Rego and fuel tax jumps
The government is being accused of breaking a promise made before the general election by announcing a $50 increase in vehicle registration fees and fuel-tax jumps totalling 20 cents per litre.
Simeon Brown, Minister of Transport, has retained National’s pledge to scrap Labour’s promised 12c fuel-tax hike next term. Now he’s pushing the increase back until January 2027 in the next term of parliament.
After that, fuel taxes will increase by six cents per litre in 2028 and four cents each following year. By the end of the next parliamentary term, the government will have raised fuel taxes by 22c.
These increases will be accompanied by an equivalent hike in road-user charges (RUC). Vehicle registrations will also jump by $50, which National had not campaigned on.
Despite claiming it was a “one-off fee”, Brown’s announcement states: “To balance the transport budget, we are proposing an increase to the motor-vehicle licensing fee by $25 in January 2025 and a further $25 in January 2026.”
Brown, pictured, announced the increases as he released a draft version of the government policy statement (GPS) for land transport, which lays down how much the government wants to raise from road users in fuel taxes and RUC, and what it wants to spend the money on.
The draft will go out for consultation before taking effect on July 1 and will be in place for the next six years, or until it is renewed, which will probably happen in three years’ time.
Labour leader Chris Hipkins says the decision to hike taxes in the second term is effectively a broken campaign promise by simply raising time in a hypothetical second term.
Green Party transport spokeswoman Julie Anne Genter describes National’s plan as “extreme”. She adds: “It will lead to more emissions, more congestion and higher transport costs for all of New Zealand.”
The plan marks a big shift back towards roading and away from the former government’s focus on public transport and cycling.
Its two centrepieces are a greater focus on road maintenance with a pothole repair fund, and restarting the last National government’s roads of national significance (Rons) programme, with 15 new roads set to be delivered.
Brown says the Rons were “some of New Zealand’s most successful state-highway corridors, reducing congestion and improving safety”.
The draft GPS doesn’t put a dollar figure on the new roads. NZTA costings show they could cost twice as much as the Nats budgeted for before getting into power, leaving the party about $24 billion short, reports the NZ Herald.
Brown says he has seen multiple pieces of advice on the cost of those roads and the transport agency will assess the projects before looking for private-sector investment.
The GPS tells the NZTA how much money should be spent in different areas of the transport system, called “activity classes”.
Brown has created two new classes for pothole prevention. One will spend up to $2.3b on pothole maintenance on state highways, the other will spend up to $2.5b on fixing potholes on council-owned local roads. He wants the funding to lead to “two per cent of the state-highway network being renewed each year”.
National has killed GPS funding for inter-regional rail, which could mean an end to the Te Huia train line between Hamilton and Auckland, and has axed funding for coastal shipping, which had been given up to $20m a year. This funding was to encourage people to ship freight by water, rather than by truck.
Funding for public transport has been cut dramatically. Labour planned to spend up to $3.2b on such infrastructure over the next three years. This has been slashed by nearly $1b.
The funding pot for council subsidies to public transport has been cut, which could result in fare hikes. Labour promised up to $2.8b in subsidies over the next three years. The Nats have reduced this to $2.3b.
Brown says the last government increased public transport funding by 71 per cent in five years, despite patronage declining by 23 per cent, although he concedes some of this was due to the Covid-19 pandemic.
He adds the “private share” of funding for public transport has fallen from 32 to 11 per cent over the same time.
Brown has indicated further work will be done to fix the transport revenue system, under which money raised from fuel taxes has dwindled.
This work was begun under the last National government and was significantly accelerated under the last Labour government. The changes will probably mean an end to fuel taxes, which would be replaced by universal RUC.
Timescale for RUC
Despite the government’s decision to hike fuel tax each year from 2027, Brown has confirmed it will almost certainly be gone by the end of the decade and be replaced by a universal RUC.
This will see all road users charged depending on the weight of their vehicle and how much they drive it.
Brown is getting advice in the middle of this year about how quickly he could move to an RUC system.
“I know the Iceland government is also doing it,” he adds. “They’re looking at doing it next year, so we will look to see what they’re doing. Technology is going to have to play a role in terms of making that work.”
He says fuel-excise tax will “absolutely” be gone by the end of the decade. The advice he is receiving now will look at the “transition”. A major challenge is getting a system capable of processing the RUC transactions of New Zealand’s millions of road users, reports the NZ Herald.
