Speech to the Road Transport Forum
Christchurch

Ladies and Gentlemen, it's a pleasure to be invited to speak at your annual conference.

I came across an interesting fact the other day, which seems appropriate to share at a roading conference. The Romans, as you no doubt know, were great builders of roads. The Roman road network at its peak was 85,000 kilometres in length.

Now that is almost exactly the same length, it turns out, as the current New Zealand road network. That is quite some achievement considering that in those days roads were all built by hand. If you wanted, you could drive your cart from northwest Africa all the way to Gaul and never get off the Roman equivalent of a state highway.

The Romans understood the importance of connectivity in a way that would shame many modern planners. This network of roads opened mainland Europe up to trade, travel, and communication.

That's what roads did 2,000 years ago and that is what they do now.

In modern New Zealand, the roading system we have developed over the years is one of the most fundamental infrastructural networks in the country. It connects us as an economy and as a society.

Road transport carries far more people and a far greater volume of goods than any other form of transport. Where other forms of transport are involved, road transport feeds them, distributes from them, and links them together.

Cook Strait aside, the road network offers almost unlimited connectivity between homes, businesses, and public places all across New Zealand, from Houhora to Milford Sound. Most of us use these roads every day of the week, whether we're doing the school run, commuting to work, or driving on a long-haul route.

For those of us who live in Auckland, we seem to be using the roads almost every hour of the day as well, sometimes very slowly.

The sort of crippling traffic congestion we see in Auckland, the Bay Plenty, Wellington, and in other parts of the country is a sign that the capacity of our road network – at least in some areas – is woefully inadequate. As a result, moving people and goods has a much higher cost than it would if we had a better network.

We all experience the cost of moving people. We wait in long queues, we organise our lives around traffic, and we forego opportunities to do things because it is not worth the hassle of travelling. We all experience the cost of moving goods as well, because part of this cost is passed on by businesses to consumers, adding to the price of everything we buy.

For some businesses, it is not worth continuing because of the costs they face to transport goods across the country, or to ports and railway stations. These costs are a real handbrake on our economy.

The reason we are experiencing such congestion is because over the past few decades we have basically been in maintenance mode. The construction of roads has not kept pace with an increasing population, increasing economic activity and, therefore, an increasing use of cars and trucks.

These trends are only going to continue in the future. For example, the distance travelled by heavy vehicles is estimated to almost double between now and 2020.

Because we have been in maintenance mode, we have had few actual additions to the road network. In Auckland, we haven't completed the motorway network that was thought necessary to cope with traffic in the 1960s.

The Government's recent flurry of spending on roads has not reversed us out of maintenance mode, and it remains to be seen whether recent spending increases will be sustained over time.

But I do applaud the Government's decision to commit all the petrol excise to the National Land Transport Fund. What a good policy that is. It seems vaguely familiar to me. It reminds me of National's policy over the past few years of committing all the petrol excise to the National Land Transport Fund!

So, in the spirit of helping the Government out with roading policy, I'd like to offer it some further advice. As a country we need more and better roads. In particular, we need more and better state highways. We need to move from maintenance mode to expansion mode.

Now I want to make it clear that building roads is not the only solution. We can't build our way out of all traffic delays. We also need to manage travel demand to make more efficient use of the roads we have.

In addition, we have to be aware of the environmental impacts of building roads and of the vehicles that use them. After all, about a quarter of our total greenhouse gas emissions come from transport.

As a whole package, we need to look at effective public transport, at vehicle efficiency, at land use planning, and at traffic management. In the longer term, we need to look at other forms of road pricing as well.

These are topics for another day. Today, I want to focus on increasing our investment in roads.

You might ask why, if there are substantial gains to New Zealand from increasing our investment in roading, we are not making this investment already.

The problem, as I see it, is that we currently do things the wrong way round.

We start off with a funding mechanism. We fund roading with the money raised through road taxes, on a year-by-year basis. A small amount of general tax revenue is thrown in as well.

The second step is that we forecast how much that funding mechanism will give us in future years, and we estimate what we can build for that amount of money.

Finally, once we've worked out what we want to build, we try to get consents for doing that work. As you know, these can take years and years to obtain, add millions of dollars to the cost, and may not even be granted at all.

I don't think that's the right way to do it. I want to do things differently.

Where we should start is by working out what we need to do to have a well-functioning road network and what projects will enable us to do that. Then we need to consider the most appropriate way of financing each of those projects. Finally, after deciding what we are going to do, and how we are going to pay for it, we need to know that consents are going to be dealt with in an efficient way.

That seems to me a far more logical way of doing things. It's what other countries do, and they do it very successfully. I have no doubt we can do this in New Zealand as well.

So today, I want to talk briefly about what National would do to improve our road network, in three areas.

• Developing a national transport plan.
• Taking a more investment-focused approach to funding.
• Streamlining the process of approvals.

Firstly, developing a plan.

Some of you may roll your eyes when I say that, because the transport sector seems to wallowing in plans already. There is a New Zealand Transport Strategy, a Transport Sector Strategic Direction, a National State Highway Strategy, the 10-year State Highway Plan and Forecast, and numerous regional land transport strategies.

The problem is that none of these documents actually answer what is a pretty basic question – over the next 20 years, what roading projects do we need and can we realistically afford?

The State Highway Forecast, for example, is a snapshot of what is happening next year, plus a estimate of what could be done in the next 10 years given predicted funding levels. It changes every year. No one in the sector can plan with any certainty because there is no certainty of funding.

Regional land transport strategies generally do not address the long-term needs of the road network. Instead, they merely contain wish-lists of projects that have not been properly justified and many which have no realistic likelihood of attracting the necessary funding.

What National wants to do is develop a comprehensive national transport plan that sets out what we are going to do, when we are going to do it, and how we are going to fund it. This would cover not just road transport, but also water, rail, and public transport.

This needs to be a long-term plan. The timeframe for obtaining planning approvals and undertaking design and construction work of major projects is generally in the area of 10 to 15 years.

Therefore, I envisage the plan having something like a 20-year timeframe, with a definitive construction programme covering six to 10 years and a four- or five-year budget commitment.

Obviously I am not talking about detailing every hill realignment or seal widening. The plan would identify major state highway projects, commit to doing them, and give some certainty in terms of funding. Moreover, this transport plan would be part of an integrated approach that National would take to infrastructure policy.

There is a huge commonality in the issues for transport, electricity, water, gas, and telecommunications. Infrastructure involves the planning, completion, integration, and maintenance of big, complex and expensive projects. This takes place in an environment where people are understandably reluctant to pay more in taxes, charges or rates.

Together with local government, we will work through a range of pricing, regulation, and financing issues to ensure the infrastructure New Zealand needs gets built and gets built in time.

Secondly, I want to talk about funding.

Roads have to be paid for one way or the other. That is unavoidable.

The question is what is the best way to pay for them? That is, what method of funding delivers the best value for money for New Zealand, in terms of how much we can build, when we can build it, and for what cost?

The answer to that question will differ from project to project.

There are a few different ways of financing a road.

One way is to pay out of cash. That is, the government essentially whips out its cheque book and writes a cheque to pay for a road. That's the way we currently fund all our roads.

This way of funding requires that the government has sufficient funds in the bank to cover its cheques. The way we do things at the moment is that if there is not enough revenue from petrol excise and road user charges in the bank, then the government can't pay for a road to be built.

But why is the sum of petrol excise and road user charges necessarily the right amount to spend on roads? It isn't. That is why lots of worthwhile roading projects are not being considered – they might have good benefit-cost ratios but there is no money available to fund them.

Another way of funding a road is for the government to issue infrastructure bonds – raising money to pay for that particular project, and then spreading the repayments over the life of the project.

If a project has a good benefit-cost ratio then the government can borrow to do that project, pay the money back with interest, and, at the end of that process, society is better off. This is also a fair way to fund long-lived assets because it effectively spreads payment for roads across all the future users of roads.

On a much smaller scale, that's what families do when they borrow to buy a house and then pay it back over time. It's also what businesses do when they buy plant and machinery.

So, one option a National Government would look closely at would be to issue bonds in the name of particular projects, with a payback period that is in tune with the economic life of the project. As an example, we could issue 40-year state highway bonds to pay in part or in full for the completion of the Western Ring Route in Auckland.

A third way of financing is not to buy a road, but to buy the use of a road.

That is essentially what happens with Private-Public Partnerships. The private sector finances, in part or in full, the construction of the road and is repaid over time by a service charge from the government, or by revenues from the project, or a combination of the two.

PPPs allow the government to spread payments for major projects over their useful life. Payment is made only when services are delivered, risks are shared between the private sector and the government, and private sector management and expertise is also bought into play.

National believes there is certainly capacity for some private sector involvement in financing roads, where that involvement makes sense.

The private sector has been involved extensively in roading projects in Australia, in the UK, throughout Europe, in Asia, and in the United States, but so far has not been involved in financing projects in New Zealand. That is because although PPPs are permitted here, no private sector firms are interested because of the onerous restrictions in the Land Transport Management Act.

As a matter of priority, National will reform this legislation.

Related to this is the issue of tolling. National is not averse to using tolls on occasion to help pay for major roading projects, particularly where there is private sector involvement in financing.

I want to make a few points about tolls, though.

First, motorists are effectively being tolled now, whether they like it or not, through the delays on our over-congested roads and through the handbrake these roads put on our economy.

Secondly, we are certainly not going to toll roads that have already been paid for out of taxes – that would be double-dipping of the worst kind.

Thirdly, tolling has come a long way since the days of the Auckland Harbour Bridge toll, and nowadays tolling is almost always done electronically.

Road taxes will continue to be by far the most common source of financing for New Zealand's roads, and the government will continue to own them. But for major roading projects we need to look at what the alternatives are and see whether these would be better.

As I said, private sector financing of roading projects is commonplace in comparable jurisdictions. This is not a matter of ideology – it is about the best way to deliver value for money in roading to New Zealanders.

Finally, I want to talk about streamlining the process of approvals for new roading projects.

Provisions in the Resource Management Act, the Building Act, and the Land Transport Management Act have created a bureaucratic nightmare of delays, costs, and uncertainty for engineers who are trying to get roads built.

Elsewhere in the world, a general rule of thumb for getting consents for major roading projects is the "one-third rule". A project that would take three years to build generally requires a one-year consent process. A six-year building project requires a two-year consent process, and so on.

In New Zealand, though, it often takes longer to get the necessary consents for a new road than it does to actually build the road itself. As an example, it took two years to build Albany-Puhoi stage 1 and seven years to get consents.

National wants to speed up that process.

Part of that involves making changes to the RMA, and we have committed to introducing a resource management reform bill in the first 100 days of a new National Government. This will include such measures as direct referral of major applications to the Environment Court so we don't have the same arguments trawled over again and again in different hearings with only the lawyers profiting.

We also want to look at the Building Act, which has multiplied the number of building consents required, and the compensation mechanisms in the Public Works Act.

We want appropriate consultation to occur, and all points of view to be expressed and considered, but we also want to deliver a final and certain outcome within a defined and reasonable timeframe.

It is my belief that if we want to be a First World country in terms of infrastructure, including roading, then we have to start acting like one.

We can learn many lessons from the way other countries have undertaken major infrastructure projects – by having a coherent plan, by choosing the most appropriate form of financing, and by streamlining the planning and consent process.

In this way I believe we can strengthen New Zealand's infrastructure enormously, and this will have real positive effects on our economy and on our society.

For video of this event (and the speech as delivered), click here.