Fuel tax increase deferred

An interesting announcement today by transport minister Steven Joyce – that the proposed 1.5c a litre fuel tax increase that was to take effect in July will now be cancelled – or more realistically delayed until next year and the year after (with bigger increases likely to be necessary to make up the difference):

Transport Minister Stephen Joyce announced this afternoon the 1.5 cent per litre increase due to come into effect on July 1 had been deferred.

He said the move made sense amid the ongoing impact of the global recession and the Christchurch earthquakes.

“The government’s $11 billion roading programme will not be significantly affected over the ten year plan for the programme. In fact, ongoing investment in transport infrastructure and services, which is a key economic driver, has never been higher.”

From a political perspective the announcement is pretty unsurprising. With petrol prices at record highs and people struggling with higher living costs in general, it would have been a particularly unpopular increase. Of course, one more ‘burp’ in the Middle East and chances are we’ll be experiencing much higher increases anyway.

The article continues:

Government officials are working on the next Government Policy Statement for Land Transport Funding (GPS), which will set out the Government’s transport priorities and how they will be funded.

The 2012/13 – 2021/22 GPS will include support necessary to repair Canterbury’s transport infrastructure.

Mr Joyce said it will also provide certainty for the rest of the country on the government’s commitments to supporting transport projects and economic growth.

Ah yes well we’ve been looking at the next GPS quite a lot lately and one of the loudest messages that seems to have been coming through the documentation so far is the enormous squeeze on the funding of most transport sectors that has resulted from Joyce’s pet Roads of National Significance projects. I think it’s fairly unlikely that today’s announcement will assist in resolving this funding squeeze – which will result in the loss of about $60-75 million of revenue (according to this interview).

An interesting question to ponder is where will the savings be found to meet the $60 million loss in revenue. Will it comes out of funding for new state highway projects – or will it comes out of funding other modes, like local roads and public transport subsidies?

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