Govt moves to universal road user charges as freight operators oppose wider tolling

Cabinet has agreed to sweeping legislative changes that will begin the transition of New Zealand’s 3.5 million light vehicles away from petrol tax and into a universal road user charges (RUC) system, which Transport Minister Chris Bishop says represents the biggest change to transport funding in half a century.

“The abolition of petrol tax, and the move towards all vehicles, whether they be petrol, diesel, electric or hybrid – paying for roads based on distance and weight, is the biggest change to how we fund our roading network in 50 years,” Bishop said in a statement.

“Right now, New Zealanders pay fuel excise duty of about 70c per litre every time they fill up with a petrol car. Diesel, electric, and heavy vehicles pay RUC based on distance travelled. For decades, petrol tax has worked as a rough proxy for road use, but the relationship between petrol consumption and road usage is fast breaking down.”

Bishop pointed to the rapid growth in fuel-efficient and hybrid vehicles. In 2015, there were 12,000 petrol hybrids on the road; today there are more than 350,000.

“As our vehicle fleet changes, so too must the way we fund our roads. It isn’t fair to have Kiwis who drive less and who can’t afford a fuel-efficient car paying more than people who can afford one and drive more often,” he said.

Modernising an ‘outdated’ 1970s RUC system

The Government’s transition begins with reforming what Bishop called an “outdated” RUC regime that still relies on paper labels, manual odometer checks and buying licences in 1000-kilometre increments.

“The current RUC system is outdated. It’s largely paper based, means people have to constantly monitor their odometers, and requires people to buy RUC in 1000 km chunks,” Bishop said.

“We’re not going to shift millions of drivers from a simple system at the pump to queues at retailers. Instead of expanding a clunky government system, we will reform the rules to allow the market to deliver innovative, user-friendly services for drivers.”

Key changes being progressed include:

• removing the requirement to carry or display paper RUC labels
• enabling a wider range of electronic RUC devices, including technology already built into many modern vehicles
• supporting subscription-style and post-pay billing models
• separating NZTA’s roles as both RUC regulator and retailer
• allowing other road charges, such as tolls or time-of-use pricing, to be bundled into a single payment

“These changes will support a more user-friendly, technology-enabled RUC system, with multiple retail options available for motorists,” Bishop said.

“Eventually, paying for RUC should be like paying a power bill online, or a Netflix subscription. Simple and easy.”

Bishop expects legislation to pass in 2026, followed by a new Code of Practice and market engagement to test third-party technology. By 2027, RUC would be “open for business” for new providers and electronic systems.

No date has been set for the transition of the light vehicle fleet. Bishop says that is deliberate, as the Government wants the system fully modernised before selecting a timetable.

Freight sector supports RUC reform but warns against tolling changes

National road freight association Transporting New Zealand says it cautiously supports the RUC changes but has strong concerns about other parts of the bill, particularly around tolling.

Transporting New Zealand represents more than 4,700 businesses operating urban, rural and inter-regional freight services. The sector moves 92.8% of New Zealand’s freight by tonnage and employs more than 34,000 people.

Chief executive Dom Kalasih says modernising the RUC system is essential.

“These changes will enable greater use of technology and more flexible payment options and also do away with the requirement to display a RUC label. This will help get our RUC system match-fit to enable tech businesses to offer low-cost products that could be rolled out to the petrol vehicle fleet in the future,” Kalasih said.

He said the freight sector accepts that universal RUC is a significant undertaking, but a necessary one to ensure transport funding remains sustainable.

However, Kalasih says the industry is “much more cautious” about clauses enabling tolling on existing roads and powers that could force heavy vehicles onto tolled routes.

“I accept that can bring forward raising the revenue to construct a new road, but we’d like to see some constraints around that. Existing roads have already been paid for by road users through petrol tax and diesel RUC. If this approach was to progress, we’d like to see that other options, like PPPs, have first been fully explored before tolling existing roads.”

Kalasih also warned against proposals that could prohibit heavy vehicles from using alternative free routes.

“Worse though is a clause that could prohibit heavy vehicles from using alternative free routes and force them onto tolled roads or else face a fine. That is fundamentally denying transport operators and drivers freedom of choice.”

Transporting New Zealand says it will support the RUC-related clauses in the bill but wants tolling provisions thoroughly examined to avoid “unintended and perverse outcomes”.