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.

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55 comments

  1. I seem remember some years ago a regional fuel tax was introduced to Auckland. Is it still in place?? I’m not in favor of any addition taxes as councils seem tax happy these days..

    1. Agreed. Council needs to exhibit responsible management of funds. Also, no brainer, any extra fuel tax hits the poor hardest. I’m surprised that supporters of fuel taxes don’t understand this.

        1. There are some very heavy bets being placed outside New Zealand that a full-scale transition to electric cars is now under way. If that’s true, fuel taxes have the potential in short order to become both an effective anti-pollution measure and avoidable by those rich enough to buy a new car.

          1. Donald its unstoppable, so a switch to road user charging is certain at some point. Fuel tax is a short term yet still vital measure which should be being used to prepare the country for this place and energy transition. And is transferable to being a Carbon Tax, which surely which it will become under future focussed leadership.

            The enormous tragedy for the city, the nation, and the planet is that this government is continuing to impatiently squander this resource on the wrong infrastructure while it is still functioning. This will be looked back on with disbelief much sooner than they could imagine. Things are accelerating in ways that those who’s only view is backwards continue to miss….

  2. Another factor will be if the govt tries to use its current leverage over transport and infrastructure funding to force Council to privatise assets, as is their ideology. Could be a bit of an election-year tussle with Joyce.

  3. I’m with the government on this one.

    Aucklander’s already pay more than enough to our council in the form of Rates which in recent years have seen massive increases. What is being proposed here is a backdoor tax, essentially a massive rates hike via another method that would never get through a democratic election process (as none of the proponents would be elected). The Council needs to take a look at the big picture and prioritise funding for the departments that need it. If transport projects are the number 1 priority in council then spending should reflect that at the expense of other expenditure deemed less important. Saying there’s only x amount of dollars in transport is complete crap. That’s a decision the council makes!

    As an example it’s amazing how the Council can project $70mil expenditure to turn a speedway into a test cricket ground (a proposal that even Auckland cricket is against) whilst claiming to be poor. We desperately need Phil Goff to show leadership and shake up this organisation, re-priorisitng expenditure and opening projects up to alternate forms of funding from the private sector.

    1. I agree, although I don’t live in Auckland, I’d much rather see a carbon tax then we might see more spent on public transport and cycling infrastructure.

      If fuel tax’s increased country wide I see nothing wrong with that, even if it’s used in Auckland their taxes are used to fund our hospitals and schools.

    2. What do you think the council spends money on that could be saved. Maybe a few million here and there, but billions?
      And what is the cost to the local economy if the council saves money on sports grounds, events, etc? Do boring cities attract the types of people that can stimulate the local economy?
      How much does your household pay in rates compared to taxes? In ours its about 1:30. Yet we get stuff all from the government, at least the council take our rubbish, supply our roads, etc.

      1. Well you got 13 years of free education, probably three heavily subsidised years after that, a lifetime of free healthcare, unemployment insurance, super annuation, significantly reduced chance of being the victim of a crime or fire, free access to national parks, a national network of roads between major centres, and about 50% of all other roads.

    3. I hope you contacted your local MP and other members of the government to express your vigorous opposition every time they increased the national fuel excise tax to pay for their motorway projects. And I agree that the council should look for opportunities to save money. The Reeves Rd flyover, Mill Road and Penlink would be good places to start.

      Given National’s reluctance to given councils any extra methods to raise revenues, it looks like only a change of government will fix the problem.

    4. Fuel taxes already pay for 50% of the non State highway roading upkeep in Auckland. As they do for most of the rest of NZ.

      So whats you beef with fuel taxes?

      Fuel taxes are he perfect example of the user pays system – don’t use your car/truck/whatever, don’t pay the fuel taxes.
      And fuel has many, many taxes in it, not just GST, which is always added on top of the other taxes.

      Or is it simply that you don’t like the idea of the local government having the power to levy what amounts to “local taxes” and want that right kept to Central Govt? If so what about rates, you want Central Gov’t to set them too?

      In any case, if central Gov’t retains control of taxation then needs to come to the part by ensuring Auckland gets a fairer share of the fuel tax money spent on it, according to population basis. Something which historically has never been the case for Auckland.

      In the past, its been a case of road spending portioned out according to need, more than population warrants.
      And now Aucklands needs and population are higher than other places you seek to deny a fairer share of the fuel taxes simply ‘cos the council won’t roll over and sell assets or chooses to spend ratepayers money on stuff you don’t happen to agree with?

      Pretty skinny grounds for opposing a regional fuel tax.

      What Auckland council would want to do is issue infrastructure bonds to pay for inter-generational assets.
      But to do that they need revenue to repay the bond holders, a local fuel tax would let the council do exactly that.

      Of course, both local and central Government need to realise that fuel taxes as a funding source are going the way of the do-do in the next 30 years.
      So whatever is put in place has a natural lifetime as a result. But in lieu of another acceptable funding source, its ok for now even if not perfect.

      We should not let the perfect funding system be the enemy of a better one.

      1. Disagree regarding Auckland getting its fair share of population. The majority of road expenditure comes out of the NLTF, which is funded by fuel tax, which should be distributed where it is used, not where the user lives. For example the Waikato likely has higher road use than it’s population would suggest as it is sandwiched between two of the countries largest regions.

        Also a significant amount of fuel tax will come from non-residents as tourists fill up their rental cars and they are more likely to use roads in less populated places like the West Coast and Southland.

          1. I think you could go to any region in NZ and find people will argue that they have an infrastructure shortfall. There are two reasons for this, we spent a good decade or two getting out of the hole Muldoon dug and secondly people almost always believe they should have more infrastructure than they do.

          2. And? That doesn’t change the fact that Auckland is legitimately underfunded when it comes to infra.

          3. Only based on arbitrary lines drawn on maps. I suspect if it was done an a territorial authority basis, the Hamilton, Tauranga, Wellington, Christchurch and Dunedin would all be in the same boat. If we put all the taxes collected in those cities just into those cities there wouldn’t be much left for the roads in between.

    5. I think,we Aucklanders are a bit too fast to complain about high rates. They were kept artificially low by Banks for years as an election bribe and at the expense of infrastructure – and people in other smaller places pay nearly as much as we do!

      1. People complaining about big rates rises since the amalgamation do not seem to realise that those were dictated by the government’s enabling legislation which forced regional rebalancing across the region to happen in a short time. Areas that had been more lightly rated got big annual increases.

        1. And was also coupled with a re-balancing of the rating differential between businesses and residents, with residents paying a higher portion of rates.

          Which is why some rates went up by 12+% a year for a number of years. But didn’t for others.

        1. Anyone who thinks that way as those folks do, is being willfully blind to the real costs of living in the boonies – hint its not rates.

          Its the cost of having to have private transport to and from everything they want to do or use. Whether thats work, school or shopping.

          Quite obvious these guys didn’t do their homework.

        2. That article may as well be titled “people don’t know that rates are relative to house prices in their city, not absolute across nz”

    6. “opening projects up to alternate forms of funding from the private sector.”

      That’s exactly the sort of thing Council has been asking for, but this government refuses to change the law to allow that. It’s not up to the Mayor or his colleagues.

      1. The government is open to PPP funding. However we need to be clear what that means: it’s essentially a form of vendor funding that moves purchases off the balance sheet and turns it into an ongoing operating expense (usually 20-30 years). Very common in the private sector to finance equipment (at shorter terms).

        Of course the private sector doesn’t have the ability to issue cheap bonds to finance these purchases as council does. And PPP funding is at private sector rates with a margin added on.

  4. This is an election year so hopefully this will become an issue for all candidates in the Auckland Region (which has about two dozen electorates to be contested).

  5. Need a new government. This one is terrible on so many issues from climate change to transport to health care to education.

    Time. To. Go.

    1. 100+ Steve Withers.

      Lets be honest, we have put up with the arrogance of Joyce and this misleading government for nearly 9 years. They have held up the development of infrastructure in Auckland at least with the obvious exception of motorways ever since they got in. Self funding the electrification of rail in Auckland and building on it was destroyed by the wrecking ball Joyce and his clones and hence we Aucklanders got a $500,000,000 loan instead with no hope of expansion. Hence the system we did end up with was late and to this day I can only imagine how pissed National are with the success of rail in Auckland despite their best attempts to thwart it. Hence no busways on the North Western motorway, hence fiddling while Rome burns with our PT infrastructure.

      There is always a reason why PT cannot have the focus and money it needs with investment and to make alternatives to roads happen. The fact is I and most of us cannot afford to donate the kind of money to the National Party that speaks to them. Hence we get motorways, but now with traffic lights. Hence we get housing bubbles and a housing crisis. We dont have to put up with this, this is not North Korea. Vote them out!

      1. Remind me of all the property reforms that Labour put through while house rises really took off under their watch? You’re mad to think that National is solely responsible for the housing crisis and even more mad to think a party that only gave a shit once they were voted out has any credible idea (or intent) to create meaningful reform.

        1. Im not mad, just over the pissing about and the empty rhetoric from Joyce for years on end. I can remind you that these turkeys have created a lot of the aggravating circumstances such as rampant immigration and a determined effort to look like they’re doing something but not, the loophole filled Brightline test, overseas ownership farce that did nothing to change the status quo and a refusal to do anything meaningful with as speculators, in the almost NINE years they’ve been around. They don’t want anything to change.

          Regardless National have been a handbrake on PT but you just know Lab/Greens will be anything but.

          1. People have this idea that the world was absolutely perfect in 2008 until the moment National got into power. National have done more for property price reform than Labour ever did, although I definitely agree it has been too little, too late. Thin Cap rules have tightened, mixed use asset rules were bought in, and although largely a timing difference, depreciation on building has cut into the ability for investors to finance their properties through rental losses. As I said, this is still tinkering around the edges, but it’s a damn sight more than Labour did.

            I didn’t see the Labour Govt pouring huge amounts of cash into PT in Auckland either (save for electrification which would be the best thing Cullen ever did). Point me to Labour promising PT funding reform other than the Mt Albert by-election boondoggle (other areas of Auckland need Light Rail too lads) and I’ll reconsider, but there isn’t a lot from either side to encourage me that their additional taxes aren’t going to just end up underwriting expenditure in other areas. Hopefully this will change as policy is announced closer to polling date but based on previous form, I remain unconvinced.

          2. Jesus wept who and or what will you Nat’s blame next, the Kirk government? This mess has taken place under National, they have been in power and had control of this for nearly 9 years, two thirds of which Key and his mates said there was no problem, remember? Now you can’t have it both ways, either there was never a problem as per Nationals – who gives a shit phase, or the revisionist version, its all Labours fault. A premium National response because its suits them to have a generation locked out of buying a home and others living in people movers. If you had been awake you would have seen that Labour have had no say for nearly NINE years. And as stated Nationals “reforms” have been an exercise in smoke and mirrors.

            And do you really think Joyce would have double tracked the Western Line, revamped Newmarket, spent up large to bring in the infrastructure for Britomart in 2003, revived the Onehunga line, built the Manukau Branch, or even committed to electrification were it not so far down the planning and ordering route? And the vast majority of this work was done whilst the government had to contend with a variety of privately owned consortium’s who owned the network. There is no way on Gods green earth would they have ever done that. Not many votes or donations in public projects like that!

          3. Where to begin with this: Firstly, not a Nat. Secondly, take a look at what happened between house prices between 2000 and 2007. I’ll wait. I think you’ll find this problem was brewing for years before the Nats got anywhere near the levers but rising house prices made people feel wealthy and kept them spending. The only thing that stopped it was the GFC. But hey, maybe you weren’t ‘awake’ then.

          1. Agree, however I share Buttwizard’s cynicism about how much better a centre-left government will be, they certainly didn’t demonstrate it last time they were in. I hope I am incorrect.

          2. Jezza, read the last paragraph of my previous reply. Yes they could have done better, but the achievement with rail in Auckland during their tenure outstripped any other government since the 20th Century, probably the early 20th Century.

            What has National done for PT in their 9 years? I think that is the measure by which any of us should judge and I would argue they have done more to hold it back and go against Auckland’s wishes more than anything.

          3. TBH, the success of Auckland rail last decade had more to do with ARC scrimping and saving and managing to get something useful up and running on the smell of an oily rag. They had to battle away to get funding out of Cullen for the New Lynn rail trench and electrification, he finally relented on electrification in his 8th year. The current government has agreed to fund (again reluctantly) the biggest rail project NZ has seen and has been vastly superior regarding cycling.

            I’d give both a fail for transport in Auckland and I’d mark them a similar grade, maybe a bit lower for National as they are operating in a period of greater demand for PT. Any centre left government in the near future will be made up of three similar sized parties so who knows what it would do.

          4. Cullen’s ambivalence towards rail happily disappeared during labour’s last term of office. The result down here in Wellington was funding approved for long-overdue new trains and rail-network upgrade. I very-much doubt this would have happened under National.
            Likewise the KiwiRail buyback. National would have left previous owners Toll Holdings to shut down large parts of the network, as they were threatening to do. In the nick-of-time before being voted out, Labour intervened and ended National’s disastrous ‘privatisation party’.

  6. Fuel taxes are a third best method. ATAP rejected the idea of road pricing based on cordons but were in favour of road pricing based on technology that doesn’t exist yet. Huh? Even if or when a GPS based method exists there is no telling if people will ever accept a method that tracks their movements or if they want to trust a government with that data. There is only a funding gap because we continue to provide roads free to the end user. Charging extra for the petrol people use to mow their lawn or the petrol they use to drive when there is no congestion seems particularly stupid to me.

    1. The road pricing solution proposed is only because the Government deliberately picked a road pricing system doesn’t exist yet, so they can kick that can down the road. Its just a form of delay and nothing else. They don’t want this on their watch as they don’t want the backlash.

      As to petrol taxes being spent mowing lawns. Not every tax is perfect.
      And if the local lawn mowing business feel so aggrieved they can claim the tax back, all 20 dollars of it.

      Or they could ditch the petrol powered stuff altogether and move to electric powered mowers and trimmers, which don’t have a fuel tax on them.
      And are quieter and mostly carbon free to boot. Win/Win I’d say.

      1. A lawn mowing business with a Nissan NV200-e electric van wouldn’t pay any petrol tax……or RUC. Such a van would be ideal for that job.

    2. “Even if or when a GPS based method exists there is no telling if people will ever accept a method that tracks their movements or if they want to trust a government with that data”

      Wait until they find out what Google knows about them, especially if they have an android phone. Google probably has enough information already about its users to make a reasonable guess as to who much tax would be chargeable under a GPS system.

      1. Google has no idea who I am, because my phone has no links to my (legal) identity. All it knows is that “entity XYZ, presumed to be a male 43-47 years old, does this and that”

    3. Everything depends on how well designed a GPS system is for its acceptability. I don’t think we are being ambitious enough if we just think about this technology offering the chance to more precisely aportion disincentives to impose costs (road pricing) it can also be used for people to earn credits. Huh? What do I mean.

      Well people could earn HOP credits every time they rode their bike simply through a GPS app like Strava, which many bike users already willingly use to record their rides. These could then be spent on PT fares, parking, road tolls, in other words in other areas in the city’s transport system that imposes economic and financial costs on others.

      Is could also work via Fitbit or similar for walking. The city could game the entire movement system to encourage behaviours with high benefits and charge for those with high costs… Credits could even be a transferable sort of currency that could, for example be donated to Greater Auckland, for example…

      But to earn and spend those ‘HOP dollars’ would require being GPS monitored, as almost everyone is now, via their phones, but without benefit to there or the city” movement systems….

      1. How will you feel about being taken to the Police station and put in an identity parade with 50 others just because you happened to be driving or cycling through an area when a crime was being committed? Once the GPS data is available it will be used by the state.

  7. Fuel tax encourages more supply of roads.

    Fuel tax encourages more roads to be built and more cars to be purchased, so more fuel can be burned and more revenue can be collected.

    1. Well, maybe, but also : fuel tax discourages people wanting to drive more, surely? But for it to work, it would need to be a significant amount. Say, a minimum of 10% more on fuel would have an immediate effect, biting. 20 or 30% would have a massive effect on fuel use. People would stop driving on non-essential trips. But a fuel tax of 1% ? Would have virtually no effect on consumption at all, and very little effect on pay-packets, even for the poorest in the commuting community.

      1. You forget that adding a fuel tax of 10% lime you are suggesting will have an immediate effect of pushing delivery and service prices up and then who will have to pay for that?? Then end user regardless of whether they drive a car or not..

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