Last Thursday Finance Minister Steven Joyce announced that the government was “ruling out” using a regional fuel tax as one way to fill the $4 billion transport funding gap that was identified by ATAP. He noted a few reasons for this decision:
And second, I stress that we are not interested in introducing a regional fuel tax. I have reiterated to Mayor Goff this morning that we do not see regional fuel taxes as part of the Government’s mix for transport in Auckland because they are administratively difficult, prone to leakage and cost-spreading, and blur the accountabilities between central and local government.
In some respects it wasn’t particularly surprising that the government made this decision. They have long had a somewhat bizarre hatred of regional fuel taxes, not only cancelling Auckland’s proposed fuel tax in 2009 that was going to pay for the electric trains (a decision that probably delayed electrification for a year or two) but then also changing the Land Transport Management Act in 2013 to remove the possibility of Councils even applying to the government for such a tax.
Many of these “concerns” were addressed in a report (page 15 onwards) that the Council commissioned in 2012 to inform their submission on the LTMA changes. Looking first at the issue of cost-spreading (which basically means the risk that petrol companies will raise prices around NZ rather than just in Auckland to pay for the regional fuel tax):
With the level of scrutiny in this sector it seems pretty unlikely that we would see this happening. Furthermore it seems like there are good checks and balances that could be put in place to ensure it doesn’t happen. So, not really a valid excuse.
Now for “leakage”, which is the likelihood of people travelling outside Auckland to “fuel up” and therefore avoiding the regional tax:
Once again it seems like these issues are marginal and can be easily addressed. This led the commissioned report to conclude that concerns that were raised in relation to a regional fuel tax at the time (which seem very similar to those mentioned by Joyce last week) can be easily addressed.
Of course Joyce’s final point – about accountabilities between central and local government, is probably the real reason for the opposition. Essentially government doesn’t want to give up the power it has through collecting fuel taxes. But this seems a bit petty and I’m sure in relation to such a high profile issue in Auckland (the funding of transport) and the broad agreement between Council and Government on what the priority investments are, there would be clear accountability with the public.
This rejection of the regional fuel tax now puts the ball back in the government’s court to come up with some other ideas for addressing the funding gap. They’d better hurry up as the clock is ticking to get this sorted in time for the 2018 transport funding plans.