With petrol prices on the rise, it is once again raising suggestions that the government should cut fuel taxes to ease the burden on the public. The National Party in particular are pushing this line, although they don’t say how the government could then afford to pay for current transport plans. While I’m sure if asked they’d say the government should cut back on projects like light rail, now is exactly the time we need good quality alternatives, especially those not subjected to the fluctuations in the price of fuel.

It’s worth remembering that our fuel taxes aren’t that high compared to many countries in the OECD.

Higher fuel prices are likely to have a lot of people thinking about how they travel and if alternatives are available, which isn’t a bad thing.

Consumer NZ boss Sue Chetwin said fed-up motorists may simply opt for public transport, biking, or walking if filling the tank up became too expensive.

“Prices going up so strongly is not good from a consumer perspective, but it might encourage people to think differently about their transport.”

However, I’ve been thinking about other ways the government could help with the issue of fuel prices. Perhaps one small thing they could do is to make it easier for employers to consider non-car based perks, such as subsidising public transport for employees.

I suspect many companies would at least be interested in the option of doing this but don’t after realising they’d not only need to pay the perk but also Fringe Benefit Tax on top of it. FBT is something they often don’t need to pay when offering carparks due to a loophole. The previous government did suggest closing the loophole but quickly backed down following opposition from both businesses and unions.

Removing FBT from PT would at least level that playing field and I suspect would have zero impact on the government because no company is currently doing it.

Taking it further, agencies like Auckland Transport could create special products to sell to businesses. This could consist of full travel passes, like monthly passes currently do, or alternatively, use the same functionalty used for child/student concessions. In that situation, the employee might get discounted PT with AT billing the company for the difference. Both options could help to encourage more people to use PT which fits perfectly with goals for both Auckland and the Government.

Of course, this isn’t likely to be something that will benefit everyone. Public transport isn’t practical for a lot of people, especially those in rural areas but it’s one little thing that could help.

If the government were to take it a step further, they could also pick up and tie it in with an idea we posted last year. It would require employers who provide parking for staff to allow employees to have the value of that carpark cashed out.

What other options should the government consider?

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  1. “What other options should the government consider?”

    Being the sole retail supplier of fuel in NZ.

    That would remove the profit margin from the price of fuel and could ensure a standardised price throughout the country.

    1. Should that be the case with food, accommodation, power, etc too?
      I’m not sure why people and govt are so fixated with fuel prices when we know our supermarkets are a thieving duopoly charging us so much more than they should. Why are there so many government investigations into a reasonably competitive fuel market while I have never seen an investigation into the food market? Why do the government perceive cheap fuel to be more important than cheap food?

      1. Because people who benefit from cheap fuel are much more powerful than people who benefit from cheap food.

        1. Good study. The figures also suggest those who can grow their own vegetables and fruit, (swapping plants, seeds, raw materials, processed produce and excess produce for those they don’t grow) can save nearly $140 per week. Useful info, thanks.

    2. Why should the price be standard throughout the country? Surely it is quite reasonable that fuel at Lake Waikaremoana or Great Barrier Island is more expensive than it is in Auckland.

      1. Yes – and likewise I wouldn’t expect the price of a bag of apples outside a Hastings orchard to be the same as at an Auckland city centre New World, and I definitely wouldn’t want the government to force them to be the same.

      2. “Surely it is quite reasonable that fuel at Lake Waikaremoana or Great Barrier Island is more expensive than it is in Auckland”

        Ha ! That doesn’t explain why petrol prices in central Wellington are 30c a litre higher than in Eketahuna….

        1. (for those of you north of the Bombay Hills, Eketahuna is, quite literally, in the middle of nowhere).

        2. It’s isolated but nowhere near nowhere. I had always assumed that nowhere was on the end of the “bridge to nowhere”, on the Parapara. Is that not right?

        3. Well, driving from Nowheretown (aka Masterton), to Nowheresville (aka Woodville), Eketahuna sits somewhere in the middle, with all the businesses shutting down and giant kiwi roaming the Main Street (only a slight exaggeration) – and yet there are some public toilets (main reason to stop) and a petrol station cheaper than Wellington.

          The bridge to nowhere doesn’t actually have a road, so it is no surprise that it also does not have a petrol station…. but semantics. The point I was trying to make was – how come a petrol tanker that is literally 100s of kilometres from any signs of intelligent life (sorry – “civilisation”) can deliver petrol miles cheaper than a port city which the ships literally unload directly into? Madness…..

        4. Eketahuna isn’t far from Masterton, which has Gull (i.e. real competition).

          Wellington only has fake competition (Gull is shut out of Seaview, too far to road tanker it from Tauranga in sufficient volume).

        5. As I said below, I suspect the rent for the petrol station in Eketahuna is quite a bit lower than say the Z on Whitmore St in the Wellington CBD.

        6. Think the Whitmore St site has been sold to developers and leased back – making the future doubtful …

          Have to wonder about the Taranaki St BP too – large site, could be put to better uses …

        7. I imagine the ground rent or land costs would explain a reasonable amount of that difference. Also while you say Ekatahuna is in the middle of nowhere it is on SH2 so I imagine it would have reasonable access to passing fuel supplies. Very different to an end of the road or island location.

        8. petrol station seems like a poor economic use of prime land like whitmore st z to me.

        9. You’ve answered your own question, supply and demand. The demand is higher in central wellington, and the cost of supply greater too, the cost of the ground lease that wellington gas station sits on is no doubt dozens of times greater than in Ekatahuna, and the cost of servicing it was a tanker probably greater too. Where is the liquid fuels distribution point in the lower north? Not in central Wellington I assume.

          Ekatahuna has low costs, low demand… and low prices.

        10. “Where is the liquid fuels distribution point in the lower north?”
          Seaview, Lower Hutt – ~15 km by road from Central Wellington.

    3. Could you imagine the shortages that would occur if you let a pack of civil servants distribute fuel? By their very nature they don’t really give a bugger if they achieve things or not. They get paid regardless.

      At least the market system usually results in goods being available where you need them when you need them.

      I have no doubt they would be able to produce very colourful strategy documents full of jargon and bullshit. But you seriously can’t expect people like that to actually provide something tangible. It would be beyond them.

      1. Do you ever have a positive word to say about anything. Your cynicism is tiring.
        Maybe we should get Fletcher Challenge to run the country, or Mainzeal or Goldcorp, or South Canterbury Finance. Maybe Pumpkin Patch? Yeah right.
        Whereas of course, when things go wrong private companies go squealing to the government for help.

        1. Or maybe we could let Caltex, Mobil, BP, Z Energy, or Gull distribute fuel. Maybe the invisible hand actually works when it comes to commodities. Maybe it would be stupid to repeat the failures of socialist countries in the 20th century. As for your examples, it is called creative destruction. Try reading Joseph Schumpeter sometime. You might just learn something. But then again maybe not.

    4. What money would the government use to buy all the assets in the fuel distribution network? Are you suggesting they will then own every little country service station and truck stop that sells fuel?

  2. I’m supposed to have the use of my own car for work, as part of my contract. If my employer was to provide a pool car or even an ebike or two, I would have no need at all for my own car, and neither would most of my colleagues. I wonder how many other city workers have such a condition in their employment contracts, and whether that is the reason for some to dogmatically claim that they ‘need’ to drive their car to work.

    In reality, I’ve needed my own car for customer visits about half-a-dozen times in the last couple of years. So I cycle to work or take the bus if I’m under the weather or the weather looks like something I don’t want to be under. I schedule customer visits for the next day if I need my car, or take a bus, or walk if they’re in the city. I’m seriously toying with the idea of cashing in my car for a couple of ebikes and signing up to a car share scheme for the few days a year when I really need one.

    1. Brilliant. Some firms made the shift years ago. A family member encouraged his firm to look at how many cars they really needed to have on hand at work, cut the requirement on staff to bring one, and replace the provision of a car with a cash equivalent.

  3. I see the AA want 10 cents per litre tax off the price. Was it GST as well? They are obviously so damned naive that they don’t think the fuel companies will slowly make that little difference up, in a benzine contaminated heartbeat. And from which transport project will be axed by the funds lost from such a tax, AA? The grey cardy, Toyota Camry/Corolla driving AA executive need to take a deep breath and stop playing amateur politics!

    And I think $3 per litre is ridiculously alarmist but hey, its not National in government so the sky is the limit and making that pesky transport tax for Auckland Council go away is the objective isn’t it?.

    And of course the National Party would cut tax wouldn’t they, they always say that but then what else are they going to cut to fund the shortfall, Health, Education, Policing, welfare, all the usual’s they did last time? Yeah, nah, been there, done that and its all quite a mess as a result.

    Good ideas by you Matt L however.

    1. I see you want the AA to “stop playing amateur politics”.
      It’d be nice if you could do the same and focus on the topic.

  4. One way to win over Ken Shirley and the road lobby: lower fuel tax on trucks, agricultural vehicles, work vans etc, and raise it on commuter cars, especially SUVs.

    1. Yeah but that won’t help shift freight to rail, nor ease the burden on citizens paying for the roads the trucks damage.

    2. Well, there is no road tax on diesel, that’s why they pay RUC; agricultural vehicles are also either exempt from RUC (if diesel) or able to claim back their petrol tax

      The RTF (so far as their diverse membership allows) has been understanding of the level of RUC, and the increases over the last decade, because they can see how it is calculated and that it is being spent on things that support their members. Back in 2012 when the three annual increases of 3c/litre + RUC equivalent were announced they said as much in their press release. Operators want safer roads with fewer idiots on them crashing into their trucks and killing themselves.

      I think we are getting to a point where everyone knows we need to up the price of commuter road use, certainly at congested times and places, but making the first move is scary for governments, and also alarming to many people.

      1. Why isn’t the RUC for trucks properly reflecting the much higher damage that higher axle loads cause, Tutehanga?

        1. Because the National government was firmly in the pocket of the RTF. Ken Shirley had open door access to Brown;less to and Bridges while Greater Auckland struggled to get a single meeting.

  5. Something not quite right with the formatting at the end there, Matt. It’s interesting that we used to be one of the cheapest countries (basically Nth America and Australasia were at the bottom – guess who are the most auto-centric?). Not sure why our base fuel cost is so much higher (we’re not that far away…) but at least our fuel taxes are heading towards European levels where true behaviour change starts to kick in.

    I’d go further and introduce FBT exemption for PT and inducements to biking (e.g. bike ownership subsidies). At the moment you can already do a little bit under the FBT radar (there is an exemption up to $1200/yr per employee of allowances, etc), e.g. my company has a $500/yr allowance for us to spend on bike repairs, replacement bike gear, or even contribute towards the cost of a new commuter bike (the remaining $700/yr goes towards other health & wellbeing expenses like medical checkups or yoga classes).

  6. Or employers could pay people reasonable wages to begin with and employees could do what they like with the money, FBT be damned. I’m not sure why people with the time and luxury of a PT commute as a realistic option should be underwritten by taxpayers who don’t.

  7. Removing FBT for PT is not a good idea. The underlying principle of our tax system is neutrality i.e. tax is not a factor in determining behaviour. While it is rightly pointed out that there is a difference in treatment of parking vs PT the far better option is to charge FBT on parking. Once an exception is made here then othe demand will be made for more and more exceptions. Eventually, we end up with a tax system that is far too complicated for most non-specialists to navigate.

    1. “tax is not a factor in determining behaviour” – are you serious? Our tax system massively determines behaviour. Why do you think property investment is so popular with kiwis? Why is income taxed but capital is not? Why is GST increased while income tax is lowered? It is all designed to change behaviour and punish (i.e. the poor) or reward (i.e. the rich) people.

      That i a very naive comment.

  8. Every time a government tries to regulate the cost of fuel, that government gets fxxked. If they try and set the retail price, the companies selling the oil to NZ would still charge the global market price. Cindy would then be subsidising everyone’s fuel for the difference.
    She is probably silly enough to do that

  9. This whole fuel price thing is stupid. The Herald has run article after article on it!
    Why is everyone obsessed about the price of fuel?
    Why no ‘where is the cheapest Milk in the country’ articles?

    1. Have you forgotten the many Campell Live episodes about 10 years ago when milk prices were rising, trying to find the dairy with the cheapest milk in NZ!

    2. And why is everyone focusing on the retail headline price, when so much is sold to businesses at lower rates. This impacts the price of consumer goods and services, of course.

  10. “Why no ‘where is the cheapest Milk in the country’ articles?”

    Why would the Herald be interested? Can’t run a car on milk …

  11. Have we all forgotten that English raised the duty on petroll for 3 years in a row? And now the nats are saying it should be reduced! Hypocrites: the lot of them.

    1. Technically it was Brownlee, and it was to stay true to the RONS commitments made under Joyce.

      If you look at the material released at the time it shows that expenditure would tail off once the RONS hump was cleared, assuming a government didn’t (a) build the 2nd harbour crossing; and (b) come up with a whole lot of other projects to do.

      If it did do both (a) and (b) it could avoid road tax increases if it was prepared to use Crown funding to cover the hump rather than increases in road taxes. So in theory a government could hold off raising road tax rates which, not being indexed, would decline in real value over time.

      Although our fuel taxes may be at the lower end, because they (and RUC) are hypothecated, which is highly unusual, NZ has one of the best funded road systems in the world. It seems disingenuous, though, to use Crown funds to top this up further, and take funding away from less privileged areas of the government budget, to avoid the public necessity of either increasing transport taxes or running a comb through the planned projects.

      The Opposition’s position arguably carries on from their last few years in government. Rates were able to be held steady in 2016 and 2017. However, it is likely that this was because inflation was flat and Crown injections were used. There is some information in the NZTA regular reports etc that also suggest project delays, issues with local governments finding the local share needed to initiate projects on time, and savings meant funds could be redeployed to cover emerging priorities.

  12. 1) Allow local government to apply levies to all long term public and private parking spaces as a demand management tool.

    2) Ignoring the crude oil price the excise tax / ETS component will only continue to increase in the future. I think the excise tax component is inflation adjusted and the carbon price is also likely to rise

  13. A government programme encouraging whacky corporate team-building days where staff make a public transport infrastructure improvement to an impoverished area. I’m thinking bus stop beautification and planting beside walking tracks to PT stops and stations (leading to better walkability and ownership of the locals). I just don’t see this being funded enough, so alternatives are needed.

    Corporate team-building exercises at one of our community gardens has seen concentrated and much-appreciated bursts of energy, involving labour and donated items like trees. But it’s also been really good at raising awareness in the teams of the purpose and work involved in community gardens.

  14. I think having an exemption from FBT for any sort of public transport season ticket is a great idea. You could then close the loophole on car parking at the same time, to keep it revenue neutral, and compensate for the cost on parking.

    Employers in urban areas where there was no public transport in the town or city could be exempted. This would also encourage employers to migrate towards buildings near good public transport in cities that had it.

  15. From the net

    “Govt to hike petrol taxes and road user charges 9 cents over three years to pay for ‘roads of national significance’
    Posted in News December 18, 2012 – 11:16am, Alex Tarrant

    By Alex Tarrant

    The government will hike petrol tax by three cents a litre every year over the next three years to fund its Roads of National Significance programme and other roading projects, while road user charges will also rise, Transport Minister Gerry Brownlee says.

    To put this in context 2012 was the year of the last record price for petrol. And as stated above rather than slash the tax on petrol by 10c the National government increased it by 9c.

    If you behave like a clown then its likely that people will view you as a clown.

    1. 2012 was literally six years ago. Also, note the Green reaction, which you left out of the article you didn’t link to:

      ““The Government shouldn’t increase tax on all New Zealand families just so that it can pour billions into boondoggles that aren’t worth building.”

      Sound familiar? It’s politics. Oppositions oppose things.

        1. Their philosophy was it wasn’t worth building? So…the same thing then?

  16. Sadly, public transport isn’t practical for those living even in the densest part of the city. One of my pet peeves with public transport in the city is how it does not cater to shift workers at all. If I’m to get to work by 7am, or if I don’t get out of work until after 12am, I simply can’t use public transport because there are no services in operation at the time so I am forced to use other means (I cycle or walk). Yes, it would be nice if my employer had discounted monthly passes for sale, but what AT really needs to do is ramp up its services by increasing the frequency of its routes (so it’s not every 30m or 1h that you’re waiting) and extending its schedule to include shift workers.

    1. I imagine later at night it would be cheaper for AT to pay every shift worker that would use PT to drive to work than it would be to keep the PT network operating.

      1. If so, Jezza, then it’s a sign that we’re not yet a grown up city at all. If the existing footprint of the city is not yet dense enough to provide sustainable transport to its shift workers, there is no place at all for greenfields development.

        1. Are there many cities around the world of Auckland’s size irrespective of density that offer 24/7 public transport (excluding low quality night bus services)? These would be very expensive to run and would tie up a lot of money that could otherwise be used to improve the system for a much larger number of users.

          There are many reasons not to encourage sprawl but I’m not sure making night PT viable would be high up the list. I don’t know a lot about shift work but I suspect most of it happens well away from the inner city and the core of the PT network.

        2. I wouldn’t exclude low quality night bus services, Jezza! Gosh, we’re having to include low quality day bus services in our transport network. 🙂 Back in the nineties I was able to take buses through the night in a number of European cities. Low quality, perhaps, but still available. And being young, I often did, even if not for something as noble as shift work.

        3. By low quality I was thinking of the night buses they had in Auckland when I used to see that time of night. They just did a long circuitous route through broad areas of the city running every hour or so.

          They were good if you were drunk, didn’t feel like paying for a taxi and lived near the route but they would be next to useless for shift workers unless they wanted to spend as much time getting to work as they were at work.

        4. I just had a quick look at a few European cities and it seems that PT through the night is standard if it’s not an English-speaking city… 🙂

        5. Toronto’s TTC offers 24/7 transit services for some of its key routes (“Blue Line” buses and streetcars). Services also tend to start before 6am in many cases and don’t finish until 1 or 2am.

          Many shift workers work in health care so some commute to the inner suburbs at least. I know many of my colleagues whinge about their transportation woes which include auto-reliance, parking difficulties, and the real danger of sleep-deprived workers commuting back home in rush hour after night shifts.

    2. Surely if you are getting to work at those odd shift times the roads are not so congested, and parking will be more available. Walking and cycling will also be improved by the planned works in the city centre.

    3. I think a starting point could be all the new frequent routes have a 7 days night schedule where they all run say hourly. This would at least give some back bone route 24 hrs. The trains should slowly shift to starting earlier and finishing later too.

    4. Yes absolutely but that is a tiny percentage of commuters and maybe yes they will continue to drive. Even in Amsterdam some people still drive to work.

      The point is not to have zero people driving but a larger proportion using PT or cycling.

      I don’t know why people are so obsessed with identifying one fringe group for whom PT or cycling can’t work and extrapolate that to PT and cycling won’t work for anyone.

      PT and cycling are already an option for 50-60% of the population. If half of those take up the option it will be massive sea change in how Aucklanders travel. However, the current PT system would implode if that many people changed now. Different story after the CRL is finished and light rail built.

      1. Yes. And it could be in two years’ time if we diverted money right now from Mill Rd to new electric buses and paint for bus lanes.

  17. I have been wondering about free/fully subsidised PT.

    I appreciate that it would look expensive, but I emphasise the ‘look’ aspect because transport deals in huge numbers, whereas a 100% subsidy from the NLTF is merely ‘very big’. 😉

    That being said, I guess you don’t have to make all of it free: but which bits?

    At the moment, based on no evidence whatsoever, I think the local collector/distributor services could be the free bit, tying to an interchange for the still-subsidised-but-with-a-farebox-component rapid transit services. I did mull the RT bit being free but that seems more likely to result in people on the fringes subsidising the white collar CBD workforce.

    I think a properly big change in PT use needs a properly big shift in funding mindset.

    Re the main idea in this article, employer incentives are a nice idea, but don’t seem likely to generate big change. With all the PTOM related losses in bus driver jobs right now, you might expect charter bus companies to be touting their services to companies that could do little more than broker a shared service on behalf of their staff – cheaper travel and no FBT issues – but it isn’t happening. So, it seems there is something more than financial concerns in the way.

    1. Interesting ideas. I’m wondering how to tie them up with land-use strategy. I’m a fan of just putting regulations in as required, eg no more greenfields, only brownfields development allowed. But if, as many people believe, you need to let everything be possible but be regulated and priced to provide the outcomes we want, does that mean charging developers a PT contribution that is much more for the high cost/passenger local service in greenfields areas than for the lower cost/passenger service in brownfields areas?

  18. By low quality I was thinking of the night buses they had in Auckland when I used to see that time of night. They just did a long circuitous route through broad areas of the city running every hour or so.

    They were good if you were drunk, didn’t feel like paying for a taxi and lived near the route but they would be next to useless for shift workers unless they wanted to spend as much time getting to work as they were at work.

  19. The council and AT could work together to consent new housing with no parking, and offer an AT Hop to each new resident there of with free or heavily discounted PT for a year or two.
    Events providers could have two ticket prices (checked by the same devices the train managers have -AT could loan them out for a small fee) – one price for drivers, another for PT passengers.
    The government could ban all out of zone school enrolments – there by substantially reducing school hour traffic in Auckland – this would need to be supported by a citywide audit of, and improvements to, cycling and walking facilities around all schools.

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