Hon Gerry Brownlee
Minister of Transport

28 March 2012

Vehicle Licensing Reform for value for money

Reform to deliver a simpler and more efficient vehicle licensing system has been announced by Transport Minister Gerry Brownlee.

The Vehicle Licensing Reform project, jointly led by the Ministry of Transport and the NZ Transport Agency will examine annual vehicle licensing (commonly known as registration), warrant of fitness and certificate of fitness transport services licensing.

“This reform has the potential to save millions of dollars in unnecessary costs and time for households, businesses and the government,” Mr Brownlee said.

“The almost $1 billion that comes in from annual vehicle licensing is important for ACC and contributes to transport infrastructure and services, so it needs to be collected efficiently.

“In addition we need to make sure the warrant of fitness and certificate of fitness and transport services licensing systems are still cost effective and fit for purpose.

“For example, the 5.5 million warrant of fitness inspections a year cost car owners around $250 million in inspection fees, so we need to ensure the rationale for all the aspects of those systems are clear and justified.”

“More than 14 million vehicle certification and licensing transactions take place each year. This puts significant administrative and compliance burdens on households, businesses and government agencies that process these transactions.

“It is sensible to look at how the government could take advantage of technological developments to make licensing easier and offer better value for money solutions.

“However, safety will remain a key priority in considering any changes,” Mr Brownlee said.

Reform work is in the early stages and there will be opportunities for stakeholders to be involved in the process.

“I want to make it clear that no decisions have been made. Getting a good picture of the impact of this work on the economy, businesses and households will be a vital part of delivering a simpler and more efficient vehicle licensing system that lasts for decades to come,” Mr Brownlee said.

Recommendations from the reform project will require Cabinet approval, with announcements on any proposed changes expected by the end of 2012.

Officials will now begin the process of talking with key stakeholders, with broader public consultation planned to begin by the end of June.

Further information about the Vehicle Licensing Reform, including questions and answers, is available at www.transport.govt.nz.

What is the Vehicle Licensing Reform?

Vehicle Licensing Reform is a joint Ministry of Transport and NZ Transport Agency review of annual vehicle licensing (commonly known as registration), warrant of fitness/certificate of fitness and the transport services licensing systems. The review will explore opportunities to make each of the systems simpler and more efficient.

Why is reform needed?

This reform has the potential to save millions of dollars in unnecessary costs and time for households, businesses and the government.

More than 14 million vehicle certification and licensing transactions are generated by these three systems each year. This puts significant administrative and compliance burdens on households, businesses and government agencies that process these transactions.

The current licensing systems have been in place for many years and affect every vehicle owner. We need to be sure the rationale for all the aspects of those systems are still clear and justified.

It is also sensible to look at how the government could take advantage of technological developments to make licensing easier and offer better value for money.

Why now?

The transport sector, like all parts of the public sector, is looking for ways to improve economic growth, reduce costs for people living in New Zealand, and deliver services in a better way.

The Ministry of Transport’s broader regulatory reform programme undertook work in late 2011 that helped to identify the potential in reviewing the annual vehicle registration, warrant of fitness/certificate of fitness, and transport service licensing systems.

These systems are linked by the NZ Transport Agency’s data and business systems, so there is value is considering changes to them as a package.

How long will it take?

Recommendations from the reform project will require government approval, with announcements on any proposed changes expected by the end of 2012.

Will there be an opportunity for people to have their say on proposed reforms?

Technical knowledge and expertise from key stakeholders will be vital for this process and over the coming months we will be seeking their input and feedback.

Any proposed changes to legislation, rules and regulations from the reform project will require Cabinet approval and will follow usual consultation processes, where people will have an opportunity to have their say.

The Ministry of Transport website www.transport.govt.nz also has a Vehicle Licensing Reform page, which will be updated regularly, including keeping people up to date on opportunities to engage.

An email feedback link is also provided: vehiclelicensingreform@transport.govt.nz

What happens to the current systems during this reform work?

Nothing – the status quo remains. Vehicle owners and operators will need to continue to ensure their vehicles are re-licensed and have up to date Warrant of Fitness/Certificate of Fitness.

How many vehicles are there in the national fleet?

There are 4.2 million vehicles currently recorded in the motor vehicle register.

(Note: If a vehicle remains unregistered for more than a year it is removed from the register; once struck off the vehicle’s owners have to pay a fee to get the vehicle back on the register).

Annual vehicle licensing (commonly known as registration)

What is annual vehicle licensing?

This is the process where vehicle owners or people who have a vehicle registered under their name pay a fee to use a vehicle on public roads.

The fee helps to pay for a range of transport projects and services, such as roads and public transport, and vehicle safety programmes.

The ACC Motor Vehicle Account levy is also collected through the annual vehicle licensing process. The account covers claims for injuries involving motor vehicles on public roads in New Zealand. This is currently the largest portion of the amount paid when a vehicle is re-licensed each year.

What is the difference between licensing and registration?

Registration is generally a one-off process that identifies you as the person legally responsible for a vehicle.

Licensing is the regular annual process through which you pay to use your vehicle on public roads.

Why is annual vehicle licensing needed?

In addition to collecting the fees that contribute towards transport projects and vehicle safety programmes, and the ACC motor vehicle levy to cover claims for injuries involving motor vehicles on public roads in New Zealand, the system also enables vehicle owners to update information held on the Motor Vehicle Registry such as change of address, the vehicle colour or change of ownership.

Up to date information is important to allow effective policing of our roads. This contributes to the safety of all road users.

How many transactions are generated and revenue collected?

About 5.7 million transactions are generated every year for 4.2 million vehicles.

There are more transactions than vehicles because vehicle owners can pay a lower amount by licensing their vehicles for periods less than 12 months and can apply for exemptions for vehicles not currently being used on the road.

Close to $870 million is being collected annually through annual vehicle licensing and of this just over $682 million is ACC revenue. ACC also collects $303 million from motor vehicles through a petrol levy of 9.9 cents per litre.

What is the average cost of re-licensing?

Typically, the owner of a petrol-powered private car will pay $287.75 for a 12 month licence. A diesel-powered private car will pay $417.61 (cost as of 1 May 2011).

The difference in cost between re-licensing petrol and diesel vehicles is because some ACC is collected on petrol, meaning car owners pay towards ACC when they put petrol in their cars.

As a lot of diesel is used for off road and agricultural purposes, ACC is not collected on diesel. Instead, ACC is paid when a diesel vehicle is re-licensed.

What aspects of annual vehicle licensing are being looked at as part of the reform and why?

• The way the vehicle registration process is currently set up, including the frequency of licensing and the fee collection mechanism.
• Ways to improve the system, with the aim of making the system easier to use, faster and more convenient.

The annual vehicle licensing system has only changed incrementally since the early 1900s and places significant administrative and compliance burdens on households, businesses and the government.

It is likely that there are more efficient and simpler ways to administer these systems, so it is sensible to look at how the government could take advantage of technological developments in recent decades to make registration easier and offer better value for money.

Will this mean changes to frequency and cost of vehicle re-licensing?

Work on reform is at a very early stage so there has been no decision to change the frequency. The current system still stands and vehicle owners need to continue to re-license their vehicles as usual.

However, we are confident we can find ways to reduce costs through better ways of managing transactions.

Warrant of fitness/certificate of fitness

What is warrant of fitness/certificate of fitness?

Regular vehicle inspection is used in New Zealand to control the standard of maintenance and safety of the vehicle fleet. It measures roadworthiness at a given point in time and is designed to reduce road crashes caused by vehicle defects The warrant of fitness system covers most light vehicles. The certificate of fitness system covers heavy vehicles such as trucks (and some light vehicles).

How many transactions are generated and inspection fees paid?

There are 7.7 million warrant of fitness and 470,000 certificate of fitness vehicle visits every year (including re-inspections) to obtain a warrant or certificate of fitness.

Private cars under six years old must have a warrant of fitness inspection annually. Inspections for vehicles over six years old are six monthly.

The cost of obtaining warrant or certificate of fitness varies considerably between providers who set the price for an inspection. A warrant of fitness inspection can cost around $50. Re-inspections are not charged for provided the vehicle is re-submitted for testing within 28 days.

Around $250 million a year is paid in warrant of fitness inspection fees to inspection providers. Around $31 million is paid in certificate of fitness inspection fees.

What aspects of the warrant of fitness/certificate of fitness system are being looked at as part of the reform and why?

New Zealand’s vehicle inspection system is one of the most frequent in the OECD. We want to look at whether the current regime is delivering the best balance between compliance costs and safety benefits, and if possible, reduce costs and inconvenience for vehicle owners and operators while maintaining or improving safety.

Will this mean fewer/tougher warrant of fitness/certificate of fitness inspections?

It is too soon to say whether the warrant of fitness/certificate of fitness system will be changed. The review will include a rigorous examination of costs and benefits of any proposed change.

Will getting a warrant of fitness/certificate of fitness cost more or less?

It is too soon to say. The review will include a rigorous examination of costs and benefits of any proposed change.

How will maintaining vehicle safety be guaranteed?

Investigating potential safety risks and impacts of any proposed change will be a key part of this work.

Any potential changes will need to be assessed on their ability to contribute to reducing compliance costs and improving productivity, and their impact on safety.

What will this mean for businesses involved in vehicle testing for warrant of fitness/certificate of fitness?

It is too early to say. There will be a rigorous examination of costs and benefits and technical knowledge and expertise from stakeholders will be vital in building an accurate picture of how this might affect the transport sector and overall economy.

The Ministry of Transport previously indicated it would be issuing a discussion document on the warrant of fitness system what has happened to this?

The Ministry of Transport and the NZ Transport Agency are now reviewing the warrant of fitness/certificate of fitness system together with annual vehicle registration, and transport services licensing as part of a larger package of regulatory reform work.

As a result of the warrant of fitness review work moving into this larger programme of work, the timeframes indicated in 2011 no longer apply.

Transport services licensing

What is transport services licensing?

The operators of some road transport services and some vehicles (whether an individual or a company) are required to hold a transport service licence if operating any of the following types of service or vehicle:

• Goods services – mostly trucks with some specific exceptions
• Passenger services – taxis, shuttles, limousines, buses, and “dial a driver” services
• Vehicle recovery services – tow trucks, and similar vehicles
• Vehicle rental services – rental cars and other motor vehicles for hire.

How many transactions are generated and revenue collected?

There are around 37,000 active licences, the holders of which operate around 180,000 vehicles. The NZ Transport Agency collects almost $9 million a year from licence holders.

There are 2500 applications per annum for transport services licenses. The one-off application cost is $382.60 (GST exclusive). The ongoing license cost is $47.80 (GST exclusive) per vehicle per annum.

What aspects of the transport services licensing system are being looked at as part of the reform and why?

The reform will look at all aspects of transport services licensing including all four types of transport service listed above.

It will also consider whether the transport services licensing system as a whole remains a sensible way of regulating the sector. The current licensing system has been in place for more than 20 years, so we need to be sure there are still clear reasons for the system.

Will this affect costs for people who operate commercial vehicles under a transport services licence?

It is too soon to say how any changes to the transport services licensing system impact on costs. The review will include a rigorous examination of costs and benefits of any proposed change.

What is meant by risk?

There are a number of risks that the transport services licensing system seeks to address. These include risks to road safety, personal security, land transport revenue (road user charges), and involvement of organised crime such as gang involvement in towing and burglary networks in goods transport.

How will road safety be affected?

Road safety is a key government priority. It will remain a priority for developing and assessing options for change to the transport services licensing system.

How will the reform ensure people keep their vehicles registered and warranted to pay their fair share?

The Vehicle Licensing Reform is foremost about finding ways to make complying with the vehicle licensing system as easy as possible.

It has the potential to save millions of dollars in unnecessary costs and time for households, businesses and the government.

An easier, less costly, technologically advanced system will make compliance much easier for vehicle owners.

The reform will look at enforcement of the system as a whole, but we need to first get a clearer picture of how people currently use the system to find long lasting solutions.

How many vehicles are unlicensed?

At any one time during the year there are around 260,000 cars unlicensed and the owners of nearly all of these cars pay their overdue licence fees within a year.

We do not know the likely number of people driving unregistered vehicles. Officials are currently working on estimating this figure.

How many vehicles are unwarranted?

At any one time during the year there are around 260,000 cars unlicensed. The owners of nearly all of these cars pay their overdue licence fees within a year.

Based on the cars on the vehicle register we know that:

• Around 10 per cent are without a current warrant of fitness or certificate of fitness.
• Around 9 per cent are unlicensed.
• Around 5 per cent are both without a current warrant of fitness or certificate of fitness and unlicensed

ENDS

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