User Pays - But Who Are the Users of Infrastructure?

User Pays - But Who Are the Users of Infrastructure?

The concept of user pays is well entrenched in New Zealand.  People mostly accept that if you benefit from something, then you pay for it.  Interestingly, when it comes to infrastructure, users and those who benefit aren’t necessarily the same.

In my opinion, all New Zealanders generally benefit - directly or indirectly -from improvements in infrastructure and therefore the costs should be shared among us all.

This isn’t a widely held viewpoint. 

Auckland roading 

For instance, many people who live outside Auckland object to paying for Auckland roading.   They fail to appreciate that, although they don’t directly use Auckland roads, they would benefit from improved roads in the region. 

Most of New Zealand’s petrol and diesel comes from the Marsden Point Refinery in Whangarei and is transported by road to Auckland for distribution around the country.   It makes economic sense that the faster we can move petrol (and other goods) around the country, the lower the cost everywhere. So logically, because everyone benefits from cheaper petrol and other goods, it makes sense that everyone should contribute to Auckland roading. 

It’s been estimated that a sensible roading network in Auckland could increase productivity by 10% due to reduced travelling times.  With one-third of the population living in Auckland, this would increase the productivity of the country by 3.33% overall. Clearly, that benefits all New Zealanders.

Tourism Infrastructure

All New Zealanders benefit from tourism, which is a huge revenue source for our country.

Te Anau is the gateway to the extraordinary Milford Sound which attracts many international tourists annually.  Te Anau’s population is about 2000.  However over summer, the population trebles and an additional 4000 beds are required for visitors.  

Tourism is important for the economies of both Te Anau and New Zealand.  But it would be difficult for Te Anau’s 2000 people to pay for and support infrastructure for 6,000 people - as it is for the many other communities who are gateways to our landmark tourism areas.  Because we all benefit from the revenue that tourism generates, shouldn’t we all contribute to the infrastructure required to support access to these places?

Central funding

Central funding would resolve the user pays issue.  Where things are legislated in law, local communities have no choice about whether or not to comply and as such should not be asked to pay. 

Central control and management of infrastructure at a national level, particularly in the water and waste water sector, is a must.  We have central funding for our roads, so why not for this equally critical area?

Central funding has two impacts: 1) it removes local communities from the sole responsibility of paying for a piece of nationally significant infrastructure; and 2 ) It removes the control of the level of service from the local community and puts it into the hands of people with expertise in that area. 

National provider of water and wastewater infrastructure

A fine example of a highly efficient national provider of core infrastructure services is in Scotland, where water and sewerage services are provided by a single public company, Scottish Water. The success of Scottish Water is widely acknowledged.  It is regulated by the Water Industry Commission for Scotland, which ensures that householders and businesses receive a high-quality service and value for money by setting prices, monitoring Scottish Water’s performance and facilitating competition in the water industry. 

If we could stop being so regionally focussed and start thinking nationally about implementing a similar system here - New Zealand Water - the benefits in terms of quality and cost would be immense. 

Conclusion

I believe that directly and indirectly, we all benefit from infrastructure and should therefore all contribute towards its cost.  At best, the user pays approach is parochial and inefficient.  At worst it’s holding us back from making the necessary investment in our infrastructure, which is critical to increasing productivity, driving growth and enhancing our quality of life. 

It’s time to think about infrastructure from a national perspective and not as a collection of independent regions.

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