Labour announces $19billion social infrastructure rebuild

By
Martyn Bradbury
-
13
3

Boom…

Labour announces $17bn social spending policy

Labour will spend an extra $17 billion over four years on health, education and family incomes in the Budget if it wins the coming election, it says.

It said it could achieve that by scrapping National’s planned tax cuts, higher tax revenue from multi-nationals and property speculators, and by paying down debt at slower rate.

Labour said its plan, released by the party leader Andrew Little today, was in line with its own Budget Responsibility Rules.

Over four years, the party would spend an extra $8bn on health, $4bn on education and spread $5bn between Working for Families, Best Start package and the Winter Energy Payment.

…the chronic underfunding of the social infrastructure of NZ so that National can gerrymander a surplus for tax cuts has to end if we want to be serious about education, hospitals, mental health, superannuation and inequality reduction programs.

Include the 2billion for Kiwi build that’s $19billion plus a $10billion election promises pool as well.
By announcing a $29billion increase in social funding, Labour have provided leadership here.
By targeting multinationals and refusing to bow to the business community demanding tax cuts, Labour are reminding everyone that they are still the big kid at the table in the next government, despite all Winston’s huff and puff.

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13 COMMENTS

  1. A rail re-build is vital as the roads are crumbling under the weight of huge heavier trucks and dangerous places for any other users of the roads.

    Read what we need to change from road to rail.

    This is a solid discussion document given to Government NZTA and Kiwirail.

    Will they listen as they should?

    EQUITABLE COMPETITION IN NZ LAND TRANSPORT
    A Discussion Document

    July 2017.

    Preface
    Kiwirail and commercial road transport operators compete for business but not on a fair and equitable basis. Competition within the transport industry would be healthy if there was a level playing field. The reason it is not is largely because the road transport industry is not paying it’s full share of roading costs which means that the taxpayer subsidises the commercial operators.

    The most recent year for which there is published information on funding sources for roading and government spending on transport is 2015. In that year Road User Charges from light and heavy vehicles amounted to $1.2 billion. Expenditure on roading including footpaths and bus lanes amounted to $3.546 billion. Commercial vehicles thus paid about 34% of the total expenditure on roading. The question is – was this per centage less than what it should have been? The answer can only be determined by undertaking a study of what portion of roading costs actually relate to commercial vehicles. While the majority of road users are non commercial vehicles, in particular cars, the construction and maintenance costs must largely relate to commercial vehicles, particularly heavy vehicles, whose axle loadings are significantly greater and therefore cause the most damage to roads. Note that most of the road works on the alternative road to Christchurch from Picton, due to State Highway 1 being closed, are to provide for large trucks that traditionally travel by the shorter route.

    This paper explains how fair competition can be created and achieved with resultant benefits to the economy.

    Land Transport
    Roading is largely paid for by government through the National Land Transport Fund and regional authorities rates levies. Rail is separately funded by government although a small portion is provided by NZTA. Perhaps the latter should be the funder for “below the wheels” rail costs as well as for roads.

    Kiwirail freight services are the main users of the rural rail network. Road users, by contrast, comprise all manner of types of vehicles – private; commercial e.g. trucks, vans, utilities, buses and coaches; non commercial e.g ambulances, not for profit entities vehicles.

    All road users contribute towards the upkeep of our roads to a lesser or greater extent. There is however a shortfall between the cost of construction, improvements and maintenance of our roads and highways and the recovery of these costs from users by way of road user charges, licence fees, and petrol excise. The overall shortfall between the costs of roading and recoveries falls on motorists, taxpayers and ratepayers but the extent of the shortfall attributed to each group is unknown.

    Kiwirail does not make a commercial profit. It reports only an ‘above rail surplus’ which ignores all other costs such as the rail lines and supporting infrastructure. It cannot make a profit largely because of the lack of volume of freight to support the network. This is partly due to the nature of our topography and the fact that the network was mostly constructed during the early years when the emphasis was on constructing lines at the cheapest cost as quickly as possible with significant political decisions involved as to which lines were built. A breakeven annual financial situation on commercial freight is the best that can be expected excluding unprofitable freight services and lines that the government requires KiwiRail to operate for social or other reasons. These should be separately funded. Not with standing a commercial profit is unattainable in the current economic climate because not enough freight is carried. Railways are volume carriers.

    Road transport operators don’t pay their fair share of roading costs as stated earlier. Government analysis in the U.S. in 2008 shows that “ larger trucks over 100,000 pounds pay only 40% of their costs. In effect, reimbursement by a truck for anything less than the damage it creates to the highway network is a subsidy. The subsidy is paid by either the other users of the highway (passenger vehicles and smaller trucks) or general taxpayers This subsidy for bigger trucks becomes even more significant as the size of the truck increases. From an economic standpoint, this relationship between revenue and costs distorts the competitive environment by making it appear that heavier trucks are a less expensive shipping method than they actually are and puts other modes, such as rail and maritime, at a disadvantage. “ Is this situation any different to ours in New Zealand ? In reality the trucking industry has an unfair advantage over rail and shipping as it is ‘subsidised’ by taxpayers and ratepayers by the shortfall between their costs and the revenue generated from RUC and other charges.

    Road Transport Operator Issues
    Some years ago the road transport forum petitioned the government to allow heavy haulage truck (and trailer) units to use bigger and heavier rigs on our roads. Their wish was granted, without much consideration as to whether many of our roads would cope. The main argument submitted by the industry in favour of allowing bigger rigs was to improve efficiency in the transportation of goods. Another strong argument was that there would be fewer trucks on our roads. The latter has not happened. Not surprisingly no mention of improved profitability to the carriers arising from the use of bigger rigs.

    The Heavy Transport Operators Forum is now complaining that our roads are not up to standard. The new inland route (all be it temporary) between Christchurch and Picton illustrates this. Because of the longer distance involved they are not slow in telling customers that freight rates have to go up. This is understandable. On the other hand where roads are improved and travel times are reduced are the savings passed on to their customers? The writer is not aware of this happening.

    The upgrade of the inland route which includes new and stronger bridges and extended road shoulders is almost largely because it is now being used by big rigs. The cost of this work is not being passed on to those who directly benefit i.e. the commercial trucking operators. Another criticism by the road transport industry is that the tunnels on State Highway 1 are not big enough to take their bigger rigs. That was not mentioned when they asked for and were granted authority to use larger vehicles. State Highway 1 is being improved post earthquakes. These improvements are being carried out largely for the benefit of the commercial operators without those additional costs being passed on to them by way of increases in road user and fuel charges.

    When natural disasters occur causing major damage to roads remedial work is undertaken quickly in order to minimise the economic loss to the economy. Heavy transport operators and other road users are not asked to make a contribution to the repair cost. The cost is borne by government and not passed on in higher charges for RUC , licence fees etc. There is a strong argument that as the cost is unrelated to road usage then the status quo should remain. However where there are road improvements carried out as part of road remedial work then it could be argued that that portion relating to improvements should be recovered from those who benefit i.e. the commercial operators.

    KiwiRail –Financial Reporting
    Public reporting of financial results are in relation to an ’above rail’ operating surplus before taking into account track costs. This provides an incomplete and somewhat misleading picture. It is assumed that the Wellington and Auckland metro services, which Kiwirail does not operate, are excluded. No other train operator uses Kiwirail track ( ignoring a small section of line that Dunedin Railways use) so the track costs purely relate to Kiwirail use.
    Also capital expenditure on assets and improvements should be amortised over the years of economic use.(1) Interest use of money should be ignored because most funding comes from the government which does expect a return on capital. The real cost of operating the network will thus take into account operating expenditure, maintenance on locomotives and track etc., as well as amortisation of capital expenditure and improvements and after deducting incomes generated from goods and services. Note that major structural damage resulting from abnormal causes such as earthquakes should be excluded expenditure as such is separately paid for, as is roading damage, by government. Again, KiwiRail should not have to bear the costs relating to mothballed rail lines or the cost on deferred maintenance which is a carry over from the days of privatisation. Because the network is substantially underutilized government, in conjunction with KiwiRail management, should determine the level of cost recovery from revenue it expects pending regaining a fair market share of the total transport business available e.g. 70% of costs.

    (1) There will be residual asset values remaining after amortisation to the end of asset economic lives. These values being written off when the assets are disposed of on scrapping or sale. Accumulated amortisation to date should be deducted from the purchase or construction cost before commencing amortisation as an operating expense (for the remainder of their economic lives).

    Roading Cost Recoveries
    Unlike rail a variety of vehicles use our roads – both commercial e.g. heavy trucks, light trucks, buses and coaches, and non commercial vehicle user groups.

    In respect of roading costs these should be analysed between new roads, improvements e.g. deviations; and maintenance of existing roads with an appropriate allocation of costs between the various types of road users. The allocations attributed to the various commercial operator categories should be fully recovered from them. This being the user pays approach. Emergency, service vehicles, ambulances, local delivery vehicles and similar should not however have to pay their full share of roading costs by way of road user charges.

    There are comprehensive formulae that are used to determine the road user charges and licence fees charged the various types of road users but they do not fully absorb the costs relating to road use. Commercial users, in particular, do not pay their full share of roading costs. Government has the right to determine the extent to which there are full or partial exemptions based on the nature of activity roads are used for. Ambulances for example should not be charged on a full recovery basis.

    Roading costs should be analysed by vehicle category type and use e.g. light commercial; heavy commercial; private car etc. which would require some assumptions being made. The shortfall between costs and recoveries represents the extent of under recovery by category.
    In this paper the main consideration is the extent to which all types of commercial vehicles don’t fully ‘pay their way’, being the amount by which taxpayers subsidise them. Information on the extent to which the taxpayer is subsidising the different types of road users should be made publicly available. In relation to the work currently being undertaken on the alternative road from Christchurch to Picton we are told that the cost of road rebuilding/resurfacing has been separately costed as have safety improvements.

    The government now allows the heavy operators to operate bigger, longer and heavier rigs following convincing arguments that do not fully take into account road suitability. Now the same heavy commercial operators say that the roads are not good enough for them and a lot more should be spent on widening our roads to allow them to maximise their speed and lower times. They have also complained that their bigger rigs cannot use the tunnels on the Kaikoura highway! It should be noted that heavy commercial vehicle numbers account for about 16-20% of traffic on rural roads and highways.

    Competition
    All railway systems are capital intensive, requiring significant supporting infrastructure due to their being stand alone transport operators. This in turn means that to be viable there is reliance on high freight volumes of bulk commodities. Our railway system is substantially underutilised. Extra freight volumes can be carried without commensurate cost increases. Moving more freight by rail would clearly reduce the amount carried by road but at a lower average marginal cost. In turn that would mean less road maintenance and funding required for roading with an overall economic benefit to the economy.

    Note that savings from the closure of uneconomic rail lines are generally not great because the maintenance of the infrastructure at the time of closure would have been progressively reduced over the years in an attempt to regain profitability. In addition any remaining revenue would be lost to road transport.

    If government is reluctant to raise road user and other charges levied on long distance transport operators to a level that recovers their share of roading costs then Kiwirail cannot be expected to pay it’s own way in the long term and compete with the trucking industry. A lower threshold would be for KiwiRail being required to simply become responsible for only paying ‘above rail costs’ from it’s revenues. This means that the capital and maintenance ongoing costs relating to the lines and infrastructure, including remediation work required following natural events like landslips and earthquake damage, being funded by government either through NZTA or another agency.

    Advantages of using road for transporting goods
    Flexibility – in their use of our extensive roading network compared with our limited rail
    network.
    Licences – need only purchase RUC as required

    Disadvantages of using road for transporting goods
    Capacity- – additional capacity can only be achieved by adding more trucks on to our roads
    Road maintenance – increases significantly with heavier and bigger loads
    Safety – more accidents involving injury and death. (Trucks are involved in 1:5 fatal
    accidents on our roads) Accidents on roads often cause major traffic delays as well as human and economic costs.
    Road congestion – fewer trucks on our roads means less congestion and delays for others.

    Advantages of using rail for transporting goods
    Volumes – ability to transport greater bulk quantities of goods.
    Capacity – additional capacity i.e. additional wagons can be added to trains at no extra cost.
    Fuel efficiency – very fuel efficient with reduced carbon emissions
    Safety – few accidents involving injury and death
    Road maintenance – is much reduced with fewer trucks on our roads.
    The Environment – air pollution is much lower on a comparative basis

    Co-operation between rail, road and sea transport
    We are a small country so should be operating a competitive system using a co-operative model. Examples of this are – between KiwiRail and Mainfreight and at the present time following the Kaikoura earthquakes, between KiwiRail and shipping companies. Such a model benefits all parties.

    Kiwirail and NZTA should work more closely and co-ordinate their “below the wheels” long term planning regarding capital expenditure. Ideally there should be an integrated transport plan for long distance freighting in order to achieve the most economic solutions for land transport in New Zealand.

    Summary
    The purpose of this paper is to promote discussion on ways whereby the road transport industry and rail can compete on an equitable basis for the benefit of the country as a whole and how rail can compete, regain lost market share and increase that share back to what is considered an acceptable level.

    As noted earlier if road user charges paid for by long distance transport operators are not increased to eliminate their being subsidised by taxpayers then KiwiRail cannot be expected to pay it’s own way. Allowing rail to compete on an equal basis would make rail a more attractive transport alternative than it has been.. A study has shown that currently rail carries only 6% of the national freight whereas road transport carries 92%. In the last decade rails share of freight carried has fallen 50% while road freight share has increased 60%.
    As noted earlier, the other option is lowering the threshold for Kiwirail so that it is only required to pay for and recoup the ‘above rail costs’ from revenue. This means that it is not saddled with the network costs. This option would not require RUC charges paid by road users to be increased significantly. A politically more acceptable approach to ensuring fairer competition but which ignores the user pays argument.

    Regardless of whether there is a railway network it is argued that commercial road transport users should not be subsidised by the taxpayer. If however the rail network was to close then the additional cost of roading to meet the extra trucks on our roads would far exceed the financial support for Kiwirail .

    Treasury is of the view that rail should be self funding but doesn’t apply the same argument to road transport. The funding of rail is public information but the extent to which commercial road operators are subsidised is not available which probably accounts for Treasury’s view.

    Rail needs large freight volumes if it is to be competitive in the bulk goods transport market.
    Greater volumes can be carried for marginal cost increases (because the infrastructure is already in place regardless of use) resulting in a much improved financial performance. The rail network across most of the country is vastly underutilised.

    Some current funding of rail is a catch up of underfunding from past years, with some to make the network more efficient .

    The construction of major road deviations and highways, at considerable cost, benefits the road transport industry by reducing travel times but which makes it harder for rail to compete. This will put rail increasingly at a greater disadvantage in the future unless a new approach is taken to land transport funding and accountability to achieve equitable competition.

    Reducing the number of heavy trucks on the road has many benefits –lower roading costs, improved safety, faster travel times for domestic vehicles through not having to tail behind trucks on winding hills and roads, greater fuel economy and efficiency – to name some.
    Where an option, heavy haulage companies should consider building their own dedicated roads improve their as an alternative to paying higher road charges. Off road cartage is common in the logging industry.

    Government talks of ‘roads of national importance’. The rail network is also of ‘national importance’. As government owns the rail network it is in the country’s interest to ensure that it is utilized to it’s potential and so relieves congestion on our roads as well as cost.

    The final comment is a quote by the Chief Executive of the N Z Heavy Haulage Association “anything that makes the transport of goods more efficient has got to be good for everybody”.

    Gary S Riggs BCA CA CMA
    Picton
    July 2017

    Copies: NZTA
    KiwiRail

  2. Now wait for the National propaganda saying how fiscally irresponsible this social rebuild is.

    An easy retort would be, how much was Government debt when you took office, 10 billion and how much is it now? Just on 85 billion, so don’t start talking about fiscal responsibility when Nationals track record borders on corruption, appalling.

    Labour are looking to correct an anomaly that needs redressing, sadly something that National created.

    • Way you go then. We’ll come over for a critical look-see when you’re up and running.
      People are having a go at expressing themselves here. Usually, they’re not wank savvy thus they appear naive to some. Myself included. Never the less, express ourselves we do. And bloody good on us for that.
      So, you were saying?? Do you think there’s in fact less to be said for our cluster fuck politics, our cluster fuck economy and our people dying in the gutters while foreigners buy our state houses at the behest of a National Party greed incentive?
      Snarky sarcasm is what I’d expect of a pro Nat’ so maybe you should try WhaleOil? They like that sort of thing over there.

      • Well said sir, whilst there is an ounce of democracy left in N.Z, I’ll have my two cents worth, thank you very much!

  4. What the country needs is a “return to normalcy” (Warren G. Harding election campaign, 1920) and all this is a good step.
    It will take time, lots of money and expert organisation because you can’t rebuild what National has systematically destroyed quickly, easily or cheaply.
    So why are New Zealanders prepared to wait patiently for nine years for National to fail on their promises but expect Labour to do everything in the blink of an eye.
    Because that is what Labour’s critics in the MSM tell the people they should demand.

  5. … ” the chronic underfunding of the social infrastructure of NZ so that National can gerrymander a surplus for tax cuts has to end if we want to be serious about education, hospitals, mental health, superannuation and inequality reduction programs ” …

    Of course it has to end. Their surplus and their economic reputation for sound management is totally bogus if it rely’s on simply shifting the finance round by robbing Peter to pay Paul…any government can do that if they wanted to.

    The fact that not only are they doing this to appease their big business donator’s , – they are willingly perpetuating the social evils of poverty on those who can least afford it to do so. Compounding this appalling attitude is ACTUALLY PROMISING TAX CUTS to those well off at the expense of the poor !!!

    Truly ,… this is the very same sort of government that the likes of Mickey Joseph Savage fully intended to head off so long ago…

    A greedy , subversive , autocratic government that displayed absolute incompetence brought about by its pandering to a small sector of both local and foreign elites at the expense of its own citizens.

    Well ,… the fact that Labour has demonstrated the money is there for the people of New Zealand by their diligent research only highlights the current motives of this corrupt National government. National could have chosen to do what Labour will do, – but they didn’t.

    They chose instead to continue on implementing poverty on the citizens of New Zealand in favour of turning a blind eye to tax evasion and the lenient taxation of multinationals who are not sharing the taxation burden and benefits of maintaining an advanced democracy.

    Profit and political donations before the common folk of New Zealand.

    And yet more and more tax cuts are promised by National to the people, – tax cuts that they know achieve nothing to provide relief for NZ’s now seriously underfunded social infrastructure yet are useful only as an election bribe.

    If anyone is serious in dismantling this cabal of corporate and political hegemony , – their only real options are to vote for a Labour / Greens and NZ First future coalition government.

    And I have every confidence that this is in fact , the make up of the next incoming government.

  6. The Right will no doubt call Labour$19 billion investment in social services as “throwing money at it”.

    Because tax cuts are NEVER throwing money at the Rich, eh?

    • Labour is proposing to invest money in Kiwis, National for the last 9 years have been actively taking it away. How can National say Labour is taking what Kiwis never had in the first place? The tax bribe for the top 10% is only IF National is re-elected.

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