National goes after Govt over fuel tax proposal, PM Hipkins acknowledges increased costs won't be welcomed

National's Nicola Willis also made a promise.
National's Nicola Willis also made a promise. Photo credit: Newshub.

The National Party has gone after the Government for proposing to increase fuel taxes from July next year, arguing it is inappropriate during a cost of living crisis.

Nicola Willis, National's finance spokesperson, on Thursday promised her party wouldn't consider increasing the fuel excise duty (FED) until the annual inflation rate fell back below 3 percent.

"This is our commitment to New Zealand. Your petrol tax won't go up under National until inflation is under control," she said. 

But according to the Reserve Bank's latest projections, inflation would be at 2.7 percent in September next year, nearly a year from now and just a few months after the Government is planning to increase FED by 2 cents per litre.

When it was put to Willis that under her proposal National could be considering increasing FED in a year's time, she suggested it may take longer under Labour to get to 3 percent. Inflation is already trending downwards under Labour.

"What I am saying is that at the point inflation is under control and the cost of living crisis is behind us, we will then assess whether any modest increases are needed to fund land transport costs."

National claims its transport plan is "fully-funded", though Labour has taken issue with some of its costings, which are based on figures from years ago.

Simeon Brown, National's transport spokesperson, said the party had other means to pay for its proposal other than increasing FED.

"We are funding it through increased Crown contributions, reallocations - some of the things that are in this plan such as light rail and rapid transport in Wellington we are not going to be doing - we are going to have an additional Crown allocation and we are going to rely on the private sector to invest in roads and public transport infrastructure."

Finance Minister Grant Robertson said it was "pretty vague" to be relying on public-private partnerships to pay for transport infrastructure.

"Ultimately, that is still consumers paying in one form or another. We think it is really important that we are upfront about this," Robertson said.

"Up until COVID, there were regular increases in fuel excise duty because that goes directly to pay for our transport links. We are going back to that now because we have to show New Zealanders how we are going to pay for it."

Willis said: "Between the Super fund, KiwiSaver funds, iwi funds, global pension funds, there are lots of investors who want to help New Zealand build its infrastructure".

The new Draft Government Policy Statement (GPS) on land transport released on Thursday shows that FED would increase four cents per litre every year for three years.

This would begin with an initial two-cent increase in July 2024 and a second two-cent increase six months later. That would be followed by a four-cent increase in 2025 and again in 2026. 

Each four-cent per litre increase is equivalent to an additional cost per week of 88 cents for the average motorist, according to the Government. By July 2026, when the full 12-cent increase has come in, the additional cost will be $2.64 per week.

Prime Minister Chris Hipkins defended the proposal on Thursday by noting the increase was staged over three years. 

"We recognise as a Government that you have to fund the roads somehow. Other parties are saying you can have all these new transport projects and not have to pay for them. 

"Ultimately, if we want better roading infrastructure, we have to be able to pay for that. Even if we are using mechanisms like public-private partnerships or other forms of funding, we still have to pay for that. Fundamentally, someone's got to pay for the roads. 

"The model we have for funding roads in New Zealand is we use fuel taxes as the primary source of funding for that. That is why this plan is a balanced plan. I note in 2017, when we came into Government, the last draft GPS that was issued by the National Government also had increases built into that as well." 

Hipkins believed the annual increase was "manageable in the context of the significant investment we're making in roads". 

But he acknowledged "anything that increases household costs isn't going to be particularly welcome". 

The Prime Minister - who is the Labour Party leader - didn't agree that proposing to increase the taxes could cost his party the election. 

"I think that motorists who are stuck in traffic want to know that we're actually investing in the roads that they're currently experiencing difficulties with," Hipkins said.

"Those who have seen their roads degrading want to know that actually they're going to be upgraded and that we're going to be investing in road maintenance, and those who are using public transport want to know that we're focused on that as well and we are."

The new GPS lays out 14 key strategic projects the Government views as priorities for New Zealand over the next 10 years. 

Six strategic priorities are given - maintaining and operating the system, reducing emissions, increasing resilience, safety, sustainable urban and regional development and an integrated freight system. The minister expects "value for money", an "efficient use" of the National Land Transport Fund (NLTF) and a focus on building back better.

It includes at least $5.4 billion on road maintenance, a minimum of $3.8 billion on road improvements, $3.6 billion on public transport, $1.5 billion on safety programmes like road policing and safety advertising, $1.2 billion on upgrading and maintaining the rail network and $500 million on walking and cycling improvements. 

But the Greens said there was too large a focus on roads. 

"We're pleased to see some rail, and recognition of necessary safety improvements but the focus is still too much on new roads, and not low carbon alternatives," said transport spokesperson Julie Anne Genter.

"Funnelling billions into building more roads, instead of investing in low carbon transport options like regional rail, shows Labour are not serious about climate change."

ACT transport spokesperson Simon Court said the "prospect of shiny new roads" was just an election bribe. 

"The 12c increase to fuel taxes shows how incoherent Labour is, they cut fuel taxes in a bout of populism and now they're ramping them up because they've run out of money. EVs and Hybrids who use the road as much as anybody will be subsidised further by petrol and diesel vehicles. ACT's proposal for a world-class tolling system is a much fairer way of ensuring roads can be paid for and people pay for infrastructure they use."