1 The Ministers of State Services, Finance and Transport asked the State Services Commission to lead a multi-agency review of the land transport sector in February 2007. The Review was one of the Government's responses to the findings in the report from the Ministerial Advisory Group on Roading Costs, 2006.
2 The Next Steps in the Land Transport Sector Review (Next Steps) Report outlines officials' analysis of the machinery of government, governance and funding arrangements for the land transport sector. It makes recommendations to the Ministers of State Service, Transport and Finance on proposed changes to the government land transport sector in terms of investment planning, funding and structure with a view to enhancing agency responsiveness, performance, capability and value for money.
3 The land transport sector is complex. There are a high number of stakeholders and the scale, cost and multifaceted nature of infrastructure projects has increased dramatically in recent years. In addition, the sector has been subject to much change and is still adjusting to a new operating environment.
4 Transport sector infrastructure is critical to the transformation of the New Zealand economy and the movement of people and goods impacts profoundly on the nation's health, lifestyle, sustainability (environmental and economic) and public safety. Government agencies must be able to respond to changing Government priorities over time as well as deliver the desired outcomes and benefits cost effectively.
5 The land transport sector has been reviewed a number of times in recent years. Many improvements have been made, but there has been an on-going concern that it is: not fully achieving value for money; not fully delivering on the New Zealand Transport Strategy (NZTS); not fully delivering on the Government's wider agenda e.g. economic transformation and sustainability; not sufficiently responsive; and creating ongoing fiscal risk for the Government.
6 The Review has identified a number of underlying causes including:
- gaps in the interpretation of the NZTS objectives;
- the Ministry has yet to acquire sufficient capability to fulfil the leadership role envisaged by the Government Transport Sector Review in 2004;
- expenditure pressures that are not being addressed strategically;
- the roles of some Government agencies remain unclear, and some functions are duplicated;
- inconsistent planning and funding policies distort incentives within the sector; and
- inefficient churn in planning and limited sector collaboration fail to align central, regional and local land transport plans.
7 This Report concludes that a lack of sector collaboration and integration underpins many of the issues present in the sector. The lack of role clarity, sector leadership, and common expectations about how the sector should engage has helped perpetuate a fragmented sector culture.
8 These concerns and issues have been endorsed consistently in stakeholder conversations during the review.
9 Consistent with the Terms of Reference, the Review has focused on current and improved machinery of government, governance and funding arrangements for the land transport sector.
10 A package of measures is recommended, which would require legislative change.
11 The Review concludes that the most urgent issues to address relate to land transport sector planning and funding. Therefore, it recommends measures to improve land transport decision-making and funding that build on the current system and previous reviews.
12 Useful improvements, in terms of sustainability and balance between transport modes, could be made through more integrated decision-making, and if the Government and government agencies provided more guidance to the sector. It is also recommended that Government should determine the appropriate balance between different classes of activities.
13 Lower compliance costs should also result if the current consultation and paperwork churn could be reduced.
14 Key points to note in the planning and funding proposals are that:
- legislative change would be required;
- statutorily independent decision-making would be retained for individual activities/projects;
- more explicit guidance on the Government's funding priorities would be provided for the land transport sector through two published documents:
- "Implementation of the New Zealand Transport Strategy" - currently under development by the Ministry and due in March 2008; and
- a Government Policy Statement with a six year outlook and a three-yearly update process;
- activity class ranges and associated Fuel Excise Duty and Road User Charge levels would be determined through clear processes as part of the Government Policy Statement settings;
- all land transport plans would be produced every three years rather than annually;
- regional councils, probably through their Regional Land Transport Committees, would become responsible for prioritisation of all land transport activities, including State highways, within their Regional Land Transport Programmes;
- separate consideration could be needed for Auckland; and
- all consultation on activities that would be funded through the National Land Transport Programme would take place at regional level. Therefore, Approved Organisations, including Transit NZ, would no longer be required to consult separately on their Land Transport Programmes. All revenue raised from Fuel Excise Duties would be directed into the National Land Transport Fund - this would usefully demonstrate to road users that road charges are being used for, or match the level of transport investments.
15 From the outset of the Review, it has been apparent that the transport agencies needed to work more collaboratively and with a common purpose. The Review notes that the many levers of Ministerial influence over the Government agencies in the land transport sector could be utilised more effectively to support this collaborative approach.
16 The report states that the proposed changes to the planning and funding system would address most of the issues facing the sector. Their implementation would require changes to the configuration of the current roles, functions and nature of the Government institutions in the sector.
17 The subsequent question addressed was whether the changes would go far enough, especially in terms of the signals sent to the sector about the required changes in expectations, behaviour and approach.
18 The Review considered a number of structural options in detail. Two viable options emerged as the most appropriate - the first would retain the existing three agency model, but with the required changes to their roles and functions, while the other would merge the two Crown entities to form one land transport agency.
19 The Review concludes that both options are viable. However, on balance it recommends the more significant structural change to disestablish Land Transport NZ and Transit NZ as separate agencies and merge their new functions into a new statutory Crown entity (which would retain the statutorily independent functions currently held by Land Transport NZ).
20 The factors considered against the merger included the possible loss of transparency, making it more difficult for the Ministry of Transport to carry out its role as the Minister's adviser, and a likely perception by some stakeholders of bias in favour of State highways in the funding allocation (despite measures to limit that possibility). In addition, a merger could be seen as coming too soon after the 2004 restructure, and therefore providing insufficient time for the more difficult, "soft wiring" behavioural changes to have become the norm.
21 The reasons for the Review's preference for a merger include the following:
- the benefits of integration would be greater than the benefits of retaining separately focused entities;
- one Crown entity would be required to consider all transport modes and activities and ensure that appropriate trade-offs are made;
- one Crown entity would be accountable to the Minister;
- one Crown entity would be required to focus on cost-effective delivery of its activities; and
- one Crown entity should facilitate more easily the transition, over time, to the fully implemented new planning and funding arrangements.
22 The report emphasises that the success of the proposed changes to roles and responsibilities across the agencies would be influenced by the membership of the Crown entity board and its operation. For example, it may be appropriate to require the establishment of one or more board sub-committees.
23 Irrespective of other outcomes, the Review considers that the Ministry must fulfil its envisaged sector leadership role and enhance its capability. In addition to the proposed changes to the land transport Crown entities, a number of key roles and responsibilities are recommended to transfer to the Ministry. To this end it would quickly need to boost its capability in key areas to negate any need for other agencies to fill a vacuum.
24 A collaborative culture needs to be embedded throughout the Government land transport sector. The proposed new planning and funding arrangements and the proposed merger of the current two Crown entities to establish new institutional arrangements would contribute to this.
25 The proposals outlined above represent the next steps for the land transport sector and will take considerable effort to implement successfully. Implementation aspects include:
- legislative changes
- roles and functional clarification and changes
- structural changes
26 Implementation arrangements will need to remain active for at least the next 18 to 24 months. It is recommended that an Implementation Steering Group, led by the Chief Executive of the Ministry of Transport and supported by a multi-agency team, drives these arrangements. Regular reports on progress are recommended to be made to the Ministers of State Services, Finance and Transport.