New Zealand Government to introduce legislation to enable congestion pricing: Part One - Summary

Auckland - the Congestion Question general depiction of locations for congestion pricing

As US advocates for road pricing mourn that New York has, once again, seen congestion charging stall, it is New Zealand (NZ) which is showing a path towards implementing that most difficult of types of road pricing.  On 12 August the Hon. Simeon Brown, Minister of Transport for NZ announced the NZ Government’s policy for implementing “time of use” road pricing (congestion pricing) (TOUP is my acronym), including that it would introduce legislation to enable TOUP later this year. TOUP will be led by the NZ Transport Agency (NZTA), the central government agency which is the state highway road manager, the manager of the land transport funding system and manager of the motor vehicle register and road user charging (RUC) system. 

As a unicameral Parliamentary democracy, with the governing coalition having a majority in its Parliament, passage of legislation should not be a problem, although the legislative process will provide ample opportunity for input and submissions from the public. It is almost certain this will pass into law, and NZ will have enabled the introduction of TOUP on a case by case basis.

In summary, the process will see NZTA work with local authorities that express interest in introducing TOUP to develop proposals for approval by the Minister of Transport for introduction. Those proposals must fit a series of criteria, and be focused on reducing congestion and will be developed as a partnership between the two levels of government. The overwhelming emphasis is on developing TOUP proposals that can gain public acceptance. In short, NZ does not want the scenario seen in the UK whereby local authorities develop proposals in isolation which are focused on raising revenue or restricting traffic for the sake of public amenity, but to have a joint central/local government approach to making the road network be more productive.

All going well, with legislation enacted in 2025, it is possible that the first TOUP scheme will be operating in NZ in 2027 or 2028 in Auckland. 

More details are in this background document here (PDF), but below is a summary.

Background

As I wrote previously, the change of Government in New Zealand has seen adoption of explicitly pro-road pricing policies, including support for congestion pricing, which it has called “time of use” pricing or charging.  

This is largely driven by congestion in the country’s largest city, Auckland, with five studies in the past twenty years all supporting the introduction of some form of road pricing in the city. However, the policy is not just about Auckland, but about any city which can demonstrate a case for congestion pricing. There is a case for it in Wellington and Tauranga, given congestion in those cities due in large part because of trip patterns on a constrained road network.

The history of time of use pricing in New Zealand goes back to the Helen Clark led Labour Government of 1999-2008, which initiated the first major study into road pricing in Auckland (summary here). This did not result in implementation, largely because of a strong political belief that major transport projects in Auckland needed completing first before the public would accept road pricing. This include key projects upgrading and extending the motorway network (notably SH20 and SH18 to provide the “Western Ring Route” as a bypass to the Auckland Harbour Bridge and the central motorway junction), the Northern Busway and modernisation, expansion and electrification of the city’s commuter rail network. These projects have all been completed, with two more busways and an underground inner city rail loop under construction as well now.

However, interest in road pricing did not end when the Clark Government lost the 2008 election, as studies continued under the John Key/Bill English led National Government of 2008-2017, and under the Jacinda Ardern/Chris Hipkins led Labour Government of 2017-2023. Yet it is the Chris Luxon led National Government that looks likely to finally implement it.

It is NOT a model of enabling local authorities to implement schemes, but rather a partnership approach whereby central and local government work together to develop and implement road pricing.

Key points

• Time of Use Pricing is to be introduced to improve traffic flow and shorten journey times. It is not to be introduced as a revenue measure, although net revenues will be generated by it.
• Legislation is to be introduced to create an enabling framework for road controlling authorities to work with the NZTA to develop TOUP proposals for approval by the Minister. NZTA itself, as a road controlling authority for state highways, can generate its own TOUP proposal for part of its network.
• TOUP proposals will need to be consulted with local stakeholders and the community.
• TOUP proposals must include impact analysis on traffic and local businesses, as well as the community.
• TOUP proposal design will be led by the NZTA, working with relevant local authorities. This will form a TOUP partnership which will lead the consultation of the scheme.
• Scheme development, design and implementation costs must be fully recovered from future revenues.  Government funding will not be made available for TOUP schemes on the basis that they should at least pay for themselves.
• Net revenues must be spent on the transport system in the region where money is raised and will supplement not replace existing funding sources. Decisions on the precise projects or activities to be funded will be made by the local authority members of the partnership and the Minister of Transport.
• Authority to implement a scheme will be granted by the Minister of Transport through Order in Council.  The Order in Council will include details about where and when the scheme will operate, and how much it will charge users. 
• There will be flexibility in the Order in Council to vary charges and the geography of the scheme within defined boundaries. The illustration below demonstrates this.
• The "scheme area" will be determined by Order in Council, but the first scheme implementation could be a small cordon within it, or a single route, and the TOUP partnership would have flexibility to progressively expand (or contract) the geographic scope without seeking new approval.

Flexibility within New Zealand congestion pricing scheme proposals

• TOUP schemes will be required to regularly monitor their performance, specifically impacts on traffic volumes, travel times on priced roads and the wider network, revenue raised and how it has been used as well.
• The Secretary of Transport (head of the Ministry of Transport) will be responsible for scheme oversight including whether the scheme is meeting its objectives and complying with the relevant Order in Council
• If the TOUP partnership wishes to change elements of the scheme outside the Order in Council, it will need to engage in public consultation and seek an amended Order in Council from the Minister of Transport. 
• The policy is technology neutral, although it is expected the first schemes will be using ANPR-based technology as detection and/or declaration based schemes, likely using the NZTA's tolling system back office.  

Process of application

The full process for approval of TOUP schemes is depicted below:

New Zealand Time of Use Road Pricing approvals process

What's next?

As the legislation is to be drafted and policy developed, the Ministry of Transport and NZTA will be focused on this in coming months. Meanwhile, it is widely known that Auckland Transport has already procured services from a consulting consortium to help it design and develop a TOUP scheme that it wishes to seek appropriate, and it is unclear how that work will proceed under this framework.  It seems likely that the scope and timing will be curtailed somewhat, as any scheme needs to be developed in partnership with NZTA, and Auckland Transport will not want to risk spending too much money on scheme development if it doesn't have the consent or approval of NZTA.

The next major step will be the publishing of draft legislation and its introduction into the NZ House of Representatives later in the year, after which it will be sent to the Committee stage for public consultation.

Comment

The NZ Government has taken a prudent approach to the development of TOUP given that the world has no shortage of congestion pricing schemes that have failed to proceed due to public backlash. It is appropriate for both central and local government to work together closely, as the UK experience of local government led congestion pricing schemes is largely woeful.  There are far more cities that have advanced and seen proposals be cancelled, than advanced, and that is in no small part to local authorities appearing to be unable to develop schemes that bring the public on board.  See Cambridge as the latest example. 

NZ is going to probably have two cities at best implementing TOUP before 2030, and perhaps one or two more after that. It needs to get it right, and with a small population (5.1m) it should rally the resources of both levels of government to enable it to be done in a way that obtains public support.  NZ has the world's highest per capita car ownership, so it is critical that it introduce urban road pricing in a way that delivers value for those who pay, without frightening those not affected, and it actually reduces congestion.

This is why NZ sees Singapore, notwithstanding enormous differences in urban form and travel patterns, as the best case study for congestion pricing today. It is the ONLY system that regularly reviews and changes prices both up AND down based on network performance.  No other system is that sophisticated or flexible. NZ could do worse than emulate the policies seen in Singapore.

NEXT: The Cabinet Paper for Time of Use road pricing contains a lot of analysis and consideration of options for this policy, I'll summarise this.