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IPW: what’s the fairest way to pay for infrastructure? New Zealand public responds

Date
15 February 2024

In this week’s Infrastructure Policy Watch, the New Zealand Infrastructure Commission publishes public polling data on funding infrastructure fairly.

IPW: what’s the fairest way to pay for infrastructure? New Zealand public responds
Should those who benefit the most from infrastructure networks pay a higher cost? Image credit: Shutterstock

Last year, the New Zealand Infrastructure Commission (Te Waihanga) announced a research programme looking into how the country's infrastructure is funded and priced.

The research will also outline the implications for equity and quality of the infrastructure provided.

Along with many other countries, New Zealand faces infrastructure challenges including a growing population, the need to cut carbon emissions, and adapting to a changing climate.

These challenges are forcing governments to rethink how they prioritise, fund, and deliver infrastructure. This raises questions about who pays for infrastructure – and whether this is fair.

‘Pay per use’ infrastructure receives most support

As part of the research programme, the commission has released the results of a survey asking New Zealanders about fair ways to pay for infrastructure.

The survey explored perceptions of fairness in different funding approaches for roads, water, and electricity.

The highest support was for usage as a fair way for charging. Nearly three-quarters of respondents thought it was fair that what households pay for electricity (74%) and water (72%) should be based on what they use.

Views on road usage were less clear

Most respondents (65%) view congestion charging as an unfair way of charging for road use at peak times.

Aucklanders were more likely to think it was fair (31%) than those from elsewhere (22%), possibly due to the city's severe congestion problems.

But overall, no funding method presented for roads was considered fairest by respondents.

The commission says this may be due to:

  • the complexity of road funding mechanisms;
  • the perception of roads as a public good for all; and
  • individuals’ perceived lack of control over their road usage compared to other utilities.

The ICE has previously explored what the British public would consider acceptable as an alternative to funding roads.

In 2019, 47% of British adults said they would support a ‘pay-as-you-go’ model for road use if it completely replaced Vehicle Excise Duty and fuel duty.

What support was there for other funding options?

Lower-income households were more likely to agree that income-based charging was fair, while higher-income households were less likely to agree.

This level of self-interest isn’t unusual, though 24% of respondents said they were willing to pay more to offset the bills of lower-income households.

Most survey respondents also thought it would be unfair to charge based on the cost of supplying electricity (55%), water (57%), or roads (60%).

Such an approach would likely put people in rural areas at a disadvantage.

There were also notable differences in perceptions of fairness by age, gender, and ethnicity.

For example, those under 30 were more likely to favour congestion charging than those over 60.

What should policymakers do next?

The New Zealand Infrastructure Commission highlights that decision-makers have an opportunity to harness the broad support for use-based charging as a fairer means of paying for water.

This means introducing water metering in areas where this isn’t already present, with a view to charge for water based on the volume used.

The commission says this could be done by incorporating a low fixed charge for basic needs and the discretion to have lower charges for some households.

Despite there being no clear public consensus on congestion charging, the commission points out that there’s a global trend in other cities for increased public support after this method has been introduced.

Finally, the commission highlights that there are some tough decisions for the future about who should bear costs.

For example, who pays for rebuilding infrastructure in remote communities after extreme weather events, or for adapting infrastructure to be resilient to climate change?

The ICE’s view

The study from the New Zealand Infrastructure Commission explores areas policymakers often fear to tread.

Should those who benefit the most from infrastructure networks pay a higher cost? Should the costs fall mainly on current or future users? What levels of risk and what trade-offs are the public prepared to accept?

These are tricky questions that are facing governments globally.

A nation’s goals – such as achieving net zero emissions, addressing regional inequality, or strengthening resilience – all come with costs, which will have to be paid for one way or another.

In some cases, these goals may clash with fairness objectives.

For example, policies that seek to achieve net zero emissions may put pressure on low-income households that don’t have the means to switch to lower-carbon transport or energy options.

This was something the ICE and All-Party Parliamentary Group on Infrastructure looked into recently. This work concluded that the public needs an infrastructure system that will empower them to make the right choices.

Meanwhile, the Enabling Better Infrastructure (EBI) programme sets out guidelines for policymakers to consider the short- and long-term affordability of infrastructure, including taxation and user charges.

In case you missed it:

You can also sign up to ICE Informs to get a monthly digest of the latest policy activities from ICE, including calls for evidence to support our ongoing advice to policymakers.

  • David Hawkes, head of policy at ICE