Fears of fuel tax hikes as Government promises to publish much-delayed transport budget

Transport Minister David Parker said the Government will finally publish its much-delayed draft transport budget, saying it would be out by the time the house rises on August 31.

It puts pressure on councils to put together their own funding plans, and does nothing to assuage fears of potential tax hikes.

Parker would not say whether the Government intended to hike fuel taxes in that budget. Fuel taxes have been frozen since 2020. Prior to that, the Government hiked the tax by 3.5 cents a litre for three years, and hiked road user charges (RUC) by an equivalent amount.

Former Transport Minister Michael Wood was in charge of putting together a draft Government Policy Statement on Land Transport, which acts as an effective transport budget, telling Waka Kotahi NZ Transport Agency and councils how much money the Government wanted spent in different priority areas like road maintenance, new roads, and public transport.

It was meant to be published in draft form for consultation earlier this year before taking effect on July 1 next year, but Wood was sent back to the drawing board after outrage at part of the plan, which would have allowed councils to swap out car parks for cycleways while they were repairing roads.

Wood said in May the draft document would be published “approximately in the next month”, while his replacement in the role, Parker, said he expected the draft GPS would come “before the House rises”.

“I haven’t got a specific date,” Parker said.

When asked about how the new document would shift priorities from what Wood teased earlier in the year, Parker said he would not comment until the document was released.

He said he had no “signal to make” on whether the Government would put up fuel taxes in the document.

Treasury in the Budget reiterated a prior warning to the Government that fuel taxes may need to go up as soon as July 1 next year to continue to fund the transport budget.

“There is a risk that Fuel Excise Duty (FED) and/or Road User Charges [RUC] will need to be increased in order to manage pressures on the National Land Transport Fund and enable repayment of a $2 billion loan, which is being provided to support delivery of the 2021-24 National Land Transport Programme,” Treasury warned in the BEFU [Budget Economic and Fiscal Update] forecasts, released with the Budget.

As people drive less or get more fuel-efficient cars, the amount of revenue the Government receives dries up. EV drivers do not currently pay fuel tax either. This creates a funding problem for the Government, which is made worse by spiralling infrastructure costs.

AA spokesman Dylan Thomsen said he would prefer the Government took its time and got things right, but said continued delays would cause problems for local government.

“We wouldn’t want something to be rushed out now that still hadn’t been fully worked through, costed and developed and evaluated,” Thomsen said.

“There’s no point in putting something out just to get it out if all the work hasn’t been done to make sure it’s going to be an accurate document well costed and well thought through.”

Local councils put together their own transport budgets based on the signals in the central government budget. Local government transport projects, such as road building, road maintenance, and subsidising bus fares, is jointly funded by local and central government.

Those funding plans hark back to the GPS, meaning the councils need to have a look at the draft soon in order to put together their own funding plans.

“It’s going to become an increasingly big problem, the longer it goes on without a GPS out there because all the councils, the regional authorities around the country are needing to put together their plans for transport over the next three years,” Thomsen said.

“They need to know how much money is going to be available, what is going to be provided through the assistance from central government to local government.”

National’s Transport spokesman Simeon Brown said the plan had been delayed because the first reports of it were so unpopular, and also thanks to the portfolio being thrown into chaos by Wood’s departure, which has seen the portfolio held by three ministers this year, Wood himself, Parker, and acting minister Kieran McAnulty.

Brown said he hoped the new GPS “does not include radical ideas” like the draft version reported earlier this year.

He said National would announce its own transport policy in a few weeks.

Brown said the party’s infrastructure policy opened the door to the use of “value capture, tolls, and other tools”.

He said National had no current plan to hike fuel taxes, and would publish its own GPS if it wins the election in October.