Case for transport subsidy rejected

Press, 22 July 1988, Page 34

Case for transport subsidy rejected

By

OLIVER RIDDELL

in Wellington The arguments for subsidising urban transport services prepared by the Urban Transport Council have been rejected by the National Roads Board. The board at its monthly meeting in Wellington last week considered a report from the council, which said a 55 per cent subsidy to urban transport services would be justified because of road congestion. The thrust of the study was to have prices (in the form of fares for public transport and road taxes for private transport) reflect the marginal cost of providing the capacity for travel.

Thus, the report said, within public transport it was recommended that off-peak fares be lower than peak fares because the marginal cost of travel in the off-peak period was less. Ideally, the sained

should apply to pricing for roads — the charge for using a motorway should reflect the cost of adding an extra lane as use approached capacity. Travel along uncongested roads should be charged at a lower rate, the report said. Because this marginal cost-pricing approach was not used for roads, there was a tendency for road use to be greater than it should be for over-all economic efficiency. If public transport were subject to marginal costpricing and private transport were not, there would also be a potential imbalance. The urban transport subsidy calculated in the report was aimed at correcting this imbalance to optimise over-all economic efficiency. The deputy director of reading for the Ministry of Finance, Mr Allan Kennaird, who is a member < of the council, said that if

a toll-type system were implemented for congested roads the justification for any road congestion subsidy would disappear. The report said that most of the total subsidy calculated was; a central Government responsibility, he said. This conclusion was deficient, both economically and in equity, Mr Kenhaird said. It called for a universal tax to subsidise Auckland and Wellington commuters and did not address the questions of who paid and how much. There was no matching regional or local authority contribution, but the report did envisage local government subsidising public transport for other reasons, such as social responsibility. The National Roads Board has advised the Urban Transport Council that it does not accept its conclusions.