Wednesday 7 November 2012

Debate continues in Australia about congestion pricing

Road pricing has shot up the agenda in Australian politics, with two politicians recently expressing opposing views on the issue.

The ABC reports that Independent Federal MP Rob Oakeshott has come out in favour of congestion pricing, saying that it is politically unpopular and "Both sides know that this is something that at some point has to happen”. He opposes increasing taxes on fuel and vehicle ownership, saying these unfairly impose costs on country motorists and truck operators to pay for new transport investment in cities.

By contrast, Liberal Party Federal MP Scott Ryan is opposed (The Liberal Party is in Opposition at present). In the Australian Financial Review he writes a contorted argument that pricing in an artificially constrained market isn’t reasonable. In short, he says while the market arguments about congestion pricing sound good, they don’t add up when the state decides on road and public transport systems, and the state benefits from the revenue. He says unless alternatives can be developed to respond to the price, then it is not a real market. Indeed, he goes so far as to question whether government should ever assess the “value of time” for road users, by determining if the value for those willing to pay is higher than those unwilling (even though it is, by definition). He says it ends up being a tax increase or state imposed rationing system.

I accept Oakeshott’s view that congestion pricing is inevitable to manage congestion in Australian cities, and that general motoring taxes across the board create significant distortions by raising prices for all, not just those benefiting from any new capital investment. However, Ryan’s view simply neglects the fundamental point that not charging road users directly results in demand exceeding supply in a way that he would consider unacceptable in most other sectors of the economy. He wouldn’t tolerate waiting to put a phone call through at peak times, or awaiting a ration of electricity at peak times, so why tolerate it for roads? His key points have validity, in that it is important to decide who sets the charges, on what basis and what the money is used for. I wonder if he’d share the same view if other motoring taxes were reduced in parallel, such as fuel tax.

Still it is good for there to be debate, and positive for one MP at least to be honest about the issue. However, there is still a long way to go before the debate becomes a matter of how, rather than if. 

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