

        Do you pay a year in advance guesstimated on how far you drive, or get charged at the end of each year based on odometer readings ?

  8. Jason says:

    This will never work, you’ll have people tampering with the GPS before such a scheme ever gets of the ground.

    Taxing the inputs that a car requires to function (ie. petrol/diesel/gas) is a lot easier, and cannot be avoided.

    • The Claw says:

      Taxing the inputs that a car requires to function (ie. petrol/diesel/gas) is a lot easier, and cannot be avoided.

      The owners of electric cars will love you.

      • Doha83 says:

        That’s OK, they’ll just recover that with increased electricity prices.

        Or they’ll just add a ‘meter’ to your charge outlet for your EV or add EV metering abilities to your *smart* meter


      • drsmithy says:

        Annual odometer readings taken as part of a registration renewal solve that problem easily.

  9. Explorer says:

    Most of the data can already be captured from Telcos as users move from cell to cell along main roads.

    The NRMA does journey time measurements quite regularly on major routes.

    Ford motor company has the data on all its car GPS from in dash navigation apparently.

    Toll roads and a petrol tax are a good enough and cost efficient solution which can be enhanced by existing data if collected and correlated.

  10. General Disarray says:

    I’d disable my GPS the first day they attempted this.

  11. TheJoneses says:

    “Finally, there are obvious privacy issues with the Government (or private agencies) being able to track everyone’s movements and whereabouts.”

    Thats the deal breaker for me.
    No Big Brother charges!

    • outsidetrader says:

      Why not use the amount of fuel consumed as a proxy for the distance traveled, and place an excise on the fuel. Oh wait…

  12. PhilBest says:

    An important point that no-one seems to be making on car drivers behalf, is that MOST of the cost of building roads, is the cost of engineering them to carry 20 ton vehicles. The same goes for the cost of maintaining them.

    IF we built roads for CARS, the petrol tax and rego fees would far more than cover the cost.

    Heavy vehicles mileage fees SHOULD be the dominant source of funding for highways and major arterials at least.

    CONGESTION is the cost that cars create; this is different to the cost of building the roads themselves. And it WOULD be possible to “build your way out of congestion” quite cheaply if you added light-duty “cars only” lanes and bypasses and bridges and so on, to the network.

    I think it is short-sighted that this has never been the norm. If roads were more privately-provided as under economic libertarian paradise scenarios this certainly would have happened.

    The heavy vehicles would be gainers from the removal of congestion from the main routes they do use.

  13. [email protected] says:

    This nonsense comes from where?
    The productivity commission?

    Tell ‘em to get a real job.

  14. AB says:

    Now call me slow, but perhaps it would be easier, quicker, cheaper and more sensible just to re-introduce indexing on fuel excise?

    “Asked by Treasurer Joe Hockey to investigate impediments to infrastructure funding, the Productivity Commission has zeroed in on fuel excise, originally designed to fund roads but shrinking each year in real terms because of a decision by the Howard government to freeze rather than index the rate shortly after it introduced the goods and services tax.”

  15. Slambo says:

    I’ve got to be missing something here. Is this not a way of locking in disadvantage for those who work in the cities but cannot afford the property prices to live near them? At least now they have the option of driving a fuel efficient vehicle to mitigate costs somewhat. Appreciate there are a lot of moving parts to this, but the idea sounds fairly regressive.

    • Mining Bogan says:

      Yep, everybody will crowd towards where they work so ergo housing closer to work becomes more expensive and there will be no reason or incentive to expand further out.

      The housing industry scores again.


      • drsmithy says:

        As has been pointed out here multiple times, only a small percentage of people work in the CBD.

  16. emess says:

    I would think that homeowners who have already paid for their local roads as part of the land package might have reasonable cause to complain.

  17. AF says:

    I think a grey nomad tax should be introduced, along with fines for blocking the roads at 30km/h below the speed limit.

    • aj. says:

      Yes, of all the boomer sins, driving at 80 with a caravan on a single carriageway (because this is the best mileage from the cruiser) is one of the most irritating.

  18. spleenblatt says:

    We are truly reaching the apotheosis of neoliberal stupidity and greed – the privatisation of monopoly public goods to avoid the taxation of the businesses that derive the benefit of said goods, and allow said businesses to derive a new form of monopoly rent from people with no power. The Productivity Commission should be privatised while we’re at it – it will be a perfect fit for the IPA.

  19. orthonym says:

    Take one leaf, dampen it, place said leaf between sky and GPS unit – you’ve got yourself a tax free ride!

    As a method of tax, it’s completely flawed.

    As a method of reporting using the data collected by Telcos, the accuracy just isn’t there. Throw in the concept of passenger’s and how that would impact/distort the data, it would make auction clearance rates look like Gospel!

  20. somablu says:

    Agree with the first comment on the privacy issues.

    Ford Exec: ‘We Know Everyone Who Breaks The Law’ Thanks To Our GPS In Your Car
    Jan 9 2014

    This was and still is being pushed in the U.S

    Will pay-per-mile be a buzzkill for American road trips?
    December 7, 2011

    The next stop for our gov will be selling off the ehealth info as is being done in the U.K.

    NHS patient data to be made available for sale to drug and insurance firms
    20 January 2014

  21. KlimashkinaSydney says:

    Pay per drive … uhh isn’t that called going to the service station?