Comparison of motoring taxes and charges paid by three hypothetical households at present with they'd pay under model user pricing scheme assuming no change in travel behaviour (2012 $$)
Motoring taxes and charges currently paid ($2012) by three hypothetical households compared to what they’d pay under a model user pricing scheme, assuming no change in travel behaviour (source: Infrastructure partnerships Australia)

The federal Minister for Urban Infrastructure, Paul Fletcher, gave a very important speech last month embracing the need for governments to investigate the costs and benefits of road pricing for cars. That’s a few steps short of advocacy but it’s a welcome development in my view; I’ve discussed the case for congestion pricing a number of times before e.g. see herehere and here.

Not everyone’s convinced though. Phillip O’Neill from Western Sydney University reckons residents of western Sydney should be wary of claims congestion charging would make them better off (see So what’s the cost to avoid congestion?):

Western Sydney households are heavily reliant on cars. Our spread-out suburbs are difficult to link by public transport and in some new areas the infrastructure for such things is non-existent. The lack of jobs density in western Sydney’s major centres pushes all of us into our cars. 

About three-quarters of resident workers in western Sydney use cars to get to work every day. Very few have public transport options. There will be no choice for western Sydney workers except to cop the road user charge, drive in peak periods, and put up with congested traffic conditions.

The revenue targets will be met. But we will be no better off.

Professor O’Neill is right to say that residents of western Sydney wouldn’t have a realistic public transport alternative in the event user charges were introduced. The problem here is motorists don’t regard public transport as a real alternative unless it offers a similar overall journey time to driving.

The only situation where that holds is in concentrations of activity that are very well-served by public transport. In Australian cities that’s usually the CBD because it’s extraordinarily dense and blessed with a legacy of fast radial train lines inherited from the nineteenth century. There’s no realistic chance a large dispersed area like western Sydney could be retro-fitted with public transport infrastructure that’s so good it’s more attractive for the great bulk of the population than driving.

Nor can it be assumed road charges would be so high they’d undermine the competitiveness of driving relative to public transport. The federal Minister is very precise in arguing that the revenue from road pricing should not exceed existing federal and state revenue from motorists; principally fuel excise, stamp duty, and registration charges.

Mr Fletcher contends the political reality is it won’t be acceptable unless it’s presented as an alternative collection mechanism rather than as a new tax. That also means it won’t generate any extra revenue that could be applied to public transport infrastructure. It might also hobble the extent to which pricing can be used as a tool to manage traffic.

So what’s the likely impact on motorists of the sort of user charging model the Minister has in mind? Infrastructure Partnerships Australia (IPA) recently developed a revenue-neutral design, Road pricing and transport infrastructure funding: reform pathways for Australia. IPA’s proposed tariff is structured to take account of vehicle mass, distance, location, and time of day. IPA applied it to three hypothetical households:

Peter: Lives in regional Victoria and owns two vehicles. One is a 2009 Holden Cruze (Vehicle 1 does 46 km p.w.) and the other is a light commercial vehicle – 2005 Toyota HiAce (Vehicle 2 does 418 km p.w.). He operates a furniture restoration business, and uses the van for pick up and deliveries. He travels at least once a week on the national highway network to make deliveries. He uses the car three to four times per week for personal use, travelling only short distances.

Graham: Lives in outer suburban Sydney. His family owns 2 cars – 2009 Audi A4 (Vehicle 1 does 346 km p.w.) and Jeep Grand Cherokee (Vehicle 2 does 98 km p.w.).  Graham drives to work every day in the Audi on motorways (one-way journey length 26 km). His wife uses the 2010 Jeep Grand Cherokee for short distances in the local area (e.g. school drop off and pick up, other personal business). Both vehicles are used frequently on weekends.

Leanne: Lives in the outer suburbs of south-east Qld.  She owns one car – 2007 Toyota Corolla (Vehicle 1 does 260 km p.w.). She’s a shift worker, travels to work (cross city, non-CBD) in the early evening and returning home before the AM peak period. She uses the vehicle for occasional weekend trips, generally travelling short distances in the local area

Peter’s household currently pays $49.04 per week in taxes and charges; Graham’s pays $46.25; and Leanne’s pays $15.61. The exhibit shows that if they were to maintain their existing level and pattern of travel, Peter and Leanne would both pay around 20% less in government charges under the IPA’s model tariff, while Graham’s household would pay 10% more (an additional $4.62 p.w.).

Of course the aggregate revenue “lost” by those who pay less than at present would have to be offset by those who pay more. These are idealised household types; there will be other household types who’d be affected differently. For example, if Graham’s wife has the same travel pattern as he does – and two income households are common in Western Sydney – the additional cost to the household would be $23.72 p.w.

All of them would potentially benefit, though, from a reduction in congestion providing faster and more predictable travel times. That after all is the key promise of congestion charging. It’s very likely the value of travel time savings would significantly exceed the additional $4.62 p.w. (or $23.72) incurred by Graham’s household.

Moreover, many motorists will be able to reduce the amount they pay by changing their travel behaviour. They might shift some travel out of the peak; change to a smaller car; or moderate the number of kilometres they drive e.g. by combining trip purposes. I’ve noted before that a high proportion of car trips in peak periods are made for non-work purposes e.g. according to research by transport analyst Craig Mcgeoch, 17% of morning peak hour motorised trips in Melbourne are for recreation and shopping purposes.

It’s no surprise that even on the assumption of revenue neutrality there’d be winners and losers; that’s true of any major policy change. But there’d be benefits in faster travel and there’s scope for many motorists to adapt their travel. Those on low incomes could be compensated for higher costs. There’d be social benefits too e.g. avoiding or delaying building bigger roads to accommodate peak demand. It’s time for governments at all levels to work together on advancing implementation of road pricing.