03/08/2011 - 10:48

Motorists short-changed on road returns

03/08/2011 - 10:48

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Will motorists be the next sector up in arms about rising costs?

Motorists short-changed on road returns

REGULAR readers will have noticed my occasional focus on the cost of public transport.

My concern is that, while trains and buses are increasingly popular – both with commuters and the politicians who want their votes – they are unsustainably expensive.

It costs the state about $3 for every $1 in fares received, an imbalance that makes expansion of the public transport network dangerously cost prohibitive on an operational basis.

My view is that if public transport users paid more and improved the cost recovery for the state, then we could afford to have more of it.

That focus was all about rail and buses, without examining the other side of the transport coin – private vehicles such as cars.

Fortunately, I’ve been assisted in looking into the cost of our private transport network, namely roads, by the Royal Automobile Club, which has published the details of a report it commissioned by economics adviser ACIL Tasman about how much road-related tax collected in Western Australia is spent on roads.

The report found just one third of the $2 billion in taxes, excises and levies Canberra raises from WA motorists – including GST – was returned to the state for road-related projects.

This is an astounding number, which shows just how much road transport subsidises everything else.

Here is the summary from the RAC.

• The WA government collects about $1 billion in fees (licence and registration fees, recording fees and heavy vehicle permits) from motorists each year.

• The federal government collects about $2 billion from car-related taxes in WA per year. This revenue is mainly generated by GST from car and associated sales (estimated to be $682 million in 2009-10) and excise duty on petrol ($1.12 billion).

• Total spending on roads in WA averages $2 billion per annum, a figure that has increased in recent years, and represents around 70 per cent of the revenues collected by all levels of government from motorists (up from just over half in 2006-07).

• The state government spends more on roads than it receives from motorists, but the federal government does not; only 33 cents in every dollar of revenue collected by the federal government from WA motorists is returned to the state for spending on roads. Only 25 cents are directed specifically at road projects by the federal government, with the remainder coming from the proportion of state government consolidated revenues that is associated with federal government transfers to the state.

Now, there needs to be a bit of caution around these numbers. Firstly, some are estimates. Secondly, the federal government has no way of allocating GST money to specific sectors of the economy such as roads – the Commonwealth Grants Commission simply hands over money to the states based on a formula that is currently contentious.

At the moment, WA receives less than 70 per cent of the GST if it was apportioned on a per capita basis. So let’s assume that, of the nearly $700 million estimated to have been raised in road-related GST by the federal government, only $450 million comes back.

So the federal government, via its grants commission, sends about $250 million of our road-related GST dollars to other states for them to spend as they see fit.

In effect, it returns about $950 million to WA from $2 billion it raises from motorists in this state – $450 million in GST (which goes into consolidated revenue), $300 million in specific purpose road-based payments, and $200 million in local government road funds. 

By comparison, the state spends $1.4 billion of the $1 billion it raises itself and the $450 million in road-sourced GST receipts. Both governments short-change the motorist, but the federal government is far more blatant about it while the state is nearly line ball.

In a nutshell, for every $3 WA motorists pay to various governments in taxes and fees, just $2 are spent on roads.

And the subsidy gap with public transport doesn’t end there because a significant amount of public transport, in the form of buses, uses those same roads, often with priority to avoid congestion and keep their timetables as smooth as possible.

While all this may be worthy, especially if the emissions argument is rolled out, there is no doubt that motorists are a cash cow paying for all of this.

While motorists don’t seem to be squealing about this too much – things might change as the public transport sector expands.

Right now, the numbers show that there is significant fat left when all the road-related taxes are added up and the road spending and net public transport costs ($550 million in 2009-10) are subtracted.

But for how much longer?

If expanded public transport is subsidised at the same rate as it is now and its popularity continues, won’t the cost of an ever-rising number of subsidised rail and train commuters start to outweigh the revenue provided by an ever-diminishing pool of tax-paying car drivers? Presumably, it’s the road users who convert to being train and bus passengers. By driving less they reduce fuel-related excises and GST. But a growing public transport network – especially light rail – could mean more people choose to own cheaper cars or ditch theirs altogether, which would cut sales-related taxes too.

Perhaps electric cars will become more efficient and increase in popularity, therefore also eroding the petrol-linked revenue element of the federal government. 

I can’t guess at what point this subsidy equilibrium is reached and how much longer motorists can keep paying higher bills to fund bus and train users, but after watching the noise around power bills I reckon it can’t be that much more, especially as fuel prices rise. Even though a frog in water brought slowly to the boil may not recognise its impending death, it does still die. 

This problem will be exacerbated if the government reduces spending on roads to pay for more public transport which – just to be clear – is mainly a city-centric issue when most of the state’s 187,383 kilometres of roads are regional.

The problem for motorists in metropolitan Perth is they don’t represent just one electorate. They are spread across the landscape fairly evenly. By contrast, a light rail project can be quite selective in offering certain electorates a public transport option.

Even car drivers in Mirrabooka might vote for a tram to the city. They’ll increase their commuting options and probably see land values rise.

That just means that some of the motorist’s public transport subsidy rebounds as a benefit and provides some form of insulation. Of course, that creates a new inequity between motorists living in different parts of Perth.

To a car driver a few suburbs away, the subsidy just became more expensive without any clear benefit, other than the hope of slightly less congestion if they happen to be heading for the city.

I can’t see this situation lasting if motorists start to complain like power users, grocery consumers, bank customers, Rottnest Island holidaymakers and others who have decided, rightly or wrongly, that they are paying too much.

• mark.pownall@wabn.com.au

 

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