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Treasury warns fuel taxes may need to rise to cover road costs

Treasury warns fuel taxes may need to rise to cover road costs

Excerpts from NZ Herald

6 January 2022:

 Transport officials are worried that a green revolution could wipe hundreds of millions of dollars off their future budgets.

 But its buses and trains rather than electric cars that pose the biggest threat to the Government’s $4 billion war chest for funding new transport projects, according to advice obtained by the Herald under the Official Information Act.

 Each year, Waka Kotahi NZ Transport Agency rakes in about $4b a year, mainly from fuel taxes and road user charges.

 The agency has publicly fretted that this funding source is under threat as the transport system moves away from emissions-intensive fuels. It has successfully convinced Transport Minister Michael Wood that it needed an urgent review into the sustainability of the fuel tax system, despite previous policy advice saying revenue would be stable until the end of the decade.

 That drop in revenue would be keenly felt by the agency, which would have to grapple with massive infrastructure cost inflation and rising public transport subsidy costs over the next decade.

 An example of increasing spending over the next decade can be found in the Government’s directions to Waka Kotahi, which say it should spend between $390m and $600m on public transport subsidies this year, rising to $490m-$1b by 2030 – a cost increase which would be difficult to fund with reduced revenues.

 By contrast, more public transport uptake means less revenue from road charges and higher expenses in the form of subsidies.

 1 June 2022:

 “Treasury has warned the fast-rising infrastructure costs will put pressure on the Government’s transport budget, which could force the Government to increase petrol taxes (FED) and road user charges (RUC).

 This increase would be on top of the 25 cent per litre increase (and an equivalent RUC increase), which will take place in about three months’ time, when the Government’s temporary package to reduce transport costs comes to an end.

 Labour’s 2020 election manifesto committed the party to holding FED and RUC rates level this term after it increased fuel excise duty by 3.5 cents a litre each year in its first term, along with a similar RUC increase.

 Transport Minister Michael Wood said Labour remained committed to that promise.

 “As a Government, we are focused on investing in critical services and providing help for Kiwis who need it. We remain committed to no increases to FED and RUC rates this parliamentary term, above their level prior to the introduction of the transport support package,” Wood said.

 Waka Kotahi – NZ Transport Agency manages New Zealand’s National Land Transport Fund. The Fund, which is worth about $4 billion a year, is used to build and maintain roads and public transport infrastructure and provide subsidies for public transport services.

 Most of its funding comes from petrol taxes and road user charges, although the Government has recently topped up the fund itself in return for cutting fuel taxes by 25 cents to help households deal with the cost of inflation.

 Transport Minister Michael Wood said the Government was also working on the future of the land transport revenue system. Waka Kotahi sounded the alarm last year that changes in driving habits, like the increased use of EVs, would deplete its coffers. The Government agreed to review the land transport system which could see something like road user charges rolled out to all drivers at some point in the not too distant future.”

 Just recently there has been much rhetoric in the news about supermarkets and the costs of food. The thrust of the conversation being that due to a lack of competition the supermarket duopoly in NZ is making extra profits from controlling costs and keeping them artificially high, thereby putting pressure on the lower socio-economic grouping to provide food for their families.

Taking the situation with food costs into account as discussed widely in the news this call to increase fuel taxes is just another example of the ridiculous incompetence of the present government’s decisions around the land transport plan.

They have made the decision to convert to the use of electric vehicles ASAP and in the light of that decision they decided that an incentive should be offered to get more people to make the change to electric vehicles and therefore offered subsidies on all new EV’s. Not only did they offer subsidies but they also decided that EV’s should not have to pay RUC’s.

So we have EV’s that don’t use fossil fuels and therefore don’t pay any fuel taxes, don’t need RUC’s and therefore don’t pay any specific road taxes, qualify for a substantial subsidy on their purchase price and with what we are told are rapidly increasing numbers being registered and this government can’t figure out why they need to increase taxes for the remaining fossil fuelled vehicles.

Of course as we are well aware the first thing that occurs when the price of transport goes up (and we are looking at a severe rise in fuel costs from this proposed increase), is that the price of food rises as the increases in transport costs have to be passed on to the end users.

So the government in their infinite wisdom has decided that we need to focus on EV’s, cycle-ways, rail transport, coastal shipping etc, but they forgot that there is a decreasing income from fuel taxes & higher costs from subsidies, due to that decision and therefore they won’t have enough projected income to maintain the current infrastructure, let alone improve it, going forward into the future.

It is past time we stopped making foolish ideological decisions and learnt to live within our means and if that means EV’s, electric bikes and electric scooters have to pay their fair share of the road maintenance costs, so be it.

And we haven’t even mentioned yet, the costs that will be incurred to add the extra electricity generating capacity needed for all of the extra EV’s or the costs to develop new transmission lines and new charging stations.

Surely it is way past time this current government stopped making stupid ideology based decisions, faced reality and started to live within our means, before we are all taxed into our graves.