While Chris Bishop calls it the biggest change to road funding in 50 years, details on how the new system will work remain scarce for now, writes Catherine McGregor in today’s extract from The Bulletin.

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Major shift from fuel tax to pay-per-km

The government has announced it will scrap fuel excise duty and move all vehicles to a system of road user charges (RUCs), in what transport minister Chris Bishop called “the biggest change to how we fund our roading network in 50 years”. He said the surge in fuel-efficient, hybrid and full electric vehicles had eroded the longstanding connection between petrol consumption and kilometres driven.

Under the new system, charges would be based on distance travelled, vehicle type, time and location. The timeline is still vague: Bishop expects legislation to pass in 2026, with the system “open for business” by 2027. But a full transition date for light vehicles remains deliberately unannounced, with Bishop explaining the government is “focused on getting the system right rather than rushing its rollout”, reports the Herald’s Jamie Ensor.

Privatised and digitised

Alongside the policy shift comes a sweeping modernisation of the road charging system. Gone will be the paper labels stuck to windscreens, replaced by a fully digital e-RUC system. The NZTA’s dual role as both regulator and RUC retailer will be split, with private firms taking over the collection and administration of charges. The idea is that this will drive innovation and reduce compliance costs by allowing the market to offer high-tech solutions, such as integrations with in-car computers. “Instead of expanding a clunky government system, we will reform the rules to allow the market to deliver innovative, user-friendly services for drivers,” Bishop said.

Flexible payment options like monthly billing and post-pay models are being considered, and RUCs could be bundled with tolls and congestion charges in a single bill. As Luke Malpass writes this morning in The Post​ (paywalled), the new system is being designed with one eye firmly on a future where our most expensive roads are funded with tolls, and ease of payment will be key to getting people to use them. “Roads have to be paid for somehow,” he notes.

A pattern of reform

The transport minister’s announcement came as a surprise to many, but the move had been clearly signalled for years. National ran on eliminating fuel taxes and the policy was part of the National-Act coalition agreement. Last year the government scrapped the Auckland regional fuel tax and oversaw the imposition of RUCs on electric vehicles, ending a long-standing exemption.

These earlier moves laid the groundwork for yesterday’s grand shift. As the number of petrol hybrids on the roads climbs – from 12,000 in 2015 to 350,000 today – there’s a growing mismatch between fuel tax contributions and actual road usage, Bishop said, adding that lower-income drivers of older cars are effectively subsidising wealthier owners of hybrids and EVs.

The missing details

While the move has been widely framed as a step toward fairness and future-proofing, many of the key details remain unresolved, writes Stuff’s Michael Daly. One key question: how much drivers will pay. Bishop gave no indication as to how much the government is planning to charge different vehicle types under the new system. Currently, light diesel vehicles pay $76 per 1000km, but that figure may not translate directly to petrol vehicles. Owners of small, fuel-efficient cars could be forgiven for worrying they’ll end up paying more under a RUC system, regardless of the weight class tiers.

There are also concerns about the cost of privatising tax collection. “The only people who will see any benefit from this scheme are the corporates who take their cut to gather the tax,” said Fleur Fitzsimons of the Public Service Association, whose members include NZTA employees. As the legislation progresses and the 2027 rollout approaches, the government will need to spell out what motorists are actually signing up for – and how much they’ll be paying.